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<HEAD>
<TITLE>FORM S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">As filed with the Securities and Exchange
Commission on February&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration Statement No.
333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

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</DIV>

<P align="center">
<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

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<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="5">Form S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="6">WellCare Group, Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact Name of Registrant as Specified in its
Charter)</FONT></I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">6324</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">47-0937650</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification Number)</FONT></I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="2">6800 North Dale Mabry Highway,
Suite&nbsp;268</FONT></B>

<DIV align="center">
<B><FONT size="2">Tampa, Florida 33614</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(813)&nbsp;290-6200</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant&#146;s Principal
Executive Offices)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="2">Mr.&nbsp;Todd S. Farha</FONT></B>

<DIV align="center">
<B><FONT size="2">President and Chief Executive
Officer</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">WellCare Group, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">6800 North Dale Mabry Highway,
Suite&nbsp;268</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Tampa, Florida 33614</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(813)&nbsp;290-6200</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of Agent for
Service)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><I><FONT size="2">Copies to:</FONT></I></B>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Stephen A. Riddick, Esq.<BR>
    Jason T. Simon, Esq.<BR>
    Greenberg Traurig, LLP<BR>
    800 Connecticut Avenue, N.W., Suite&nbsp;500<BR>
    Washington, D.C. 20006<BR>
    (202) 331-3100</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Dennis M. Myers, P.C.<BR>
    Kirkland &#38; Ellis LLP<BR>
    200 East Randolph Drive<BR>
    Chicago, Illinois 60601<BR>
    (312) 861-2000</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Leslie N. Silverman, Esq.<BR>
    Cleary, Gottlieb, Steen<BR>
    &#38; Hamilton<BR>
    One Liberty Plaza<BR>
    New York, New York 10006<BR>
    (212) 225-2000</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of proposed
sale to the public:</FONT></B><FONT size="2"> As soon as
practicable after the effective date of this Registration
Statement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule&nbsp;415 under the Securities Act of 1933, check the
following box.&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is filed to register additional
securities for an offering pursuant to Rule&nbsp;462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this Form is a post-effective amendment filed
pursuant to Rule&nbsp;462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If delivery of the Prospectus is expected to be
made pursuant to Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Aggregate Offering</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Price(1)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration Fee</FONT></B></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock, par value $.01 per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$100,000,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$12,670
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="7" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes shares that the underwriters have the
    option to purchase from the Registrant and the selling
    stockholders to cover over-allotments, if any. Estimated solely
    for purposes of calculating the registration fee in accordance
    with Rule&nbsp;457(o) under the Securities Act of 1933, as
    amended.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section&nbsp;8(a) of the Securities Act of 1933, as amended, or
until this Registration Statement shall become effective on such
date as the Commission, acting pursuant to such
Section&nbsp;8(a), may determine.</FONT></B>

<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>

<DIV align="left">

</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D">The information in this
prospectus is not complete and may be changed. We may not sell
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell securities and we are not soliciting
offers to buy these securities in any state where the offer or
sale is not permitted.</FONT><FONT size="2"> <BR>
</FONT>
</TD></TR></TABLE>

<P align="left">
<I>PROSPECTUS <FONT color="#E8112D">(Subject to
Completion)</FONT></I>

<DIV align="left">
<I><FONT size="2" color="#E8112D">Dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004</FONT></I>
</DIV>

<P align="center">
<I><FONT size="5">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></I>

<P align="center">
<IMG src="w93446w9344646.gif" alt="(WellCare Logo)">

<P align="center">
<I>COMMON STOCK</I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<B><I><FONT size="2">WellCare Group, Inc. is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of its common stock and the selling stockholder is
selling &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. We will not receive any proceeds from the sale
of shares of common stock by the selling stockholder. This is
our initial public offering and no public market currently
exists for our shares. We anticipate that the initial public
offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.</FONT></I></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<B><I><FONT size="2">We have applied to list our common stock on
the New York Stock Exchange under the symbol
&#147;WCG.&#148;</FONT></I></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<B><I>Investing in our common stock involves risks. See
&#147;Risk Factors&#148; beginning on page&nbsp;6.</I></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<I><FONT size="2">PRICE
</FONT>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2">A
SHARE</FONT></I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underwriting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds to</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Discounts and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Selling</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price to Public</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commissions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">WellCare</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholder</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><I><FONT size="2">$</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">We have granted the underwriters the right to
purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
to cover over-allotments.
</FONT>

<P align="left">
<FONT size="2">The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
</FONT>

<P align="left">
<FONT size="2">Morgan Stanley &#38; Co. Incorporated expects to
deliver the shares to purchasers
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004.
</FONT>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<FONT size="2"> </FONT><I><FONT size="4">MORGAN
STANLEY</FONT></I>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="19%"></TD>
    <TD width="81%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> </FONT><I><FONT size="4">CREDIT SUISSE FIRST
    BOSTON</FONT></I></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> </FONT><I><FONT size="4">SG COWEN</FONT></I></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="57%"></TD>
    <TD width="43%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2"> </FONT><I><FONT size="4">RAYMOND JAMES</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004.
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">[INSIDE COVER: COVER ART]</FONT></B>

<P align="left">
<FONT size="2">[A close-up picture of a young child occupies
approximately three-fifths of the page from the top.
</FONT>

<P align="left">
<FONT size="2">The logo for WellCare Health Plans, Inc. is
immediately below followed by the narrative:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&#147;WellCare is committed to making quality and
    affordable healthcare services easily accessible to consumers.
    We specialize in providing care to those who receive their
    health benefits through government programs such as Medicaid,
    Medicare and other programs.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">To the left of the narrative is a vertical
listing of &#147;WellCare,&#148; PreferredOne,&#148;
&#147;HealthEase&#148; and &#147;StayWell.&#148; The tagline
&#147;The Common Sense Approach to Healthcare&#148; runs across
the bottom of the page.]
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left">

</DIV>

<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#101'>Prospectus Summary</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#102'>Risk Factors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#103'>Forward-Looking
    Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#104'>Use of Proceeds</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#105'>Dividend Policy</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#122'>Reorganization as a
    Corporation</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#106'>Capitalization</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#107'>Dilution</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#108'>Selected Consolidated and
    Combined Financial Data</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#109'>Management&#146;s Discussion
    and Analysis of Financial Condition and Results of Operations</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#110'>Our Business</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#111'>Management</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#112'>Certain Transactions</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#113'>Principal Stockholders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#114'>Selling Stockholder</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#115'>Description of Capital
    Stock</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#116'>Shares Eligible For Future
    Sale</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#123'>Certain United States Tax
    Consequences to Non-United States Holders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#117'>Underwriters</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#118'>Validity</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#119'>Experts</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#120'>Additional Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#121'>Index to Consolidated
    Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv3w1.txt">CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv3w3.txt">BYLAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w1.txt">FORM OF MEDICAID HEALTH MAINTENANCE CONTRACT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w2.txt">AMENDMENT NOS.1 THROUGH 7 TO CONTRACT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w3.txt">AMENDMENT NOS. 1 THROUGH 9 TO CONTRACT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w4.txt">CONTRACT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w5.txt">PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w8.txt">EQUITY AND WARRANT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w9.txt">INVESTOR RIGHTS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w10.txt">PLEDGE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w11.txt">MERGER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w12.txt">CONTRIBUTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w13.txt">REGISTRATION RIGHTS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w14.txt">2002 SENIOR EXECUTIVE EQUITY PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w15.txt">FORM OF SUBSCRIPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w16.txt">2002 EMPLOYEE OPTION PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w17.txt">FORM OF TIME VESTING OPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w25.txt">MANAGEMENT SUBSCRIPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w26.txt">AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv10w27.txt">CONSULTING AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv16w1.txt">LETTER RE CHANGE IN CERTIFYING ACCOUNTANT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w93446exv23w1.txt">CONSENTS OF DELOITTE & TOUCHE, LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should rely only on the information contained
in this prospectus. We and the selling stockholder have not
authorized anyone to provide you with information that is
different from that contained in this prospectus. We and the
selling stockholder are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of when this prospectus is delivered or when any sale
of our common stock occurs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, all dealers that buy, sell or trade shares, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
</FONT>

<P align="center"><FONT size="2">i
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">You should read the following summary together
with the more detailed information regarding our company, the
common stock being sold in this offering and our consolidated
and combined financial statements, including the notes to those
statements, appearing elsewhere in this prospectus.</FONT></I>

<P align="left">
<B><FONT size="2">Our Business</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. We have centralized core
functions, such as claims processing and medical management,
combined with targeted marketing and provider services tailored
to the local markets where we operate. We believe that this
approach allows us to provide high-quality, affordable
healthcare services to our members and offer cost saving
opportunities to the states we serve, while maintaining mutually
beneficial relationships with our providers and our regulators.
We also believe that our approach to the delivery of managed
care services will allow us to effectively grow our business,
both through organic growth and acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate health plans in Florida, New York and
Connecticut. In Florida, we serve more than
475,000&nbsp;members, and operate the two largest Medicaid
managed care plans. In New York and Connecticut, we serve
approximately 56,000 and 24,000&nbsp;members, respectively.
</FONT>

<P align="left">
<B><FONT size="2">Our Markets and Opportunities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market for government-sponsored healthcare
programs in the United States is large and growing. In 2002,
Medicaid covered 40.1&nbsp;million enrollees and Medicare
covered 40.5&nbsp;million enrollees, according to the federal
government&#146;s Centers for Medicare&nbsp;&#38; Medicaid
Services, or CMS. Enrollment in Medicaid managed care programs
has grown rapidly in recent years, from 13.3&nbsp;million, or
40% of enrollees, in 1996 to 23.1&nbsp;million, or 58% of
enrollees, in 2002, according to CMS. We plan to leverage our
approach to the delivery of managed care programs by expanding
our Medicaid, Medicare and other products in our current markets
and in additional counties and states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are the largest Medicaid managed care provider
in the State of Florida, where we also operate a large Medicare
plan. In 2003, we added approximately 30,000&nbsp;members to our
State Children&#146;s Health Insurance Program, or SCHIP, known
in Florida as Healthy Kids. Florida has approximately
2.0&nbsp;million Medicaid enrollees, which includes
beneficiaries under the Supplemental Security Income, or SSI,
and the Temporary Assistance to Needy Families, or TANF,
programs. Florida also has 2.9&nbsp;million Medicare enrollees,
the second largest population of any state. Based on our history
of providing quality managed care services in Florida, we
believe we are well positioned to continue increasing our
membership in the state.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our health plans in New York and Connecticut have
experienced significant membership growth under our management.
During 2003, our membership in New York grew approximately 23%
to nearly 56,000&nbsp;members, and our membership in Connecticut
grew approximately 39% to nearly 24,000&nbsp;members. We believe
that both of these states are attractive markets for growth. We
believe that the New York market opportunity is substantial,
with approximately 3.1&nbsp;million Medicaid and
2.7&nbsp;million Medicare enrollees.
</FONT>

<P align="left">
<B><FONT size="2">Our Competitive Advantages</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate health plans focused on
government-sponsored healthcare programs. We believe the
following are among our key competitive advantages:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leading Market Presence.
</FONT></I><FONT size="2">We are the leading Medicaid provider
in Florida, with a market share of approximately 50% and over
475,000 Medicaid managed care enrollees. We believe that this
strong market position provides us with numerous strategic
advantages, including enhanced economies of scale, extensive
provider networks in our core markets, strong relationships with
state and local agencies and the ability to provide a broad
range of government-sponsored healthcare programs.
</FONT>

<P align="center"><FONT size="2">1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Diversified Government Healthcare
Programs.</FONT></I><FONT size="2"> We offer managed care
services for a diversified range of government programs,
including the SCHIP, SSI and TANF Medicaid programs and
Medicare. This approach helps reduce the impact of rate
reductions or other adverse changes affecting any one of these
programs. We believe that our experience in serving a broad
range of enrollees in Medicaid, Medicare and related programs
positions us to capitalize on growth opportunities within the
market for government-sponsored healthcare programs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Centralized and Scalable
Operations.</FONT></I><FONT size="2"> We have centralized our
medical management programs, claims processing, member services,
information technology and pharmacy benefits programs.
Centralizing these functions and operating on a single platform
permit management to better assess and control medical costs.
Our administrative and information services have been designed
to be scalable to accommodate growth, while allowing targeted
marketing and provider services tailored to local markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strong Relationships with Government
Agencies.</FONT></I><FONT size="2"> We work closely with the
government agencies that regulate us to develop the products and
services that we offer. Our relationships with these government
agencies enable us to deliver high-quality, affordable
healthcare services to our members and create cost saving
opportunities for the states in which we operate, many of which
currently are facing budgetary pressures. By demonstrating our
ability to provide quality, cost-effective services, we believe
government agencies will remain committed to the growth of
managed care as a means to control rising healthcare
expenditures.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Partnerships with Providers.
</FONT></I><FONT size="2">We seek to enter mutually beneficial
arrangements with our providers, which help them to develop and
grow their practices. We provide quality service and strive to
be a low hassle partner in developing and maintaining strong
relationships with our providers. As a result of this approach,
we have established a broad provider network that includes over
17,000&nbsp;physicians and specialists and 300&nbsp;hospitals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Integrated Medical
Management.</FONT></I><FONT size="2"> We employ a multi-tiered,
integrated approach to medical management in order to provide
appropriate care to our members, contain costs and ensure an
efficient delivery network. Our focus is to ensure that members
receive the appropriate care in a timely manner and in the
appropriate healthcare delivery setting. Key elements of our
medical management strategy include a focus on preventative
care, careful management of outpatient, inpatient and other
services and case and disease management. We believe that this
approach allows us to improve medical outcomes for our members,
resulting in cost savings for the states in which we operate.
</FONT>

<P align="left">
<B><FONT size="2">Our Growth Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to be the leading provider of
managed care services for government-sponsored healthcare
programs. To achieve this objective, we intend to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">expand our Medicaid business within existing
    markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">leverage our established Medicaid businesses to
    develop Medicare plans; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter new markets through internal growth and
    acquisitions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Our Company</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were formed in May 2002 to acquire the
WellCare group of companies. In July 2002, we completed the
acquisition of our current businesses through two concurrent
transactions. In the first, we acquired our Florida operations,
including our Well Care HMO and HealthEase subsidiaries, in a
stock purchase from several individuals. In the second
transaction, we acquired The WellCare Management Group, Inc., a
publicly-traded holding company and the parent company of our
New York and Connecticut operations, through a merger of that
company into a wholly-owned subsidiary of ours. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Operations&#151; Corporate History and WellCare
Acquisitions.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have operated through a
holding company that is a limited liability company. As
described in &#147;Reorganization as a Corporation,&#148; our
holding company will become a Delaware corporation
</FONT>

<P align="center"><FONT size="2">2
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">immediately prior to the closing of this
offering. At that time, our name will be changed to WellCare
Health Plans, Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal executive offices are located at
6800&nbsp;North Dale Mabry Highway, Suite&nbsp;268, Tampa,
Florida&nbsp;33614, and our telephone number is
(813)&nbsp;290-6200. Our website is www.wellcare.com.
Information contained on our website or links to our website do
not constitute a part of this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">References in this prospectus to
&#147;WellCare,&#148; &#147;we,&#148; &#147;our&#148; and
&#147;us,&#148; for periods prior to the closing of this
offering, refer to WellCare Holdings, LLC, a Delaware limited
liability company, and as of the closing and thereafter, to
WellCare Group, Inc., a Delaware corporation, together in each
case with our subsidiaries and any predecessor entities unless
the context suggests otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The WellCare trademark and design appearing on
the front cover of this prospectus are registered trademarks of
The WellCare Management Group, Inc., one of our wholly-owned
subsidiaries.
</FONT>

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by us
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by the selling stockholder
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Total
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock to be outstanding after this offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We intend to use the net proceeds of this
    offering for the repayment of indebtedness, working capital and
    other general corporate purposes, which may include select
    acquisitions. We will not receive any proceeds from the sale of
    shares by the selling stockholder. See &#147;Use of
    Proceeds.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed New York Stock Exchange symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">WCG
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Except as otherwise noted, the number of
shares to be outstanding after this offering excludes:</FONT></I>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for issuance pursuant to our incentive
    equity plans, of
    which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    are subject to outstanding options as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004; and</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for future issuances under our employee
    stock purchase plan.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Except as otherwise noted, all information in
this prospectus is based on the following assumptions:</FONT></I>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">the underwriters do not exercise their
    over-allotment option; and</FONT></I></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">the conversion of WellCare Holdings, LLC into
    a corporation immediately prior to the closing of this
    offering.</FONT></I></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SUMMARY CONSOLIDATED AND COMBINED FINANCIAL
DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our summary
financial data. This information should be read in conjunction
with our financial statements and the related notes and
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; included elsewhere in
this prospectus. The as adjusted balance sheet data gives effect
to the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, less the estimated underwriting discounts, commissions
and estimated offering expenses payable by us. WellCare, as it
existed prior to the July&nbsp;31, 2002 acquisition of the
WellCare group of companies, is referred to as
&#147;Predecessor.&#148; WellCare, as it existed on and after
July&nbsp;31, 2002, is referred to as &#147;Successor.&#148;
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands, except per unit/share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated and Combined Statements of Income
    (Loss):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">451,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">329,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">740,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,976</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">517,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,042,852</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">431,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,045,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">609,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">145,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,818</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">368,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">441,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">728,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">392,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income (loss)&nbsp;before income
    taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income tax expense<SUP>(3)</SUP></FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income attributable per common
    unit:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per
    unit&nbsp;&#151;&nbsp;basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per
    unit&nbsp;&#151;&nbsp;diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Pro forma net income per common
    share:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Average common units outstanding:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Pro forma common shares outstanding:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">4
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating Statistics:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    consolidated<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    Medicaid<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.7%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.3%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    Medicare<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefit ratio&#151; other<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expense
    ratio<SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.1%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; consolidated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">317,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">374,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">555,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">512,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; commercial
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">409,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt (including current maturities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">397,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    (deficit)<SUP>(6)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,684</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Other premium revenue relates to our commercial
    business, which is no longer marketed.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Other medical benefits relates to our commercial
    business, which is no longer marketed.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code, the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses. Pro forma tax
    expense for each of the years 1999, 2000, 2001, and the seven
    months ended July&nbsp;31, 2002 at an estimated tax rate of 42%
    (our effective tax rate as the Successor) is $100, $0, $8,990,
    and $11,731, respectively.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Medical benefits ratio represents medical
    benefits expense as a percentage of premium revenue.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(5)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Selling, general and administrative expense ratio
    represents selling, general and administrative expense as a
    percentage of total revenue and excludes depreciation and
    amortization expense for purposes of determining the ratio.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(6)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Total stockholders&#146; equity reflects
    stockholders&#146; equity for Predecessor and on an as adjusted
    basis for 2003 and reflects limited liability company membership
    interests during 2002 and on an actual basis for 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This offering and an investment in our common
stock involve a high degree of risk. You should carefully
consider the following risks and all other information contained
in this prospectus before purchasing our common stock. If any of
the following risks actually occur, our business, financial
condition and results of operations could be materially and
adversely affected, the value of our stock could decline, and
you may lose all or part of your investment. The risks and
uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impair our business
operations.</FONT></I>

<P align="center">
<B><FONT size="2">Risks Related to Our Business</FONT></B>

<P align="left">
<B><FONT size="2">If our government contracts are not renewed or
are terminated, our business could be substantially
impaired.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide our Medicaid, Medicare, SCHIP and
other services through a limited number of contracts with state,
federal or local government agencies. These contracts generally
have terms of one or two years and are subject to nonrenewal by
the applicable agency. All of our government contracts are
terminable for cause if we breach a material provision of the
contract or violate relevant laws or regulations. In addition,
our right to add new members may be suspended by a government
agency if it finds deficiencies in our provider network or
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our contracts with the states are subject to
cancellation or a potential freeze on enrollment by the state in
the event of the unavailability of state or federal funding.
This has recently occurred with the Florida Healthy Kids SCHIP
program, which includes our Healthy Kids contract. In some
jurisdictions, such a cancellation or enrollment freeze may be
immediate and in other jurisdictions a notice period is
required. Some of our contracts are also subject to termination
or are eligible for renewal through annual competitive bids. We
may face increased competition as other plans attempt to enter
our markets through the contracting process. If we are unable to
renew, or successfully rebid or compete for any of our
government contracts, or if any of our contracts are terminated,
our business will suffer.
</FONT>

<P align="left">
<B><FONT size="2">If we are unable to manage medical benefits
expense effectively, our profitability will likely be reduced or
we could cease to be profitable.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends, to a significant
degree, on our ability to predict and effectively manage our
costs related to the provision of healthcare services.
Relatively small changes in the ratio of our expenses related to
healthcare services to the premiums we receive, or medical
benefits ratio, can create significant changes in our financial
results. Factors that may cause medical benefits expense to
exceed our estimates include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an increase in the cost of healthcare services
    and supplies, including pharmaceuticals, whether as a result of
    inflation or otherwise;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">higher than expected utilization of healthcare
    services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">periodic renegotiation of hospital, physician and
    other provider contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the occurrence of catastrophes, major epidemics,
    terrorism or bio-terrorism;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in the demographics of our members and
    medical trends affecting them; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">new mandated benefits or other changes in
    healthcare laws, regulations and/or practices.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because of the relatively high average age of the
Medicare population, medical benefits expense for our Medicare
plans may be particularly difficult to control. According to
CMS, from 1967 to 2001, Medicare healthcare expenses nationwide
increased on average by&nbsp;10% annually.
</FONT>

<P align="center"><FONT size="2">6
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we have been able to manage our medical
benefits expense through a variety of techniques, including
various payment methods to primary care physicians and other
providers, advance approval for hospital services and referral
requirements, medical management and quality management
programs, upgraded information systems, and reinsurance
arrangements, we may not be able to continue to manage these
expenses effectively in the future. If our medical benefits
expense increases, our profits could be reduced or we may not
remain profitable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain reinsurance to protect us against
severe or catastrophic medical claims, but we cannot assure you
that such reinsurance coverage currently is or will be adequate
or available to us in the future or that the cost of such
reinsurance will not limit our ability to obtain it.
</FONT>

<P align="left">
<B><FONT size="2">Because our premiums, which generate most of
our revenues, are fixed by contract, we are unable to increase
our premiums during the contract term if our corresponding
medical benefits expense exceeds our estimates.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our revenues are generated by premiums
consisting of fixed monthly payments per member. These payments
are fixed by contract, and we are obligated during the contract
period to provide or arrange for the provision of healthcare
services as established by state and federal governments. We
have less control over costs related to the provision of
healthcare services than we do over our selling, general and
administrative expense. Historically, our medical benefits
expense as a percentage of premium revenue has fluctuated. For
example, our medical benefits expense was 84.8% of our combined
premium revenue in 2002 and 82.6% of our combined premium
revenue in 2003. If our medical benefits expense exceeds our
estimates, we will be unable to adjust the premiums we receive
under our current contracts, and our profits may decline.
</FONT>

<P align="left">
<B><FONT size="2">Reductions in funding for government
healthcare programs could substantially reduce our
profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the healthcare services we offer are
through government-sponsored programs, such as Medicaid and
Medicare. As a result, our profitability is dependent, in large
part, on continued funding for government healthcare programs at
or above current levels. For example, the premium rates paid by
each state to health plans like ours differ depending on a
combination of factors such as upper payment limits established
by the state and federal governments, a member&#146;s health
status, age, gender, county or region, benefit mix and member
eligibility categories. Future Medicaid premium rate levels may
be affected by continued government efforts to contain medical
costs or state and federal budgetary constraints. According to
the National Association of State Budget Officers, Medicaid
spending consumed 15% of the average state&#146;s budget in
1999, representing the second largest expenditure. According to
the Congressional Budget Office, total state spending on
Medicaid is expected to reach $127&nbsp;billion in 2004,
representing a 9% annual increase since 2001. Some states may
find it difficult to continue paying the current rates to
Medicaid health plans. Changes in Medicaid funding, for example,
may lead to reductions in the number of persons enrolled in or
eligible for Medicaid, reductions in the amount of reimbursement
or elimination of coverage for certain benefits such as
pharmacy, behavioral health or other benefits. In some cases,
changes in funding could be made retroactive. All of the states
in which we operate are presently considering legislation that
would reduce reimbursement rates, payment levels, benefits
covered or the number of persons eligible for Medicaid.
Reductions in Medicaid payments could reduce our profitability
if we are unable to reduce our expenses. Similarly, reductions
in payments under Medicare or the other programs under which we
offer health plans could likewise reduce our profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Federal budgetary constraints also may limit
premiums payable under our Medicare plans. For example, as a
result of the Balanced Budget Act of 1997, annual increases on
premiums paid to many Medicare+Choice plans were subject to a 2%
cap, even though overall Medicare healthcare expenses were
increasing at a higher rate.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

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<P align="left">
<B><FONT size="2">We are subject to extensive government
regulation, and any violation of the laws and regulations
applicable to us could adversely affect our operating
results.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is extensively regulated by the
federal government and the states in which we operate. The laws
and regulations governing our operations are generally intended
to benefit and protect health plan members and providers rather
than stockholders. The government agencies administering these
laws and regulations have broad latitude to enforce them. These
laws and regulations, along with the terms of our government
contracts, regulate how we do business, what services we offer,
and how we interact with our members, providers and the public.
We are subject, on an ongoing basis, to various governmental
reviews, audits and investigations to verify our compliance with
our contracts and applicable laws and regulations. Any adverse
review, audit or investigation could result in:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">forfeiture of amounts we have been paid pursuant
    to our government contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposition of civil or criminal penalties, fines
    or other sanctions on us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">loss of our right to participate in
    government-sponsored programs, including Medicaid and Medicare;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">damage to our reputation in various markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased difficulty in marketing our products
    and services; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">loss of one or more of our licenses to act as an
    insurer or health maintenance organization or to otherwise
    provide a service.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any of these events could adversely affect our
results of operations.
</FONT>

<P align="left">
<B><FONT size="2">We derive a substantial portion of our
revenues from operations in Florida, and our operating results
would be materially affected by a decrease in revenues or
profitability of our Florida operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, our Florida health plans accounted for
86.0% of our total premium revenues. If we are unable to
continue to operate in Florida, or if our current operations in
any portion of Florida are significantly curtailed, our revenues
will decrease materially. Our reliance on our operations in
Florida could cause our revenues and profitability to change
suddenly and unexpectedly, depending on legislative actions,
economic conditions and similar factors. In addition, our
significant market share in Florida may make it more difficult
for us to expand our membership in Florida. For example, Florida
has recently frozen enrollment for its Healthy Kids SCHIP
program. Our inability to continue to operate in Florida, or a
decrease in the revenues of our Florida operations, would harm
our business.
</FONT>

<P align="left">
<B><FONT size="2">Difficulties in executing acquisitions could
adversely affect our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we cannot predict with certainty our
rate of growth as a result of acquisitions, we believe that
acquisitions of contract rights and other health plans will be
important to our growth strategy. Many of the other potential
purchasers of these assets have greater financial resources than
we have. Moreover, some sellers may insist on selling assets
that we do not want, such as commercial lines of business, or
transferring their liabilities to us as part of the sale of
their companies or assets. Even if we identify suitable
acquisition targets, we may be unable to complete acquisitions
or obtain the necessary financing for these acquisitions on
terms favorable to us, or at all. Further, to the extent we
complete acquisitions, we may be unable to realize the
anticipated benefits from acquisitions because of operational
factors or difficulties in integrating the acquisitions with our
existing businesses. This may include the integration of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">additional employees, whom we refer to as
    associates, who are not familiar with our operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">new provider networks, which may operate on terms
    different from our existing networks;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">additional members, who may decide to transfer to
    other healthcare providers or health plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disparate information, claims processing and
    record keeping systems; and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">8
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">accounting policies, including those which
    require a high degree of judgment or complex estimation
    processes, such as estimates of medical claims incurred but not
    reported, accounting for goodwill, intangible assets,
    stock-based compensation and income tax matters.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we are generally required to obtain
regulatory approval from one or more state agencies when making
acquisitions, which may require a public hearing. This is the
case regardless of whether we already operate a plan in the
state in which the business to be acquired is located. We may be
unable to comply with these regulatory requirements for an
acquisition in a timely manner, or at all. For all of the above
reasons, we may not be able to successfully implement our
acquisition strategy.
</FONT>

<P align="left">
<B><FONT size="2">We may be unable to expand into some
geographic areas without incurring significant additional
costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are likely to incur additional costs if we
enter states or counties where we do not currently operate. Our
rate of expansion into other geographic areas may also be
inhibited by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the time and costs associated with obtaining a
    health maintenance organization license to operate in the new
    area or the expansion of our licensed service area, if necessary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our inability to develop a network of physicians,
    hospitals and other healthcare providers that meets our
    requirements and those of government regulators;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">competition, which increases the costs of
    recruiting members;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of providing healthcare services in
    those areas; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">demographics and population density.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accordingly, we may be unsuccessful in entering
other metropolitan areas, counties or states.
</FONT>

<P align="left">
<B><FONT size="2">Our limited operating history as a stand-alone
entity makes evaluating our business and future prospects
difficult.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were formed in May 2002 to acquire the
WellCare group of companies. Until the closing of that
acquisition in July 2002, the companies that comprise our
Florida operations had operated as a closely-held business, and
our New York and Connecticut businesses had operated as
subsidiaries of a public company, the majority stockholders of
which were the owners of the Florida operations. Although the
majority of our associates were employed by our predecessor
companies, almost all of the senior members of our current
management have joined us recently, including Todd S. Farha, our
President and Chief Executive Officer. Our limited operating
history under current management may not be adequate to enable
you to fully assess our future prospects.
</FONT>

<P align="left">
<B><FONT size="2">A failure to estimate incurred but not
reported medical benefits expense accurately will affect our
profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our medical benefits expense includes estimates
of medical claims incurred but not reported, or IBNR. We,
together with our internal and consulting actuaries, estimate
our medical cost liabilities using actuarial methods based on
historical data adjusted for payment patterns, cost trends,
product mix, seasonality, utilization of healthcare services and
other relevant factors. Actual conditions, however, could differ
from those assumed in the estimation process. Due to the
uncertainties associated with the factors used in these
assumptions, materially different amounts could be reported in
our financial statements for a particular period under different
conditions or using different assumptions. Adjustments, if
necessary, are made to medical benefits expense when the
criteria used to determine IBNR change and when actual claim
costs are ultimately determined. Although our estimates of IBNR
have been adequate since our acquisition of the WellCare
businesses, they may be inadequate in the future, which would
adversely affect our results of operations. Further, our
inability to estimate IBNR accurately may also affect our
ability to take timely corrective actions, further exacerbating
the extent of any adverse effect on our results.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<P align="left">
<B><FONT size="2">The new Medicare legislation makes changes to
the Medicare program that could reduce our profitability and
creates uncertainties that could adversely affect our
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;8, 2003, President Bush signed
the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, or MMA. MMA makes significant changes to the
Medicare program. We believe that many of these changes will
benefit the managed care sector. However, the new rate
methodologies, expanded benefits and shifts in certain coverage
responsibilities pursuant to MMA create uncertainties, including
the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">MMA increases reimbursement for Medicare+Choice
    plans, which will be renamed &#147;Medicare Advantage&#148; in
    2006 under MMA. Higher reimbursement rates may increase the
    number of plans that participate in the program, creating new
    competition that could adversely affect our profitability.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Beginning in 2006, a new regional Medicare
    Preferred Provider Organization, or Medicare PPO, program will
    be implemented pursuant to MMA. Medicare PPOs would allow their
    members more flexibility to select physicians than the current
    plans, which are HMOs that require members to coordinate with a
    primary care physician. MMA requires the Secretary of the
    Department of Health and Human Services, or HHS, to create
    between 10 and 50&nbsp;regions for the Medicare PPO program,
    with each region covering at least one state and some possibly
    crossing state lines. The regional Medicare PPO program will
    compete with local Medicare Advantage HMO programs and may
    affect our Medicare Advantage HMO business. We do not know
    whether the regions will be constructed in a way that will
    create obstacles or opportunities for us to participate in the
    program. We also do not know how the creation of the regional
    Medicare PPO program, which is intended to provide further
    choice to beneficiaries, will affect our Medicare Advantage HMO
    business.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">In order to participate in the regional Medicare
    Advantage PPO program under MMA, a plan must meet certain
    requirements, including having an adequate provider network
    throughout the region. MMA provides some incentives for certain
    hospitals to join the network. However, we do not know whether
    we will be able to contract with a sufficient number of
    providers throughout our regions to satisfy the network adequacy
    requirements under MMA that would enable us to participate in
    the regional product.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Beginning in 2006, the payments for the local
    Medicare Advantage HMO and regional Medicare Advantage PPO
    programs will be based on a competitive bidding process that may
    decrease the amount of premiums paid to us or cause us to
    increase the benefits we offer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Under MMA, beginning in 2006, organizations that
    offer Medicare Advantage plans of the type we currently offer
    will be required to offer prescription drug benefits. It is not
    known at this time whether the governmental payments will be
    adequate to cover the costs for this benefit. In addition,
    Medicare Advantage enrollees will be required to obtain their
    drug benefit from their Medicare Advantage plan. Enrollees may
    prefer a stand- alone drug plan and may disenroll from the
    Medicare Advantage plan altogether in order to participate in
    another drug plan. Accordingly, the new prescription drug
    benefit could reduce our profitability and membership enrollment
    following its implementation in 2006.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Some enrollees may have chosen our
    Medicare+Choice plan in the past rather than a Medicare
    fee-for-service program because of the added drug benefit that
    we offer with our Medicare+Choice plan. Following the
    implementation of the new prescription drug benefit, Medicare
    beneficiaries will have the opportunity to obtain a drug benefit
    without joining a managed care plan. As a result, our membership
    enrollment may decline.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Beginning in 2006, individuals eligible for both
    Medicare and Medicaid, or dual-eligibles, will generally receive
    their drug coverage from Medicare rather than from Medicaid.
    Because Medicaid will no longer be directly responsible for most
    drug coverage for dual-eligibles, Medicaid payments to plans
    will be reduced. We cannot predict whether this change in
    Medicaid payments will have an adverse effect on our operating
    results.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left">
<B><FONT size="2">Changes, other than MMA, in federal funding
mechanisms also could reduce our profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to changes pursuant to MMA, other
changes in federal funding mechanisms could reduce our
profitability. As part of the current administration&#146;s 2004
budget submission to Congress, HHS announced principles for
Medicaid reform. HHS&#146;s proposal would establish two capped
allotments for states combining both Medicaid and SCHIP funds,
one for acute care and one for long-term care. Under this
proposal, all mandatory populations and benefits would continue
to be covered as required under current law. States, however,
would be given flexibility for optional populations and
benefits. The proposal would be revenue-neutral over a 10-year
period, although states would receive an additional
$12.7&nbsp;billion over the first seven years, with
corresponding funding reductions in years eight through 10.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The proposal was meant to provide increased
flexibility to the states in managing their Medicaid and SCHIP
programs, in particular in the design of benefit packages for
optional populations. Governors working in concert with HHS were
unable to reach agreement on these principles and the proposal
was set aside for the time being. It is uncertain whether this
proposal, or a variation thereof, will eventually be enacted.
Congress instead passed a $20.0 billion fiscal relief program
for the states, which included a $10.0&nbsp;billion increase in
the share of medical assistance expenditures provided to each
state&#146;s Medicaid program, known as the Federal Medical
Assistance Percentage, or FMAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If HHS&#146;s proposal is ultimately adopted and
the number of persons enrolled in Medicaid or SCHIP decreases in
the states in which we operate or the scope of benefits provided
is reduced, or expanded without a corresponding increase in
payments made to us, our growth, operations and financial
performance could be adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">We are required to comply with laws governing
the transmission, security and privacy of health information,
and we have not yet determined what our total compliance costs
will be.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, requires us to comply with
standards for the exchange of health information within our
company and with third parties, such as healthcare providers,
business associates, and our members. These include standards
for common healthcare transactions, such as claims information,
plan eligibility, payment information and the use of electronic
signatures, unique identifiers for providers, employers, health
plans and individuals, security, privacy and enforcement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HHS finalized the transaction standards on
August&nbsp;17, 2000. While we initially were required to comply
with them by October&nbsp;16, 2002, Congress passed legislation
in December 2001 that delayed the compliance date until
October&nbsp;16, 2003, but only for entities that submitted a
compliance plan to HHS by the original implementation deadline,
which we did. On February&nbsp;20, 2003, HHS published certain
modifications to the final transaction standards, but these
changes did not affect the October&nbsp;16, 2003 compliance
deadline. HHS issued the privacy standards on December&nbsp;28,
2000, and after certain delays, they became effective on
April&nbsp;14, 2001, with a compliance date of April&nbsp;14,
2003. Sanctions for failing to comply with the HIPAA health
information practices provisions include criminal penalties and
civil sanctions. The security standards became effective
April&nbsp;21, 2003, with a compliance date of April&nbsp;21,
2005 for most covered entities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HIPAA also provides that to the extent that state
laws impose stricter privacy standards than HIPAA privacy
regulations or to the extent that a state seeks and receives an
exception from HHS regarding certain state laws, such state
standards and laws will not be preempted. The states&#146;
ability to promulgate stricter rules, and uncertainty regarding
many aspects of the regulations, make compliance with the
relatively new regulatory landscape difficult and more expensive.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we have achieved substantial
compliance with HIPAA by the applicable deadlines. However,
given its complexity, the recent adoption of several final
regulations, the possibility that the regulations may change and
may be subject to changing and perhaps conflicting
interpretation, our ability to comply with all of the HIPAA
requirements is uncertain. Moreover, due to the evolving nature
of the HIPAA requirements we have not yet determined what our
total compliance costs will be.
</FONT>

<P align="center"><FONT size="2">11
</FONT>
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<P align="left">
<B><FONT size="2">Future changes in healthcare law may reduce
our profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Healthcare laws and regulations, and their
interpretations, are subject to frequent change. Changes in
existing laws or regulations, or their interpretations, or the
enactment of new laws or regulations could reduce our
profitability by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposing additional capital requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing our administrative and other costs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increasing mandated benefits;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">forcing us to restructure our relationships with
    providers; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">requiring us to implement additional or different
    programs and systems.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Changes in state law also may adversely affect
our profitability. Laws relating to managed care consumer
protection standards, including increased plan information
disclosure, limits to premium increases, expedited appeals and
grievance procedures, third party review of certain medical
decisions, health plan liability, access to specialists, clean
claim payment timing, physician collective bargaining rights and
confidentiality of medical records either have been enacted or
continue to be under discussion. New healthcare reform
legislation may require us to change the way we operate our
business, which may be costly. Further, although we have
exercised care in structuring our operations to attempt to
comply in all material respects with the laws and regulations
applicable to us, government officials charged with
responsibility for enforcing such laws may assert that we or
certain transactions in which we are involved are in violation
of these laws, or courts may ultimately interpret such laws in a
manner inconsistent with our interpretation. Therefore, it is
possible that future legislation and regulation and the
interpretation of laws and regulations could have a material
adverse effect on our ability to operate under the Medicaid,
Medicare and SCHIP programs and to continue to serve our members
and attract new members.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The statutory framework for our regulated
subsidiaries&#146; statutory net worth requirements may change
over time. For instance, New York is considering a 150% increase
in reserve requirements and the states in which we operate may
elect to adopt risk-based capital requirements, or RBC
requirements, based on guidelines adopted by the National
Association of Insurance Commissioners, or NAIC. Our
subsidiaries are also subject to their state regulators&#146;
general oversight powers. Regardless of whether they adopt the
RBC requirements of the NAIC, these state regulators can require
our subsidiaries to maintain minimum levels of statutory net
worth in excess of amounts required under the applicable state
laws if they determine that maintaining such additional
statutory net worth is in the best interests of our members. If
our subsidiaries are required to maintain higher levels of
statutory net worth due to the adoption of the RBC requirements
by the states in which we operate, or because state regulators
otherwise deem this to be in the best interests of our members,
this could have an adverse effect on our business.
</FONT>

<P align="left">
<B><FONT size="2">Restrictions on our ability to market would
adversely affect our revenue.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we enroll some of our new members
through auto enrollment programs and voluntary member
enrollment, we rely on our marketing and sales efforts for a
significant portion of our membership growth. All of the states
in which we currently operate permit marketing but impose strict
requirements and limitations as to the types of marketing
activities that are permitted. In Florida and New York, other
plans have been prohibited from engaging in marketing activities
for a period of time after being found to have violated the
state&#146;s requirements. While no such action is currently
pending or threatened by the State of Florida against us, from
time to time we have been cited, and in some cases fined, for
alleged marketing violations. Until recently, our New York
Medicare business was prohibited from marketing as a result of
past audits and regulatory deficiencies. If our marketing
efforts were to be prohibited or curtailed, our ability to
increase or sustain membership would be significantly harmed,
which would adversely affect our revenue.
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left">
<B><FONT size="2">Past operational deficiencies related to our
New York business may adversely affect our growth in
New&nbsp;York.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We inherited a number of operational deficiencies
when we acquired our New York business, which resulted in a
prohibition on marketing our Medicare program in New York.
Although we have made investments in our New York business to
address these deficiencies and are once again permitted to
market our Medicare health plan in New York, we continue to
experience problems related to our past deficiencies, including
gaps in our provider network. Moreover, members and providers
and potential members and providers may have a negative
perception of our New York health plans as a result of these
prior operational deficiencies. These issues may adversely
affect the growth of our business in New York.
</FONT>

<P align="left">
<B><FONT size="2">If we are unable to maintain satisfactory
relationships with our providers, our profitability could
decline and our ability to operate in some markets will be
adversely affected.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends, in large part, upon
our ability to enter into cost-effective contracts with
hospitals, physicians and other healthcare providers in
appropriate numbers in our geographic markets and at convenient
locations for our members. In any particular market, however,
providers could refuse to contract, demand higher payments or
take other actions that could result in higher medical benefits
expense. In some markets, certain providers, particularly
hospitals, physician/hospital organizations or multi-specialty
physician groups, may have significant market positions or near
monopolies. If such a provider or any of our other providers
refuse to contract with us, use their market position to
negotiate contracts that might not be cost-effective or
otherwise place us at a competitive disadvantage, those
activities could adversely affect our operating results in that
market area. In the long term, our ability to contract
successfully with a sufficiently large number of providers in a
particular geographic market will affect the relative
attractiveness of our managed care products in that market and
could preclude us from renewing our Medicaid or Medicare
contracts in those markets or from entering into new markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our provider contracts with network primary care
physicians and specialists generally have terms of one year,
with automatic renewal for successive one-year terms. We may
terminate these contracts for cause, based on provider conduct
or other appropriate reasons, subject to laws giving providers
due process rights. The contracts generally may be cancelled by
either party without cause upon 60 or 90&nbsp;days prior written
notice. Our contracts with hospitals generally have terms of one
to two years, with automatic renewal for successive one-year
terms. We may terminate these contracts for cause, based on
provider misconduct or other appropriate reasons. Our hospital
contracts generally may be cancelled by either party without
cause upon 120&nbsp;days prior written notice. We may be unable
to continue to renew such contracts or enter into new contracts
enabling us to serve our members profitably. We will be required
to establish acceptable provider networks prior to entering new
markets. Although we have established long-term relationships
with many of our network providers, we may be unable to maintain
those relationships or enter into agreements with providers in
new markets on a timely basis or under favorable terms. If we
are unable to retain our current provider contracts or enter
into new provider contracts timely or on favorable terms, our
profitability could decline.
</FONT>

<P align="left">
<B><FONT size="2">If a state fails to renew its federal waiver
application for mandated Medicaid enrollment into managed care
or such application is denied, our membership in that state will
likely decrease.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A significant percentage of our Medicaid plan
enrollment results from mandatory Medicaid enrollment in managed
care plans. States may only mandate Medicaid enrollment into
managed care under federal waivers or demonstrations. Waivers
and programs under demonstrations are generally approved for
two-year periods and can be renewed on an ongoing basis if the
state applies and the waiver request is approved or renewed by
CMS. We have no control over this renewal process. If a state in
which we operate does not renew its mandated program or the
federal government denies the state&#146;s application for
renewal, our business would suffer as a result of a likely
decrease in membership.
</FONT>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">
<B><FONT size="2">We rely on the accuracy of eligibility lists
provided by the government. Inaccuracies in those lists would
adversely affect our results of operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Premium payments to us are based upon eligibility
lists produced by the government. From time to time, states
require us to reimburse them for premiums paid to us based on an
eligibility list that a state later discovers contains
individuals who are not in fact eligible for any
government-sponsored program or are eligible for a different
premium category or a different program. Alternatively, a state
could fail to pay us for members for whom we are entitled to
payment. Our results of operations would be adversely affected
as a result of such reimbursement to the state if we had made
related payments to providers and were unable to recoup such
payments from the providers.
</FONT>

<P align="left">
<B><FONT size="2">Our business depends on our information
systems, and our inability to effectively integrate, manage and
keep secure our information systems could disrupt our
operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is dependent on effective and secure
information systems that assist us in, among other things,
monitoring utilization and other cost factors, supporting our
healthcare management techniques, processing provider claims and
providing data to our regulators. Our providers also depend upon
our information systems for membership verifications, claims
status and other information. If we experience a reduction in
the performance, reliability or availability of our information
systems, our operations and ability to produce timely and
accurate reports could be adversely affected. In addition, many
of our key software applications are licensed from third
parties. If the owner of the software becomes insolvent or is
otherwise unable to support the software, our operations could
be adversely affected. Our operations could also be adversely
affected if the software owner is unwilling to continue to
support the software or charges materially increased fees for
such support.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will not have a fully implemented disaster
recovery and business continuity program until the end of 2004.
Events outside our control, including acts of nature, such as
earthquakes, fires or hurricanes, or terrorism, could
significantly impair our information systems and applications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our information systems and applications require
continual maintenance, upgrading and enhancement to meet our
operational needs. If we are unable to maintain or expand our
systems, we could suffer from, among other things, operational
disruptions, such as the inability to pay claims or to make
claims payments on a timely basis, loss of members, difficulty
in attracting new members, regulatory problems and increases in
administrative expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business requires the secure transmission of
confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of
cryptography or other events or developments could result in
compromises or breaches of our security systems and client data
stored in our information systems. Anyone who circumvents our
security measures could misappropriate our confidential
information or cause interruptions in services or operations.
The Internet is a public network, and data is sent over this
network from many sources. In the past, computer viruses or
software programs that disable or impair computers have been
distributed and have rapidly spread over the Internet. Computer
viruses could be introduced into our systems, or those of our
providers or regulators, which could disrupt our operations, or
make our systems inaccessible to our providers or regulators. We
may be required to expend significant capital and other
resources to protect against the threat of security breaches or
to alleviate problems caused by breaches. Because of the
confidential health information we store and transmit, security
breaches could expose us to a risk of regulatory action,
litigation, possible liability and loss. Our security measures
may be inadequate to prevent security breaches, and our business
operations would be adversely affected by cancellation of
contracts and loss of members if they are not prevented.
</FONT>

<P align="left">
<B><FONT size="2">We may not have adequate intellectual property
rights in our brand names for our health plans, and we may be
unable to adequately enforce such rights.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends, in part, upon our ability to
market our health plans under our brand names, including
&#147;WellCare,&#148; &#147;HealthEase&#148; and
&#147;Staywell.&#148; While we hold federal trademark
registrations for the &#147;WellCare&#148; trademark, we have
not taken enforcement action to prevent infringement of our
federal
</FONT>

<P align="center"><FONT size="2">14
</FONT>

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<DIV align="left">
<FONT size="2">trademark and have not secured registrations of
our other marks. Other businesses may have prior rights in the
brand names that we market under or in similar names, which
could limit or prevent our ability to use these marks, or to
prevent others from using similar marks. If we are unable to
prevent others from using our brand names, or if others prohibit
us from using them, our revenues could be adversely affected.
Even if we are able to protect our intellectual property rights
in such brands, we could incur significant costs in
doing&nbsp;so.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Ineffective management of our growth may
adversely affect our results of operations, financial condition
and business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depending on acquisition and other opportunities,
we expect to continue to increase our membership and to expand
into other markets. In 1999, we had total revenue of
approximately $275&nbsp;million. In 2003, we had total revenue
of more than $1.0&nbsp;billion. Continued rapid growth could
place a significant strain on our management and on other
resources. Our ability to manage our growth may depend on our
ability to strengthen our management team and attract, train and
retain skilled associates, and our ability to implement and
improve operational, financial and management information
systems on a timely basis. If we are unable to manage our growth
effectively, our financial condition and results of operations
could be materially and adversely affected. In addition, due to
the initial substantial costs related to potential acquisitions,
rapid growth could adversely affect our short-term profitability
and liquidity.
</FONT>

<P align="left">
<B><FONT size="2">We are subject to competition that may
adversely affect our ability to increase or maintain membership
in the markets we serve.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate in a highly competitive environment
and in an industry that is currently subject to significant
changes due to business consolidations, new strategic alliances
and aggressive marketing practices by other managed care
organizations. We compete for members principally on the basis
of size, location and quality of provider network, benefits
provided, quality of service and reputation. A number of these
competitive elements are partially dependent upon and can be
positively affected by financial resources available to a health
plan. Many other organizations with which we compete have
substantially greater financial and other resources than we do.
In addition, changes resulting from MMA may bring additional
competitors into our market area. As a result, we may be unable
to increase or maintain our membership.
</FONT>

<P align="left">
<B><FONT size="2">Restrictions and covenants in our credit
facility and instruments governing our additional indebtedness
may limit our ability to make certain acquisitions and declare
dividends.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a $15&nbsp;million credit facility that
we plan to use for general corporate purposes and acquisitions.
We also have other indebtedness, including $119.7&nbsp;million
in debt to the selling stockholders of our Florida operations.
Our credit facility documents and other debt instruments contain
various restrictions and covenants, including prescribed debt
coverage ratios, medical loss ratios, which we refer to as
medical benefits ratios, net worth requirements and acquisition
limitations, that restrict our financial and operating
flexibility, including our ability to make certain acquisitions
above specified values and declare dividends without lender
approval.
</FONT>

<P align="left">
<B><FONT size="2">Our failure to comply with covenants in our
debt instruments could result in our indebtedness being
immediately due and payable and the loss of our
assets.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had total
consolidated long-term debt of approximately
$135.8&nbsp;million, including $119.7&nbsp;million owed to the
selling stockholders of our Florida operations. Our indebtedness
to these shareholders is secured by a pledge of a portion of the
outstanding capital stock of our subsidiary, WellCare Health
Plans, Inc., which is the parent corporation of all of our
operating subsidiaries. The percentage of the total outstanding
capital stock of this subsidiary subject to this pledge is to
decrease as the indebtedness is paid off, but will not be
reduced below 51% until the debt is paid in full. Our credit
facility is similarly secured by a pledge of stock of our
operating subsidiaries. If we fail to pay any of our
indebtedness when due, or if we breach any of the other
covenants in the instruments governing our indebtedness, one or
more events of default, including cross-defaults among multiple
portions of our indebtedness, could result. These events of
default could permit our creditors to declare all amounts owing
to be immediately due and payable. If we were
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<DIV align="left">
<FONT size="2">unable to repay indebtedness owed to our secured
creditors, they could proceed against the collateral securing
that indebtedness.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">We are dependent on our executive officers and
other key associates.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operations are highly dependent on the
efforts of our President and Chief Executive Officer and our
other senior executives. Although some of our executives have
entered into employment agreements with us, these agreements may
not provide sufficient incentives for those executives to
continue their employment with us. While we believe that we
could find replacements, the loss of their leadership, knowledge
and experience could adversely affect our operations. Replacing
many of our executive officers might be difficult or take an
extended period of time because a limited number of individuals
in the managed care industry have the breadth and depth of
skills and experience necessary to operate and expand
successfully a business such as ours. Our success is also
dependent on our ability to hire and retain qualified
management, technical and medical personnel. We may be
unsuccessful in recruiting and retaining such personnel, which
could adversely affect our operations.
</FONT>

<P align="left">
<B><FONT size="2">Claims relating to medical malpractice and
other litigation could cause us to incur significant
expenses.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our providers involved in medical care decisions
may be exposed to the risk of medical malpractice claims. A
small percentage of these providers do not have malpractice
insurance. Although our network providers are independent
contractors, claimants sometimes allege that a managed care
organization such as us should be held responsible for alleged
provider malpractice, and some courts have permitted that theory
of liability; however, the Florida legislature recently enacted
legislation that has partially limited liability of managed care
organizations for provider malpractice. In addition, managed
care organizations may be sued directly for alleged negligence,
such as in connection with the credentialing of network
providers or for improper denials or delay of care. In addition,
Congress and several states are considering legislation that
would expressly permit managed care organizations to be held
liable for negligent treatment decisions or benefits coverage
determinations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain errors and omissions insurance and
other insurance coverage that we believe is adequate based on
industry standards. However, potential liabilities may not be
covered by insurance, our insurers may dispute coverage, or may
be unable to meet their obligations, or the amount of our
insurance coverage may be inadequate. We cannot assure you that
we will be able to obtain insurance coverage in the future, or
that insurance will continue to be available on a cost-effective
basis, if at all. Moreover, even if claims brought against us
are unsuccessful or without merit, we would have to defend
ourselves against such claims. The defense of any such actions
may be time-consuming and costly, and may distract our
management&#146;s attention. As a result, we may incur
significant expenses and may be unable to effectively operate
our business.
</FONT>

<P align="left">
<B><FONT size="2">Our results of operations could be adversely
affected by downturns in general economic conditions.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of persons eligible to receive
Medicaid benefits has historically increased more rapidly during
periods of rising unemployment, corresponding to less favorable
general economic conditions. However, during such economic
downturns, state and federal budgets often decrease, causing
states or the federal government to attempt to cut healthcare
programs, benefits and rates. As a result of state budget
shortfalls, all of the states in which we currently operate are
considering future changes in Medicaid reimbursement rates or
payments. If federal or state funding is decreased, our results
of operations could be adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">Growth in the number of Medicaid eligibles may
be counter-cyclical, which could adversely affect our operating
results when general economic conditions are
improving.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of persons eligible to receive
Medicaid benefits may grow more slowly or even decline if
economic conditions improve. Therefore, improvements in general
economic conditions may cause our membership levels to decrease,
thereby causing our operating results to suffer, which could
lead to decreases in our stock price during periods in which
stock prices in general are increasing.
</FONT>

<P align="center"><FONT size="2">16
</FONT>

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<P align="left">
<B><FONT size="2">Negative publicity regarding the managed care
industry may harm our business and operating results.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, the managed care industry has
received negative publicity. This publicity has led to increased
legislation, regulation, review of industry practices and
private litigation in the commercial sector. These factors may
adversely affect our ability to market our services, require us
to change our services and increase the regulatory burdens under
which we operate, further increasing the costs of doing business
and adversely affecting our operating results.
</FONT>

<P align="left">
<B><FONT size="2">If state regulators do not approve payments of
dividends and distributions by our affiliates to us, it may
adversely affect our business strategy.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate principally through our health plan
subsidiaries. These subsidiaries are subject to laws and
regulations that limit either the amount of dividends and
distributions that they can pay to us or the amount of fees that
may be paid to affiliates of our health plan subsidiaries
without prior approval of, or notification to, state regulators.
In addition, our New York and Connecticut subsidiaries may not
pay any dividends until September 2004 without regulatory
approval. The discretion of the state regulators, if any, in
approving or disapproving a dividend is not clearly defined.
Health plans that declare non-extraordinary dividends must
usually provide notice to the regulators in advance of the
intended distribution date of a non-extraordinary dividend. The
aggregate amounts our health plan subsidiaries could have paid
us at December&nbsp;31, 2001, 2002 and 2003 without approval of
the regulatory authorities were $0, $500,000 and $500,000,
respectively, assuming no dividends had been paid during the
respective calendar years. If the regulators were to deny or
significantly restrict our subsidiaries&#146; requests to pay
dividends to us or to pay fees to the affiliates of our health
plan subsidiaries, the funds available to our company as a whole
would be limited, which could harm our ability to implement our
business strategy. For example, we could be hindered in our
ability to make debt service payments on amounts drawn from our
credit facility.
</FONT>

<P align="left">
<B><FONT size="2">Recently enacted changes in securities laws
and regulations are likely to increase our costs.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Sarbanes-Oxley Act of 2002 that became law in
July 2002, as well as new rules subsequently implemented by the
Securities and Exchange Commission, have required changes in
some of our corporate governance practices. In addition, the New
York Stock Exchange has recently adopted revisions to its
requirements for listed companies. We expect these new rules,
and interpretations of these rules, and regulations to increase
our legal and financial compliance costs, and to make some
activities more difficult, time consuming and/or costly. We also
expect these new rules and regulations to make it more difficult
and expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage. These new
rules and regulations could also make it more difficult for us
to attract and retain qualified members of our board of
directors, particularly to serve on our audit committee, and
executive officers.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to this Offering</FONT></B>

<P align="left">
<B><FONT size="2">There has been no public market, and it is
possible that no trading market will develop or be maintained,
for our common stock and you may not be able to resell shares of
our common stock for an amount equal to or more than your
purchase price.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering there has not been a
public market for our common stock. We cannot predict the extent
to which a trading market will develop, how liquid that market
might become or whether it will be maintained. The initial
public offering price will be determined by negotiation between
the representatives of the underwriters and us and may not be
indicative of prices that will prevail in the trading market. If
an active trading market fails to develop or be maintained, you
may be unable to sell the shares of common stock purchased in
this offering at an acceptable price or at all.
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<P align="left">
<B><FONT size="2">Volatility of our stock price could adversely
affect stockholders.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market price of our common stock could
fluctuate significantly as a result of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">state and federal budget decreases;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">adverse publicity regarding health maintenance
    organizations and other managed care organizations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">government action regarding eligibility;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in government payment levels;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in state mandatory programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in expectations of our future financial
    performance or changes in financial estimates, if any, of public
    market analysts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements relating to our business or the
    business of our competitors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">conditions generally affecting the managed care
    industry or our provider networks;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our operating or acquisition
    strategy;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the operating and stock price performance of
    other comparable companies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the termination of any of our contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory or legislative changes; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">general economic conditions, including inflation
    and unemployment rates.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investors may not be able to resell their shares
of our common stock following periods of volatility because of
the market&#146;s adverse reaction to that volatility. Our stock
may not trade at the same levels as the stock of other
healthcare companies, and the market in general may not sustain
its current prices.
</FONT>

<P align="left">
<B><FONT size="2">You will experience immediate and significant
dilution in the book value per share and will experience further
dilution with the future exercise of stock options.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If you purchase common stock in this offering,
you will incur immediate dilution, which means that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">you will pay a price per share that exceeds by
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
    per share net tangible book value of our assets immediately
    following the offering; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the investors in the offering will have
    contributed &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percent
    of the total amount to fund us (before deducting the estimated
    underwriting discounts and commissions and offering expenses)
    but will own
    only &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percent
    of our outstanding shares of our common stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, we had outstanding options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;were
vested, at a weighted average price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. From time to time, we may issue additional options to
associates, non-employee directors and consultants pursuant to
our equity incentive plans. These options generally vest
commencing one year from the date of grant and continue vesting
over a three-year period. As these options vest, you will
experience further dilution as these stock options are exercised
by their holders.
</FONT>

<P align="left">
<B><FONT size="2">Future sales, or the availability for sale, of
our common stock may cause our stock price to decline.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, we, along with
our officers, directors, stockholders and option holders, will
have agreed prior to the commencement of this offering, subject
to limited exceptions, not to sell or transfer any shares of
common stock for 180&nbsp;days after the date of this prospectus
without the underwriters&#146; consent. However, the
underwriters may release these shares from these restrictions at
any time. In evaluating whether to grant such a request, the
underwriters may consider a number of factors with a view toward
maintaining an orderly market for, and minimizing volatility in
the market price of, our common stock. These factors include,
among others, the number of shares involved, recent trading
volume and prices of the stock,
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">the length of time before the lock-up expires and
the reasons for, and the timing of, the request. We cannot
predict what effect, if any, market sales of shares held by any
stockholder or the availability of these shares for future sale
will have on the market price of our common stock.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on shares outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock may be sold in the public market by existing
stockholders 181&nbsp;days after the date of this prospectus,
subject to applicable volume and other limitations imposed under
federal securities laws. Sales of substantial amounts of our
common stock in the public market after the completion of this
offering, or the perception that such sales could occur, could
adversely affect the market price of our common stock and could
materially impair our future ability to raise capital through
offerings of our common stock. See &#147;Shares Eligible for
Future Sale&#148; below for a more detailed description of the
restrictions on selling shares of our common stock after this
offering.
</FONT>

<P align="left">
<B><FONT size="2">We have broad discretion to spend the net
proceeds of this offering and may spend the proceeds in ways
with which you may not agree.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business plan is general in nature and is
subject to change based upon changing conditions and
opportunities. Our management will retain broad discretion to
expend a significant portion of the net proceeds of this
offering. Because of the number and variability of factors that
will determine the use of these proceeds, our actual allocation
of the proceeds may vary substantially from our current
intentions. If management fails to use the proceeds effectively,
our operating results could suffer. See &#147;Use of
Proceeds&#148; for a more detailed description of how management
intends to apply the proceeds from this offering.
</FONT>

<P align="left">
<B><FONT size="2">The concentration of our capital stock
ownership upon the completion of this offering will likely limit
your ability to influence corporate matters.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Soros Private Equity Investors LP, or SPEI,
owned &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding capital stock as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004. Upon the completion of this offering, SPEI will
beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of outstanding capital stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
if the underwriters exercise their over-allotment option in
full. In addition, we anticipate that our executive officers and
directors will together beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our capital stock. One of the members of our board of
directors is associated with SPEI. As a result, this particular
director may have the ability to influence our management and
affairs and determine the outcome of matters submitted to
stockholders for approval, including the election and removal of
directors, amendments to our charter, approval of any
equity-based employee compensation plan and any merger,
consolidation or sale of all or substantially all of our assets.
</FONT>

<P align="left">
<B><FONT size="2">It may be difficult for a third party to
acquire us, which could inhibit stockholders from realizing a
premium on their stock price.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After completion of this offering, SPEI will
beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the voting power of our common stock. For as long as SPEI
owns a majority of our common stock, a takeover of our company
will require SPEI&#146;s approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, provisions of our certificate of
incorporation, bylaws and provisions of applicable Delaware law
may discourage, delay or prevent a merger or other change in
control that a stockholder may consider favorable.
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<DIV align="left">
<A name='103'></A>
</DIV>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus contains forward-looking
statements that address, among other things, market acceptance
of our products and services, expansion into new targeted
markets, product development, sales and marketing strategies,
development and maintenance of strategic alliances,
technological advancement, use of proceeds, projected capital
expenditures, liquidity and availability of additional funding
sources. These statements may be found in the sections of this
prospectus entitled &#147;Prospectus Summary,&#148; &#147;Risk
Factors,&#148; &#147;Use of Proceeds,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; &#147;Our
Business&#148; and in this prospectus generally. In some cases,
you can identify forward-looking statements by terminology such
as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148;
&#147;expects,&#148; &#147;plans,&#148; &#147;anticipates,&#148;
&#147;believes,&#148; &#147;estimates,&#148;
&#147;predicts,&#148; &#147;potential,&#148;
&#147;continues&#148; or the negative of such terms or other
comparable terminology. Investors are cautioned that matters
subject to forward-looking statements involve risks and
uncertainties, including economic, regulatory, competitive and
other factors that may affect our business. We undertake no
obligation beyond that required by law to update publicly any
forward-looking statements for any reason, even if new
information becomes available or other events occur in the
future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Actual results may differ from projections or
estimates due to a variety of important factors. The expiration,
cancellation or suspension of our HMO contracts by the federal
or state governments could significantly impair our results of
operations. In addition, our results of operations and
projections of future earnings depend in large part on
accurately predicting and effectively managing health benefits
and other operating expenses. A variety of factors, including
competition, changes in healthcare practices, changes in federal
or state laws and regulations or their interpretations,
inflation, provider contract changes, changes in or terminations
of our contracts with government agencies, new technologies,
government-imposed surcharges, taxes or assessments, reduction
in provider payments by governmental payors, major epidemics,
disasters and numerous other factors affecting the delivery and
cost of healthcare, such as major healthcare providers&#146;
inability to maintain their operations, may in the future affect
our ability to control our medical costs and other operating
expenses. Governmental action or business conditions could
result in premium revenues not increasing to offset any increase
in medical costs and other operating expenses. Once set,
premiums are generally fixed for one-year periods and,
accordingly, unanticipated costs during such periods cannot be
recovered through higher premiums. Furthermore, if we are unable
to accurately estimate incurred but not reported medical costs,
our profitability may be affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to these factors and risks, no assurance can
be given with respect to our future premium levels or our
ability to control our future medical costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, legislative and regulatory
proposals have been made at the federal and state government
levels related to the healthcare system, including but not
limited to limitations on managed care organizations (including
benefit mandates) and reform of the Medicaid and Medicare
programs. Such legislative and regulatory action could have the
effect of reducing the premiums paid to us by governmental
programs or increasing our medical costs. We are unable to
predict the specific content of any future legislation, action
or regulation that may be enacted or when any such future
legislation or regulation will be adopted. Therefore, we cannot
predict accurately the effect of such future legislation, action
or regulation on our business.
</FONT>

<P align="center"><FONT size="2">20
</FONT>
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<DIV align="left">
<A name='104'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to receive approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
in net proceeds from the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering, assuming that the initial
public offering price is
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. We
expect to receive approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters&#146; over-allotment option is exercised in
full. We will not receive any of the proceeds from the sale of
shares by the selling stockholder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to use the net proceeds of this
offering for the repayment of indebtedness, working capital and
other general purposes, which may include acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to repay a portion of our outstanding
indebtedness with proceeds from this offering. This indebtedness:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">matures in September 2006;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">bears interest at the rate of 5&nbsp;1/4% per
    annum; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">was used to finance a portion of the purchase
    price of our Florida operations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amounts that we actually expend for working
capital purposes will vary significantly depending on a number
of factors, including revenue growth, if any, and the amount of
cash we generate from operations. As a result, we will retain
broad discretion in the allocation of the net proceeds of this
offering. Pending the uses described above, we will invest the
net proceeds in short-term, interest-bearing, investment-grade
securities.
</FONT>

<DIV align="left">
<A name='105'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have never paid cash dividends on our common
stock. We currently intend to retain any future earnings to fund
the development and growth of our business, and we do not
anticipate paying any cash dividends in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to pay dividends is dependent on our
receipt of cash dividends from our subsidiaries. Laws of the
states in which we operate or may operate, as well as
requirements of the government-sponsored health programs in
which we participate, limit the ability of our subsidiaries to
pay dividends to us. In addition, the terms of our credit
facility and other indebtedness limit our ability to pay
dividends. Any future determination to pay dividends will be at
the discretion of our board of directors and will depend upon,
among other factors, our results of operations, financial
condition, capital requirements and contractual restrictions.
</FONT>

<P align="center"><FONT size="2">21
</FONT>
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<DIV align="left">
<A name='124'></A>
</DIV>

<!-- link1 "REORGANIZATION AS A CORPORATION" -->

<P align="center">
<B><FONT size="2">REORGANIZATION AS A CORPORATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">WellCare Group, Inc., a Delaware corporation, the
shares of which are being sold to the public in this offering,
will be the successor to WellCare Holdings, LLC, our current
holding company, following a reorganization that will take place
immediately prior to the closing of this offering. In
conjunction with the reorganization, our name will be changed to
WellCare Health Plans, Inc. The reorganization will not affect
our operations, which we will continue to conduct through our
operating subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reorganization will be effected through the
merger of WellCare Holdings, LLC with and into WellCare Group,
Inc., a wholly-owned subsidiary of WellCare Holdings, LLC. Each
outstanding limited liability company unit of WellCare Holdings,
LLC will be converted into shares of common stock according to
the relative rights and preferences of such units and the
initial public offering price of the common stock offered hereby.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the reorganization, WellCare Holdings,
LLC had three outstanding classes of common units, designated as
Class&nbsp;A Common Units, Class&nbsp;B Common Units and
Class&nbsp;C Common Units. These outstanding classes of common
units generally differ as to their relative priority with
respect to distributions and as to voting rights. Assuming an
initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, holders of common units will receive an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in connection with the merger.
</FONT>

<P align="center"><FONT size="2">22
</FONT>

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<DIV align="left">
<A name='106'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our capitalization
as of December&nbsp;31, 2003. We present capitalization:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">On an actual basis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">On a pro forma basis, to reflect our
    reorganization as a corporation and the resultant conversion of
    all outstanding limited liability company units into shares of
    common stock, immediately prior to the closing of this offering;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">On a pro forma, as adjusted basis to give effect
    to our receipt of the estimated net proceeds from the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock offered in the offering at an assumed initial
    public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting underwriting discounts and commissions
    and estimated offering expenses and the application of the net
    proceeds as described under &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As&nbsp;Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">except per unit/share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capitalization:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#146;/Stockholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common Units, 23,507,839 units
    issued and outstanding, actual; no units issued and outstanding,
    pro forma or pro forma, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B Common Units, no units issued and
    outstanding, actual; no units issued and outstanding, pro forma
    or pro forma, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C Common Units, 4,842,508 units issued
    and outstanding, actual; no units issued and outstanding, pro
    forma or pro forma, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, $0.01 par value, no shares
    authorized, issued and outstanding,
    actual; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, pro forma and pro forma, as
    adjusted; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding, pro
    forma; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding, pro forma, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock, $0.01 par value, no shares
    authorized, issued and outstanding,
    actual; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, pro forma and pro forma, as adjusted; no shares
    issued and outstanding, pro forma or pro forma, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total members&#146;/stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our capitalization information represented above
excludes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares of common stock available for issuance
    pursuant to our incentive equity plans, of
    which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    are subject to outstanding options as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares of common stock reserved for future
    issuances under our employee stock purchase plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='107'></A>
</DIV>

<!-- link1 "DILUTION" -->

<P align="center">
<B><FONT size="2">DILUTION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
public offering price per share of our common stock and the as
adjusted net tangible book value per share of common stock after
giving effect to this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003 and after giving
effect to our reorganization as a corporation and the resultant
conversion of all outstanding limited liability company units
for shares of common stock immediately prior to the closing of
this offering, our pro forma net tangible book value was
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. &#147;Net tangible book value&#148; per
share represents the amount of our total tangible assets reduced
by the amount of our total liabilities, divided by the number of
shares of common stock outstanding. As of December&nbsp;31,
2003, our pro forma net tangible book value, as adjusted for the
sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, based on an assumed initial public offering
price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and after deducting the underwriting discounts and
commissions and other estimated offering expenses, would have
been approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors. The following table illustrates this per
share dilution:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assumed initial public offering price per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share at
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase per share attributable to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share after
    the offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution per share to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summarizes, on a pro forma, as
adjusted basis, as of December&nbsp;31, 2003, the differences
between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors
with respect to the number of shares of common stock purchased
from us based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preceding table excludes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares of common stock available for issuance
    pursuant to our incentive equity plans, of
    which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    are subject to outstanding options as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares of common stock reserved for future
    issuances under our employee stock purchase plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent all of these options had been
exercised as of December&nbsp;31, 2003, net tangible book value
per share after this offering would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
total dilution per share to new investors would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="center"><FONT size="2">24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='108'></A>
</DIV>

<!-- link1 "SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA" -->

<P align="center">
<B><FONT size="2">SELECTED CONSOLIDATED AND COMBINED FINANCIAL
DATA</FONT></B>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read the following selected financial data in conjunction
with our financial statements and related notes and
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; included elsewhere in
this prospectus. We derived the combined statements of
operations data for the years ended December&nbsp;31, 1999 and
2000 and the balance sheet data as of December&nbsp;31, 1999 and
2000 from the unaudited financial statements of our Predecessor.
We derived the combined statements of operations for the year
ended December&nbsp;31, 2001, and the seven-month period ended
July&nbsp;31, 2002, and the balance sheet data as of
December&nbsp;31, 2001 from the audited financial statements of
our Predecessor. We derived the consolidated statements of
operations data for the five-month period ended
December&nbsp;31, 2002 and the year ended December&nbsp;31,
2003, and the balance sheet data as of December&nbsp;31, 2002
and 2003, from our audited consolidated financial statements.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
acquisition of the WellCare group of companies as of
July&nbsp;31, 2002 was accounted for using the purchase method
of accounting, as described in Note 2 to our consolidated and
combined financial statements included elsewhere in this
prospectus. Accordingly, the combined results of operations and
financial condition at dates prior to July&nbsp;31, 2002 are not
comparable to the consolidated results of operations and
financial condition after that date.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands, except per unit/share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated and Combined Statements of Income
    (Loss):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">451,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">329,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">740,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,976</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">517,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,042,852</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">431,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,045,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">609,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">145,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,818</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">368,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">441,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">728,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">392,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income (loss)&nbsp;before income
    taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income tax expense<SUP>(3)</SUP></FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income attributable per common
    unit:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per unit&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands, except per unit/share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Pro forma net income per common
    share:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Average common units outstanding:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Pro forma common shares outstanding:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating Statistics:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    consolidated<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    Medicaid<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.7%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.3%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits ratio&#151;
    Medicare<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefit ratio&#151; other<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.6%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative expense
    ratio<SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.8%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.1%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; consolidated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">317,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">374,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">555,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">323,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">512,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#151; commercial
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjusted<SUP>(6)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">409,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt (including current maturities)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193,533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">397,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    (deficit)<SUP>(7)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,684</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Other premium revenue relates to our commercial
    business that is no longer marketed.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Other medical benefits relates to our commercial
    business that is no longer marketed.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses. Pro forma tax
    expense for each of the years 1999, 2000, 2001, and the seven
    months ended July&nbsp;31, 2002 at an estimated tax rate of 42%
    (our effective tax rate as the Successor) is $100, $0, $8,990,
    and $11,731, respectively.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Medical benefits ratio represents medical
    benefits expense as a percentage of premium revenue.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(5)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Selling, general and administrative expense ratio
    represents selling, general and administrative expense as a
    percentage of total revenue and excludes depreciation and
    amortization expense for purposes of determining the ratio.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(6)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The as adjusted balance sheet data gives effect
    to the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, less the estimated underwriting discounts, commissions
    and estimated offering expenses payable by us.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(7)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Total stockholders&#146; equity reflects
    stockholders&#146; equity for Predecessor and on an as adjusted
    basis for 2003 and reflects limited liability company membership
    interests during 2002 and on an actual basis for 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following discussion and analysis of the
financial condition and results of operations of WellCare should
be read in conjunction with &#147;Selected Consolidated and
Combined Financial Data&#148; and WellCare&#146;s combined and
consolidated financial statements and related notes appearing
elsewhere in this prospectus. The following discussion contains
forward-looking statements that involve risks, uncertainties and
assumptions that could cause our actual results to differ
materially from management&#146;s expectations. Factors that
could cause such differences include those set forth under
&#147;Risk Factors,&#148; &#147;Forward-Looking
Statements,&#148; &#147;Business&#148; and elsewhere in this
prospectus.
</FONT>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. Our business currently
operates health plans in Florida, New York and Connecticut,
serving approximately 555,000 members as of December&nbsp;31,
2003. The following tables summarize our membership by state and
our membership by program as of December 31, 2003:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">State</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Members</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Florida
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">475,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Connecticut
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Program</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Members</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">512,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were formed in May 2002 to acquire the
WellCare group of companies. Until the closing of that
acquisition in July 2002, the companies that comprise our
Florida operations had operated as closely-held businesses, and
our New York and Connecticut businesses had operated as
subsidiaries of a public company. Results of operations
beginning July&nbsp;31, 2002 reflect our operations under
current management.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We enter into contracts generally on an annual
basis with government agencies that administer health benefits
programs. We receive premiums from state and federal agencies
for the members that are assigned to or have selected us to
provide healthcare services under each benefit program. The
amount of premiums we receive for each member is fixed, although
it varies according to each government program, based on the
healthcare needs of each program&#146;s recipients, the cost of
healthcare in their geographic location and other requirements
of the program.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our largest expense is the cost of medical
benefits that we provide, which is based primarily on our
arrangements with healthcare providers. Our profitability
depends on our ability to predict and effectively manage medical
benefits expense relative to the fixed premiums we receive. Our
arrangements with providers fall into two broad categories:
capitation arrangements, where we pay the providers a fixed fee
per member, and fee-for-service and risk-sharing arrangements,
where we assume all or part of the risk of the cost of the
healthcare provided. Generally, capitation payments represent
less than 12% of our total medical benefits expense. Other
components of medical benefits expense are variable and require
estimation and ongoing cost management.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Estimation of medical benefits expense is our
most significant critical accounting estimate. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#151; Critical Accounting
Policies.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We use a variety of techniques to manage our
medical benefits expense, including payment methods to
providers, referral requirements, quality and disease management
programs, reinsurance and member co-payments and premiums for
some of our Medicare plans. National healthcare costs have been
increasing at a
</FONT>

<P align="center"><FONT size="2">27
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">higher rate than the general inflation rate,
however, and relatively small changes in our medical benefits
expense relative to premiums that we receive can create
significant changes in our financial results. Changes in
healthcare laws, regulations and practices, levels of use of
healthcare services, competitive pressures, hospital costs,
major epidemics, terrorism or bio-terrorism, new medical
technologies and other external factors could reduce our ability
to manage our medical benefits expense effectively.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of our primary tools for measuring
profitability is our medical benefits ratio, the ratio of our
medical benefits expense to the premiums we receive. Changes in
the medical benefits ratio from period to period result from
changes in Medicaid and Medicare funding, our ability to manage
medical costs and changes in accounting estimates related to
incurred but not reported claims. We use medical benefits ratios
both to monitor our management of medical benefits expense and
to make various business decisions, including what healthcare
plans to offer, what geographic areas to enter or exit and the
selection of healthcare providers. Although medical benefits
ratios play an important role in our business strategy, we may
be willing to enter into provider arrangements that might
produce a less favorable medical benefits ratio if those
arrangements, such as capitation or risk-sharing, would likely
lower our exposure to risk or if we believe that such a strategy
would result in increased member enrollment.
</FONT>

<P align="left">
<B><FONT size="2">Corporate History and WellCare
Acquisitions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Well Care HMO subsidiary was established in
1985 by a group of physicians located in Tampa, Florida, and
began offering Medicaid managed care services in 1994 and
Medicare services in 2000. Our HealthEase subsidiary was formed
in May 2000 to acquire the business of Tampa General Health
Plan, Inc., including its HMO license and approximately 5,900
Medicaid members. HealthEase subsequently acquired almost
100,000 Medicaid members from Humana, Inc. in June 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2002, our current management acquired the
WellCare group of companies in two concurrent transactions. In
the first transaction, we acquired our Florida operations,
including our Well Care HMO and HealthEase subsidiaries, in a
stock purchase. The purchase price for this transaction
consisted of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">$50&nbsp;million in cash;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of a senior subordinated promissory
    note in the original principal amount of $53&nbsp;million,
    subject to adjustments for earnouts and other purchase price
    adjustments; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase 2,287,037 Class&nbsp;B
    Common Units of WellCare Holdings, LLC.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purchase price was subject to adjustment,
based upon a number of earnout and other calculations. In
February 2004, the remaining principal amount of the note was
fixed at $119.7&nbsp;million pursuant to the terms of a
settlement agreement with the selling stockholders. See
&#147;Certain Transactions&nbsp;&#151; Other Agreements with
Selling Stockholders&nbsp;&#151; Amendment and Settlement
Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the second transaction, we acquired The
WellCare Management Group, Inc., a publicly-traded holding
company and the parent company of our New York and Connecticut
operations, through a merger of that company into a wholly-owned
subsidiary of ours. The purchase price for this transaction
consisted of approximately $7.72&nbsp;million in cash.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are currently evaluating potential
acquisitions that would increase our membership and broaden our
geographic presence. These potential acquisitions are at various
stages of consideration and discussion, and we may enter into
letters of intent or other arrangements relating to these
transactions at any time. However, we cannot predict when or
whether we will actually acquire these businesses.
</FONT>

<P align="left">
<B><FONT size="2">Basis of Presentation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">WellCare, as it existed prior to the
July&nbsp;31, 2002 acquisition of the WellCare group of
companies, is referred to as &#147;Predecessor.&#148; WellCare,
as it existed on and after July&nbsp;31, 2002, is referred to as
the &#147;Successor,&#148; &#147;we&#148; or &#147;us.&#148;
</FONT>

<P align="center"><FONT size="2">28
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated results of operations include
the accounts of the Successor and all of its subsidiaries.
Significant intercompany accounts and transactions have been
eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined results of operations include all of
the accounts of the Predecessor&#146;s entities under common
control prior to the July&nbsp;31, 2002 acquisition of the
WellCare group of companies. Significant intercompany accounts
and transactions have been eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined results of operations of the
Predecessor also do not reflect the effects of our change in
corporate structure and management. The Predecessor&#146;s
combined financial results do not reflect the effects&nbsp;of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">additional debt incurred by Successor management,
    which results in increased interest expense;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a C corporation tax structure, which results in
    taxes being incurred by us where previously, because the
    Predecessor had an S corporation tax structure, taxes were
    incurred by the stockholders; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">accounting for amortization of the acquired
    intangible assets, which resulted from the purchase of the
    businesses.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, due to prior management&#146;s
preparation of the Predecessor for sale, certain costs and
expenses were temporarily eliminated and opportunities to
increase membership were not pursued during the relevant time
periods.
</FONT>

<P align="left">
<B><FONT size="2">Segments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have two reportable business segments:
Medicaid and Medicare. Medicaid, a state administered program,
was enacted in 1965 to make federal matching funds available to
all states for the delivery of healthcare benefits to eligible
individuals, principally those with incomes below specified
levels who meet other state specified requirements. Medicaid is
structured to allow each state to establish its own eligibility
standards, benefits package, payment rates and program
administration under broad federal guidelines. Most states
determine threshold Medicaid eligibility by reference to other
federal financial assistance programs including TANF and SSI.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">TANF provides assistance to low-income families
with children and was adopted to replace the Aid to Families
with Dependent Children program. SSI is a federal program that
provides assistance to low-income aged, blind or disabled
individuals. However, states can broaden eligibility criteria.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SCHIP, developed in 1997, is a federal/state
matching program that provides healthcare coverage to children
not otherwise covered by Medicaid or other insurance programs.
SCHIP enables a segment of the large uninsured population in the
United States to receive healthcare benefits. States have the
option of administering SCHIP through their Medicaid programs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare is a federal program that provides
persons age 65 and over and some disabled persons a variety of
hospital and medical insurance benefits. Most individuals
eligible for Medicare are entitled to receive inpatient hospital
care without the payment of any premium, but are required to pay
a premium to the federal government, which is adjusted annually,
to be eligible for physician care and other services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Medicare+Choice program, managed care
plans can contract with CMS to provide health insurance coverage
in exchange for a fixed monthly payment per member that varies
based on the geographic areas in which the members reside. The
fixed monthly payment per member is subject to periodic
adjustments determined by CMS based upon a number of factors,
including retroactive changes in members&#146; status such as
Medicaid eligibility, and risk measures based on demographic
factors such as age, gender, county of residence and health
status. The weighting of the risk measures in the determination
of the amount of the periodic adjustments to the fixed monthly
payments is being phased in over time. These measures will have
their full impact on the calculation of those adjustments by
2007. Individuals who elect to participate in the
Medicare+Choice program are relieved of the obligation to pay
some or all of the deductible or coinsurance amounts required
under the traditional Medicare program, but are generally
required to use the service
</FONT>

<P align="center"><FONT size="2">29
</FONT>
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<DIV align="left">
<FONT size="2">provided by the HMO exclusively and may be
required to pay a premium to the federal Medicare program unless
the HMO chooses to pay the premium as part of its benefit
package.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Critical Accounting Policies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of business, we make a
number of estimates and assumptions relating to the reporting of
our results of operations and financial condition in conformity
with accounting principles generally accepted in the United
States. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under
the circumstances. Actual results could differ significantly
from those estimates under different assumptions and conditions.
We believe that the accounting policies discussed below are
those that are most important to the portrayal of our financial
condition and results and require management&#146;s most
difficult, subjective and complex judgments, often as a result
of the need to make estimates about the effect of matters that
are inherently uncertain.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Revenue recognition.</FONT></I><FONT size="2">
We generate revenues primarily from premiums we receive from
agencies of the federal government and the states in which we
operate to provide healthcare benefits to our members. We
receive a fixed premium per member per month to provide
healthcare benefits to our members pursuant to our contracts in
each of our markets. We generally receive premiums in advance of
providing services, and recognize premium revenue during the
period in which we are obligated to provide services to our
members. Premiums collected in advance are deferred and reported
as unearned premiums. Any amounts that have not been received
remain on the balance sheet classified as premiums receivable.
We also generate revenues from investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We experience adjustments to our revenues based
on member retroactivity. These retroactivity adjustments reflect
changes in the number and eligibility status of enrollees
subsequent to when revenue is billed. We estimate the amount of
outstanding retroactivity each period and adjust premium revenue
accordingly. The estimates of retroactivity adjustments are
based on historical trends, premiums billed, the volume of
member and contract renewal activity and other information. We
refine our estimates and methodologies based upon actual
retroactivity experienced. Retroactivity adjustments have not
been significant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Estimating medical benefits expense and
medical benefits payable. </FONT></I><FONT size="2">The cost of
medical benefits is recognized in the period in which services
are provided and includes an estimate of the cost of medical
benefits that have been incurred but not yet reported. We
contract with various healthcare providers for the provision of
certain medical care services to our members and generally
compensate those providers on a fee-for-service or capitated
basis or pursuant to certain risk-sharing arrangements.
Capitation represents fixed payments on a per member per month
basis to participating physicians and other medical specialists
as compensation for providing comprehensive healthcare services.
Participating physician capitation payments for our year ended
December&nbsp;31, 2003 and five-month period ended
December&nbsp;31, 2002, and the Predecessor seven-month period
ended July&nbsp;31, 2002 and year ended December&nbsp;31, 2001
were 11.8%, 11.6%, 10.2% and 10.3%, respectively, of total
medical benefits expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits expense has two main components:
direct medical expenses and medically-related administrative
costs. Direct medical expenses include amounts paid to
hospitals, physicians and providers of ancillary services, such
as laboratory and pharmacy. Medically-related administrative
costs include items such as case and disease management,
utilization review services, quality assurance and on-call
nurses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits payable consists primarily of
benefit reserves established for reported and unreported claims,
which are unpaid as of the balance sheet date, and contractual
liabilities under risk-sharing arrangements, determined through
an estimation process utilizing company-specific, industry-wide,
and general economic information and data. Our year-end medical
benefits payable is substantially satisfied through claim
payments in the subsequent year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have used the same methodology for estimating
our medical benefits expense and medical benefits payable since
our acquisition of the WellCare group of companies. The
estimation process also involves continuous monitoring and
evaluation of the submission, adjudication and payment cycles of
claims. Monthly, we estimate ultimate benefits payable based
upon historical experience and other available information as
well
</FONT>

<P align="center"><FONT size="2">30
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">as assumptions about emerging trends, which vary
by business segment. Significant assumptions used in the
estimation process include trends in benefit costs, seasonality
and changes in member demographics, utilization, provider
contract terms and reimbursement strategies, frequency and
severity of claims incurred, known and adjudicated claims,
changes in the timing of the reporting, adjudication and payment
of losses, and expected costs to settle unpaid claims. We also
estimate and accrue for the costs necessary to process unpaid
claims.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our policy is to record management&#146;s best
estimate of medical benefits payable. Our review considers
amounts necessary to cover uncertainties related to our
underlying assumptions. Deviations, whether positive or
negative, between actual experience and estimates used to
establish the liability are recorded in the period known. As a
result, any adjustments to prior-period estimates are reflected
in the current period on a consistent basis. We also assess how
our prior year&#146;s estimates developed and, to the extent
appropriate, incorporate those findings in our current
projections. Since the average life of a claim is only a few
months, current medical cost trends and utilization patterns are
very important in establishing this liability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We record reserves for estimated referral claims
related to healthcare providers under contract with us who are
financially troubled or insolvent and who may not be able to
honor their obligations for the costs of medical services
provided by other providers. In these instances, we may be
required to honor these obligations for legal or business
reasons. Based on our current assessment of providers under
contract with us, such losses have not been and are not expected
to be significant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits paid can also be significantly
impacted by court decisions, interpretations by regulatory
authorities and legislative changes involving healthcare
matters. As a result, amounts ultimately paid may differ from
initial estimates that did not consider such outcomes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Actual conditions could differ from those assumed
in the estimation process. Due to the uncertainties associated
with the factors used in these assumptions, materially different
amounts could be reported in our financial statements for a
particular period under different conditions or using different
assumptions. As is common in the health insurance industry, we
believe that actual results may vary within a reasonable range
of possible outcomes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides a reconciliation of
the beginning and ending balance of medical benefits payable for
the following periods:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year&nbsp;Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period&nbsp;Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period&nbsp;Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances as of beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits incurred related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">634,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">436,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">348,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">884,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prior periods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,520</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,316</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits paid related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(538,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(335,938</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(249,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(751,826</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prior periods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,401</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,071</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(625,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(424,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(337,147</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(826,426</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances as of end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">31
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits payable at December&nbsp;31,
2002 developed favorably by $23.7&nbsp;million in the year ended
December&nbsp;31, 2003. This favorable development was primarily
due to estimated medical costs per member exceeding actual
medical costs per member both due to lower than expected
utilization of services, principally in our Florida Medicaid
businesses, and due to lower than expected cost per service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits payable at July&nbsp;31, 2002
developed favorably in the five-month period ended
December&nbsp;31, 2002 by $6.3&nbsp;million primarily due to
differences between estimated and actual utilization and
severity of claims on certain of our Florida Medicaid
businesses. Medical benefits payable at December&nbsp;31, 2001
developed favorably in the seven-month period ended
July&nbsp;31, 2002 by $1.5&nbsp;million due primarily to lower
utilization of medical services than anticipated. Medical
benefits payable at December&nbsp;31, 2000 developed unfavorably
in the year ended December&nbsp;31, 2001 by $2.8&nbsp;million,
due primarily to higher than expected utilization of services
and cost per service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the amount of medical benefits
payable as of December&nbsp;31, 2003 is adequate to cover our
ultimate liability for unpaid claims recorded as of that date;
however, actual claim payments and other items may differ from
established estimates. Assuming a hypothetical 1% difference
between our December&nbsp;31, 2003 medical benefits ratio due to
changes between estimated medical benefits payable and actual
medical benefits payable, income before income taxes for the
year ended December&nbsp;31, 2003 would have increased or
decreased by $10.4&nbsp;million and diluted earnings per share
would have increased or decreased by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, after giving effect to our reorganization into a
corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Goodwill and intangible
assets.</FONT></I><FONT size="2"> We obtained goodwill and
intangible assets as a result of the acquisitions of our
subsidiaries. Goodwill represents the excess of the cost over
the fair market value of net assets acquired. Intangible assets
include provider networks, membership contracts, trademark,
noncompete agreements, government contracts, licenses and
permits. Our intangible assets are amortized over their
estimated useful lives ranging from one to 15&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We evaluate whether events or circumstances have
occurred that may affect the estimated useful life or the
recoverability of the remaining balance of goodwill and other
identifiable intangible assets. We must make assumptions and
estimates, such as the discount factor, in determining the
estimated fair values. While we believe these assumptions and
estimates are appropriate, other assumptions and estimates could
be applied and might produce significantly different results.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We review goodwill and intangible assets for
impairment at least annually, or more frequently if events or
changes in circumstances occur that may affect the estimated
useful life or the recoverability of the remaining balance of
goodwill or intangible assets. Events or changes in
circumstances would include significant changes in membership,
state funding, medical contracts and provider networks. At
December&nbsp;31, 2003, we do not believe that any impairment of
goodwill or intangible assets has occurred.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purchase of our subsidiaries was partially
financed through a contingent note payable to the former
shareholders of our subsidiaries. The principal amount of this
note was subject to adjustment for various contingencies
including based on the adequacy of the statutory capital of
certain subsidiaries, the actual medical benefits payable of
certain subsidiaries, the earnings (or losses) of certain
products and potential indemnifications under the purchase
agreement. Adjustments to the note resulted in a change in the
purchase price and the amount of goodwill acquired of
$41.6&nbsp;million.
</FONT>

<P align="center"><FONT size="2">32
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the consolidated
and combined statements of income data, expressed as a
percentage of revenues for each period indicated. The pro forma
combined year ended December&nbsp;31, 2002 amounts consist of
combined financial data from the Predecessor for the seven-month
period ended July&nbsp;31, 2002 and from the Successor for the
five-month period ended December&nbsp;31, 2002. The historical
results are not necessarily indicative of results to be expected
for any future period.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Percentage of Revenues</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Predecessor/Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Combined</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma Combined</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002&nbsp;(combined)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statement of Operations Data:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%<SUP>(1)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code, the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Comparison of Consolidated Year Ended
December&nbsp;31, 2003 to Combined Year Ended December&nbsp;31,
2002</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Premium revenue.
</FONT></I><FONT size="2">Premium revenue for the year ended
December 31, 2003 increased $127.0&nbsp;million, or 14%, to
$1.04&nbsp;billion from $915.9&nbsp;million for the combined
year ended December&nbsp;31, 2002. The increase was principally
due to internal growth in overall membership and to a lesser
extent increased premium rates per member. Premium rate
increases were partially offset by a lower average premium per
member primarily as a result of changes in the mix of Medicaid
members by product. During 2003, membership increased by 85,000
members, or 18%, from 470,000 members at December&nbsp;31, 2002
to 555,000 members at December&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Medicaid segment includes Medicaid programs
and other state-sponsored healthcare programs. The Medicaid
segment premium revenue for the year ended December&nbsp;31,
2003 increased $143.0&nbsp;million, or 24%, to
$740.1&nbsp;million from $597.1&nbsp;million for the combined
year ended December&nbsp;31, 2002. The increase was principally
due to internal growth in overall membership within the Medicaid
segment and to a lesser extent increased premium rates per
member. During 2003, membership within the Medicaid segment
increased 92,000&nbsp;members, or 22%, from 420,000&nbsp;members
at December&nbsp;31, 2002 to 512,000&nbsp;members at
December&nbsp;31, 2003.
</FONT>

<P align="center"><FONT size="2">33
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare segment premium revenue for the year
ended December 31, 2003 decreased $2.6&nbsp;million, or 1.0%, to
$288.3&nbsp;million from $290.9&nbsp;million for the combined
year ended December&nbsp;31, 2002. We continually review the
medical loss ratio of our business and make strategic decisions
based on those analyses. During 2003, our medical benefits
expense in certain areas of Florida was at a higher level than
expected. We addressed this concern by withdrawing from areas
where financial performance was unfavorable. Overall membership
levels remained flat at approximately 42,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Investment income.
</FONT></I><FONT size="2">Investment income for the year ended
December&nbsp;31, 2003 decreased $2.9&nbsp;million, or 53%, to
$2.6&nbsp;million from $5.5&nbsp;million for the combined year
ended December&nbsp;31, 2002. The decrease in investment income
was primarily due to the continued decline in market interest
rates and maintaining investments with shorter maturities, which
was partially offset by an increase in overall cash levels. Cash
levels increased primarily due to increased profitability and
differences in the timing of our receipt of premiums as compared
to the timing of our payment of the related medical benefits
expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Medical benefits expense.
</FONT></I><FONT size="2">Medical benefits expenses for the year
ended December&nbsp;31, 2003 increased $84.4&nbsp;million, or
11%, to $861.1&nbsp;million from $776.7&nbsp;million for the
combined year ended December&nbsp;31, 2002. The increase was
primarily due to the increase in membership. The medical
benefits ratio, as a percentage of premium revenue, for the year
ended December&nbsp;31, 2003 was 82.6% compared to 84.8% in
2002. The medical benefits ratio decreased in 2003 primarily as
a result of our initiatives to enter into contracts with
providers that offer more economical benefits, to focus on
preventative and disease management programs, and to increase
the effectiveness of medical management to ensure that medical
benefits are utilized efficiently.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Medicaid segment medical benefits expense for
the year ended December&nbsp;31, 2003 increased
$112.5&nbsp;million, or 23%, to $609.2&nbsp;million from
$496.7&nbsp;million for the combined year ended
December&nbsp;31, 2002. The increase was principally due to
internal growth in overall membership within the Medicaid
segment and to a lesser extent increased healthcare costs. The
Medicaid medical benefits ratio, as a percentage of premium
revenue, for the year ended December&nbsp;31, 2003 was 82.3%
compared to 83.2 % in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare segment medical benefits expense for the
year ended December&nbsp;31, 2003 decreased $14.3&nbsp;million,
or 6%, to $238.9&nbsp;million from $253.2 million for the
combined year ended December&nbsp;31, 2002. The decrease was
principally a result of our withdrawal from certain areas of
Florida where financial performance was unfavorable and, to a
lesser extent, as a result of revised contracts with providers
containing improved contract terms. The Medicare medical
benefits ratio, as a percentage of premium revenue, for the year
ended December&nbsp;31, 2003 was 82.9% compared to 87.0% in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selling, general and administrative expense.
</FONT></I><FONT size="2">Selling, general and administrative
expense for the year ended December&nbsp;31, 2003 increased
$26.2&nbsp;million, or 26%, to $126.1&nbsp;million from
$99.9&nbsp;million for the combined year ended December&nbsp;31,
2002. Our selling, general and administrative expense to premium
revenue ratio was 12.1% and 10.8% for the years ended
December&nbsp;31, 2003 and 2002, respectively. The increase in
the ratio was the result of increased marketing efforts,
servicing our increased membership, amortization of purchased
intangible assets and costs incurred to strengthen our
infrastructure. These costs include additional management staff,
information technology system enhancements, and consulting
services. The ratio increase that resulted from these increased
costs was partially offset by realized economies of scale due to
our fixed costs being spread over a larger membership base.
Additionally, certain expenses to expand the business or make
the operations more efficient were not incurred in 2002 as the
predecessor management was preparing the company for sale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest expense.
</FONT></I><FONT size="2">Interest expense for the year ended
December&nbsp;31, 2003 increased $7.3&nbsp;million, or 252%, to
$10.2&nbsp;million from $2.9&nbsp;million for the combined year
ended December&nbsp;31, 2002. The increase was due to increased
debt as a result of the purchase of the business from the
predecessor owners.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Income tax expense.
</FONT></I><FONT size="2">Income tax expense for the year ended
December&nbsp;31, 2003 increased $12.2&nbsp;million, or 254%, to
$17.0&nbsp;million from $4.8 million for the combined year ended
December&nbsp;31, 2002. The increase resulted from being taxed
as a C corporation for 12&nbsp;months in 2003 compared to being
taxed as a C&nbsp;corporation for only five months in 2002.
Prior to August&nbsp;1, 2002, our Predecessor was an S
corporation and
</FONT>

<P align="center"><FONT size="2">34
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">was a disregarded entity for federal and state
income taxes. Our effective tax rate for the year ended
December&nbsp;31, 2003 was 41.9% and for the five-month period
ended December&nbsp;31, 2002 was 50.8%.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Net income. </FONT></I><FONT size="2">Net
income for the year ended December&nbsp;31, 2003 was $23.5
million compared to $32.6&nbsp;million for the combined year
ended December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Comparison of Combined Year Ended
    December&nbsp;31, 2002 to Combined Year Ended December&nbsp;31,
    2001</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Premium revenue.
</FONT></I><FONT size="2">Premium revenue for the pro forma
combined year ended December&nbsp;31, 2002 increased
$176.0&nbsp;million, or 24%, to $915.9&nbsp;million from
$739.9&nbsp;million for the combined year ended
December&nbsp;31, 2001. The increase was principally due to
internal growth in overall membership and to a lesser extent
increased premium rates per member. During combined fiscal 2002,
membership increased 96,000 members, or 26%, from 374,000
members at December&nbsp;31, 2001 to 470,000 members at
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicaid segment premium revenue for the combined
year ended December&nbsp;31, 2002 increased $145.9&nbsp;million,
or 32%, to $597.1&nbsp;million from $451.2&nbsp;million for the
combined year ended December&nbsp;31, 2001. The increase was
principally due to internal growth in overall membership within
the Medicaid segment and to a lesser extent increased premium
rates per member. Premium rate increases were partially offset
by a lower average premium per member primarily as a result of
changes in the mix of Medicaid members by product. During 2002,
membership within the Medicaid segment increased 97,000 members,
or 30%, from 323,000 members at December&nbsp;31, 2001 to
420,000 members at December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare segment premium revenue for the combined
year ended December&nbsp;31, 2002 increased $57.3&nbsp;million,
or 25%, to $290.9&nbsp;million from $233.6&nbsp;million for the
combined year ended December&nbsp;31, 2001. The increase was
principally due to internal growth in overall membership within
the Medicare segment and to a lesser extent increased premium
rates per member. During 2002, membership within the Medicare
segment increased 7,000 members, or 20%, from 35,000 members at
December&nbsp;31, 2001 to 42,000 members at December&nbsp;31,
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Investment income.
</FONT></I><FONT size="2">Investment income for the combined
year ended December 31, 2002 decreased $3.4&nbsp;million, or
38%, to $5.5&nbsp;million from $8.9&nbsp;million for the
combined year ended December&nbsp;31, 2001. The decrease in
investment income was primarily due to the decline in market
interest rates partially offset by an increase in overall cash
levels. Cash levels primarily increased due to cash generated
from operations and contributions of capital.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Medical benefits expense.
</FONT></I><FONT size="2">Medical benefits expenses for the
combined year ended December&nbsp;31, 2002 increased
$139.2&nbsp;million, or 22%, to $776.7&nbsp;million from
$637.5&nbsp;million for the combined year ended
December&nbsp;31, 2001. The increase was primarily due to the
increase in membership. The medical benefits ratio, as a
percentage of premium revenue, for the combined year ended
December&nbsp;31, 2002 was 84.8% compared to 86.2% in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicaid segment medical benefits expense for the
combined year ended December&nbsp;31, 2002 increased
$132.4&nbsp;million, or 36%, to $496.7&nbsp;million from
$364.3&nbsp;million for the combined year ended
December&nbsp;31, 2001. The increase was principally due to
internal growth in overall membership within the Medicaid
segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare segment medical benefits expense for the
combined year ended December&nbsp;31, 2002 increased
$33.7&nbsp;million, or 15%, to $253.2&nbsp;million from
$219.5&nbsp;million for the combined year ended
December&nbsp;31, 2001. The increase was principally due to
internal growth in overall membership within the Medicare
segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Selling, general and administrative expense.
</FONT></I><FONT size="2">Selling, general and administrative
expense for the combined year ended December&nbsp;31, 2002
increased $13.6&nbsp;million, or 16%, to $99.9&nbsp;million from
$86.3&nbsp;million for the combined year ended December&nbsp;31,
2001. The increase was primarily due to an increase in staff to
support our increased membership. Our selling, general and
administrative expense to revenue ratio was 10.8% and 11.5% for
the years ended December&nbsp;31, 2002 and 2001, respectively.
The decrease in the general and administrative expense ratio was
the result of predecessor management preparing the business for
sale and temporarily eliminating certain costs and expenses that
would have been incurred under normal operating conditions.
</FONT>

<P align="center"><FONT size="2">35
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest expense.
</FONT></I><FONT size="2">Interest expense was $2.9&nbsp;million
for the combined years ended December 31, 2002 and 2001 as we
had similar balances of short- and long-term debt during both
periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Income tax expense.
</FONT></I><FONT size="2">Income tax expense for the combined
year ended December&nbsp;31, 2002 was $4.8&nbsp;million. Prior
to August&nbsp;1, 2002, our Predecessor was an S corporation and
was a disregarded entity for federal and state taxes. Our
effective tax rate for the five-month period ended
December&nbsp;31, 2002 was 50.8%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Net income. </FONT></I><FONT size="2">Net
income for the combined year ended December&nbsp;31, 2002 was
$32.6&nbsp;million compared to $21.4&nbsp;million for the
combined year ended December 31, 2001.
</FONT>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have financed our operations principally
through internally generated funds. We generate cash mainly from
premium revenue. Our primary use of cash is the payment of
expenses related to medical benefits. We generally receive
premium revenue in advance of payment of claims for related
healthcare services. From time to time, we may need to raise
capital or draw on our credit facility to fund planned
geographic and product expansion or acquire healthcare
businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we receive premiums in advance of
payments of claims for healthcare services, we maintain
estimated balances of cash and cash equivalents pending payment
of claims. At December&nbsp;31, 2003 and 2002, cash and cash
equivalents were $237.3&nbsp;million and $146.8&nbsp;million,
respectively. We also had short-term investments with maturities
of three to 12&nbsp;months of $33.8&nbsp;million and
$69.0&nbsp;million at December&nbsp;31, 2003 and 2002,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our investment policies are designed primarily to
provide liquidity and preserve capital. The states in which we
operate prescribe the types of instruments in which our
subsidiaries may invest their funds. As of December 31, 2003, a
substantial portion of our cash was invested in a portfolio of
highly liquid money market securities with a weighted average
maturity of 138&nbsp;days. The average portfolio yield for the
year ended December&nbsp;31, 2003 was approximately 1.2%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cash Flow.</FONT></I><FONT size="2"> Net cash
provided by operations increased to $121.4&nbsp;million in 2003
from $65.1&nbsp;million in 2002 and $36.2&nbsp;million in 2001.
The growth in cash from operations was primarily due to
increased membership, improved profitability and changes in
outstanding receivables and liabilities based on the timing of
cash receipts and payments. Because we generally receive premium
revenue in advance of payment for the related medical care
costs, our cash available has historically increased during
periods of enrollment growth. At December&nbsp;31, 2003, we had
negative working capital of $4.4&nbsp;million as compared to
working capital of $2.6&nbsp;million and negative working
capital of $38.1&nbsp;million at December&nbsp;31, 2002 and
2001, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our cash resources and internally
generated funds will be sufficient to support our operations,
regulatory requirements and capital expenditures for at least
12&nbsp;months following this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Regulatory Capital and Restrictions on
Dividends.</FONT></I><FONT size="2"> Our operations are
conducted through our HMO subsidiaries. These subsidiaries are
subject to state regulations that, among other things, may
require the maintenance of minimum levels of statutory capital,
as defined by each state. These regulations may restrict the
amount, payment, and timing of the distribution of dividends
that may be paid to our parent company. The states can, in their
sole discretion, require individual subsidiaries to maintain
statutory capital levels higher than state mandated minimums.
Management believes that we are in compliance with all minimum
statutory capital requirements at December&nbsp;31, 2003, and
will continue to be so for the foreseeable future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The National Association of Insurance
Commissioners, or NAIC, has adopted rules which, to the extent
they are implemented by the states in which we operate, set
minimum capitalization requirements for subsidiaries and other
risk bearing entities. The requirements take the form of
risk-based capital rules. Florida and New York have not yet
adopted the risk-based capital standard as a net worth
requirement. Connecticut has adopted the NAIC guidance. Our
subsidiaries are required to maintain minimum capital amounts as
prescribed by the various states in which we operate. Our
restricted assets consist of cash and cash equivalents that are
deposited or pledged to state agencies in accordance with state
rules and regulations. At December&nbsp;31, 2003 and 2002, all
of our restricted assets consisted of cash and cash equivalents.
As of December&nbsp;31, 2003
</FONT>

<P align="center"><FONT size="2">36
</FONT>

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<DIV align="left">
<FONT size="2">and 2002, all of our subsidiaries were in
compliance with the minimum capital requirements. Barring any
change in regulatory requirements, we believe that we will
continue to be in compliance with these requirements at least
through 2004.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our regulators were to deny or significantly
further restrict our subsidiaries&#146; ability to pay dividends
to us or to pay management fees to our affiliates, the funds
available to us as a whole would be limited, which could harm
our ability to implement our business strategy. For example, we
could be hindered in our ability to make debt service payments
on amounts drawn from our credit facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Debt and Credit
Facilities.</FONT></I><FONT size="2"> As part of the
consideration for the acquisition of the WellCare group of
companies, we issued a senior subordinated non-negotiable
promissory note in the original principal amount of
$53&nbsp;million to the stockholder representative on behalf of
the stockholders of the Florida business. In February 2004, we
entered into a settlement agreement with the selling
stockholders that fixed the remaining amount of the seller note
at $119.7&nbsp;million. Remaining payments of principal under
the note are due on or about the closing of this offering and on
September&nbsp;15 of each of 2004, 2005 and 2006, and would be
due immediately upon a sale of our business. Interest on the
principal amount of the note accrues at the rate of 5.25% per
year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2003, one of our subsidiaries issued
senior discount notes with a principal amount at maturity of
$21.6&nbsp;million. These notes bear interest at 8% and mature
in March 2009. We received approximately $15&nbsp;million from
the issuance, prior to transaction expenses. The notes require
semi-annual payments of interest. Principal payments are due in
two equal installments in March 2008 and 2009.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We entered into a $15&nbsp;million senior credit
facility with an unaffiliated bank in March 2003. The facility
has a floating interest rate based on the one month Eurodollar
rate and requires payment of any borrowings on the facility at
its maturity date in March 2005. No amounts have been drawn from
this facility to date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These notes and credit facility include financial
and operational covenants that limit our ability to incur
additional indebtedness as well as purchase or dispose of
significant assets. Covenants on the notes and credit facility
include maintenance of a medical loss ratio below a set maximum,
a minimum claims coverage ratio and profit margin, and a minimum
statutory surplus in the HMO subsidiaries.
</FONT>

<P align="left">
<B><FONT size="2">Commitments and Contingencies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
regarding our contractual obligations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Payments due by period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Contractual Obligations at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less than</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1-3</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">3-5</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">More than</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">December 31, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1 Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5 Years</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are not an obligor under or guarantor of any
indebtedness of any other party; however, we may have to pay
referral claims of healthcare providers under contract with us
who are not able to pay costs of medical services provided by
other providers. We have no off balance sheet financing
arrangements except for the operating leases described above.
</FONT>

<P align="left">
<B><FONT size="2">Equity Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our reorganization as a
corporation immediately prior to the closing of this offering,
our board of directors plans to adopt and submit to our
stockholders for approval our 2004 Equity Incentive Plan, which
will be effective immediately prior to the closing of our
reorganization. An aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be reserved for issuance under the
Equity Incentive Plan, subject to
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">certain adjustments reflecting changes in our
capitalization. The Equity Incentive Plan will be administered
by our board of directors and compensation committee.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2002 Senior Executive Equity Plan and our
2002 Employee Option Plan were both adopted by our board of
directors and became effective in September 2002. After giving
effect to our reorganization as a corporation, a maximum
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in the aggregate was reserved for issuance to
our associates under the plans. Both plans are administered by
our board of directors and compensation committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Senior Executive Equity Plan, each
participant was given the opportunity to purchase a specified
number of what were, prior to our reorganization as a
corporation, Class&nbsp;A Common Units. As a result of that
purchase, each participant was granted, for no consideration, a
specified number of our former Class&nbsp;C Common Units. Under
the Employee Option Plan, each participant was granted an option
to purchase a specified number of our former Class&nbsp;A Common
Units. The securities that were granted under both plans are
subject to the terms, including vesting, set forth in each
subscription agreement or option agreement, as applicable. We
may repurchase securities granted pursuant to the plans at fair
market value if the participant ceases to be employed by&nbsp;us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of our reorganization as a
corporation, the Class&nbsp;C Common Units granted under the
Senior Executive Equity Plan will be converted automatically
into shares of our common stock and the options granted under
the Employee Option Plan will be converted automatically into
equivalent options to purchase our common stock. Each granted
share and option will be subject to the same vesting terms as in
each holder&#146;s original subscription or option agreement, as
applicable. The number of shares subject to each option and
their exercise price will be adjusted to reflect any stock split
effected in connection with the restructuring. Following our
reorganization as a
corporation, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our employees will hold a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
under our Senior Executive Equity Plan, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be vested,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our employees will hold options under our 2002 Employee Option
Plan exercisable for
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, at a weighted average exercise price
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be vested. We do not intend to issue any additional securities
under either of these plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We account for these plans under the recognition
and measurement principles (the intrinsic-value method)
prescribed in Accounting Principles Board or &#147;APB&#148;
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees,&#148; and related interpretations. Compensation cost
for stock options is reflected in net income and is measured as
the excess of the estimated market price of our common stock at
the date of grant over the amount an employee must pay to
acquire the stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to complying with APB Opinion
No.&nbsp;25, we also comply with the disclosure requirements of
SFAS No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation,&#148; which, among other things, requires
supplemental disclosure using a fair-value-based method of
accounting for stock-based employee compensation plans. In
December 2002, SFAS No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation&#151;Transition and Disclosure&#148;
was issued. SFAS No.&nbsp;148 amends SFAS No.&nbsp;123 to, among
other things, expand the disclosure provisions of SFAS
No.&nbsp;123 and APB Opinion No.&nbsp;28, &#147;Interim
Financial Reporting,&#148; to require disclosure in the summary
of significant accounting policies of the effects of an
entity&#146;s accounting policy with respect to stock-based
employee compensation on reported net income and earnings per
share in annual and interim financial statements. While SFAS
No.&nbsp;148 does not require companies to account for employee
stock options using the fair-value method, the disclosure
provisions of SFAS No.&nbsp;148 are applicable to all companies
with stock-based employee compensation, regardless of whether
they account for that compensation using the fair-value method
of SFAS No.&nbsp;123 or the intrinsic-value method of APB
Opinion No.&nbsp;25. We have adopted the disclosure requirements
of SFAS No.&nbsp;148.
</FONT>

<P align="center"><FONT size="2">38
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates the effect on net
income and earnings per share if we had applied the fair value
recognition provisions to stock-based employee compensation.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">except per unit data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reconciling items (net of tax effects):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: stock-based employee compensation expense
    determined under the intrinsic-value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: stock-based employee compensation expense
    determined under the fair-value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,152</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net adjustment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common unit:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Recent Accounting Pronouncements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the FASB issued SFAS No.&nbsp;146,
&#147;Accounting for Costs Associated with Exit or Disposal
Activities,&#148; which addresses accounting for restructuring
and similar costs. SFAS No.&nbsp;146 requires recognition of the
liability for costs associated with an exit or disposal activity
when we exit a facility, whereas under EITF Issue No.&nbsp;94-3,
a liability for an exit cost is recognized at the date a company
commits to an exit plan. In addition, SFAS No.&nbsp;146
establishes that the liability should initially be measured and
recorded at fair value. Accordingly, SFAS No.&nbsp;146 may
affect the timing of recognizing future restructuring costs, as
well as the amounts recognized. Application of SFAS No.&nbsp;146
was required for restructuring activities initiated after
December 31, 2002. Adoption of this standard did not impact our
financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, the FASB issued Interpretation
No.&nbsp;45, &#147;Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others&#151; an Interpretation of FASB
Statements No.&nbsp;5, 57, and 107 and Rescission of FASB
Interpretation No.&nbsp;34.&#148; The interpretation elaborates
on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. In general, the interpretation applies to contracts
or indemnification agreements that contingently require the
guarantor to make payments to the guaranteed party based on
changes in an underlying obligation that is related to an asset,
liability or an equity security of the guaranteed party. The
initial recognition and measurement provisions of the
interpretation apply to guarantees issued or modified after
December&nbsp;31, 2002. The adoption of this interpretation in
fiscal 2003 did not impact our financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued Interpretation
No.&nbsp;46, &#147;Consolidation of Variable Interest
Entities.&#148; This interpretation of Accounting Research
Bulletin No.&nbsp;51, &#147;Consolidated Financial
Statements,&#148; addresses consolidation by business
enterprises of variable interest entities that either:
(1)&nbsp;do not have sufficient equity investment at risk to
permit the entity to finance its activities without additional
subordinated financial
</FONT>

<P align="center"><FONT size="2">39
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">support, or (2)&nbsp;have equity investors that
lack an essential characteristic of a controlling financial
interest. As of December&nbsp;31, 2003, we did not have any
entities that require disclosure or new consolidation as a
result of the adoption of FASB Interpretation No.&nbsp;46.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued SFAS No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.&#148; SFAS
No.&nbsp;150 requires that certain financial instruments,
including mandatorily redeemable financial instruments, be
classified as liabilities. For existing financial instruments,
the standard is applicable for the first quarter beginning after
June&nbsp;15, 2003. The adoption of SFAS No.&nbsp;150 did not
impact our financial statements.
</FONT>

<P align="left">
<B><FONT size="2">Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 2003, we hired the Ernst &#38; Young
LLP audit partner serving us to become our chief financial
officer. We believe this action impaired Ernst &#38; Young
LLP&#146;s independent relationship with us. As a result, we
terminated the engagement of Ernst &#38; Young LLP as our
independent public accountants. The report of Ernst &#38; Young
LLP on our financial statements as of December&nbsp;31, 2002 and
for the period May&nbsp;8, 2002, our date of inception, to
December&nbsp;31, 2002 contained no adverse opinion or
disclaimer of opinion, nor was the report qualified or modified
as to uncertainty, audit scope, or accounting principles. In
connection with the audit of our 2002 financial statements, and
in the subsequent interim period, there were no disagreements
with Ernst &#38; Young LLP on any matters of accounting
principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the
satisfaction of Ernst &#38; Young LLP would have caused Ernst
&#38; Young LLP to make reference to the matter in their report.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have provided a copy of the above disclosures
to Ernst &#38; Young LLP and requested that Ernst &#38; Young
LLP furnish us with a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the above
statements. A copy of such letter, dated February&nbsp;12, 2004
is filed as Exhibit 16.1 to the registration statement of which
this prospectus is a part.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective December 2003, we retained Deloitte
&#38; Touche LLP as our independent public accountants. Our
decision to engage Deloitte &#38; Touche LLP was ratified by our
audit committee. Deloitte &#38; Touche LLP previously had been
the auditor for certain WellCare subsidiaries in 2001 and
performed consulting services during 2002. Except in relation to
these services, neither we nor anyone acting on our behalf
consulted with Deloitte &#38; Touche LLP regarding the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of the audit opinion
that might be rendered on our financial statements, nor did we
or anyone acting on our behalf consult with Deloitte &#38;
Touche LLP regarding any other matter that was the subject of a
disagreement, as defined in paragraph 304(a)(1)(iv) and the
related instructions to Item&nbsp;304 of Regulation&nbsp;S-K, or
a reportable event, as described in paragraph&nbsp;304(a)(1)(v)
of Item&nbsp;304 of Regulation&nbsp;S-K.
</FONT>

<P align="left">
<B><FONT size="2">Qualitative and Quantitative Disclosures about
Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had short-term
investments of $33.8&nbsp;million and investments classified as
long-term of $21.4&nbsp;million, principally restricted deposits
in accordance with regulatory requirements. The short-term
investments consist of highly liquid securities with maturities
between three and 12&nbsp;months. Long-term restricted assets
consist of cash and cash equivalents deposited or pledged to
state agencies in accordance with state rules and regulations.
These restricted assets are classified as long-term regardless
of the contractual maturity date due to the nature of the
states&#146; requirements. The investments classified as
long-term are subject to interest rate risk and will decrease in
value if market rates increase. Because of their short-term
nature, however, we would not expect the value of these
investments to decline significantly as a result of a sudden
change in market interest rates. Assuming a hypothetical and
immediate 1% increase in market interest rates at
December&nbsp;31, 2003, the fair value of our fixed income
investments would decrease by less than $.01&nbsp;million.
Similarly, a 1% decrease in market interest rates at
December&nbsp;31, 2003 would result in an increase of the fair
value of our investments of less than $.01&nbsp;million.
</FONT>

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<P align="center">
<B><FONT size="2">OUR BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. We have centralized core
functions, such as claims processing and medical management,
combined with localized marketing and strong provider
relationships. We believe that this approach will allow us to
effectively grow our business, both through organic growth and
through acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate health plans in Florida, New York and
Connecticut. In Florida, we serve more than 475,000 members, and
operate the two largest Medicaid managed care plans. In New York
and Connecticut, we serve approximately 56,000 and 24,000
members, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unlike many other government-sponsored healthcare
programs, which specialize in individuals eligible for only one
type of benefit, we serve individuals eligible for both Medicaid
and Medicare benefits, which include recipients of TANF, SCHIP
and SSI. We believe that our experience in managing healthcare
for this broad range of beneficiaries better positions us to
capitalize on growth opportunities across all of these programs.
In addition, unlike many other managed care organizations that
attempt to serve the general population through commercial
health plans, we focus exclusively on serving individuals in
government programs. We believe that this focus allows us to
better serve our members and providers and to more efficiently
manage our operations.
</FONT>

<P align="left">
<B><FONT size="2">Our Markets and Opportunities</FONT></B>

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    <B><I><FONT size="2">The Market for Government-Sponsored
    Healthcare Programs</FONT></I></B></TD>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market for government-sponsored healthcare
programs is large and growing. Overall healthcare spending in
the United States has increased dramatically over the past four
decades, from $41&nbsp;billion in 1965 to $1.6&nbsp;trillion in
2002, according to CMS. CMS estimates that healthcare
expenditures will continue to increase over the next decade at
an average annual rate of 6.4%, growing to a projected
$2.8&nbsp;trillion by 2011. Approximately 32% of total
healthcare spending in 2002, or $516&nbsp;billion, was financed
by Medicare and Medicaid, according to CMS. In 2002,
approximately 40.1&nbsp;million people received Medicaid
benefits, and total Medicaid expenditures were approximately
$216&nbsp;billion, of which almost $98&nbsp;billion was the
responsibility of state governments and the balance provided by
the federal government. In the same year, approximately
40.5&nbsp;million people were enrolled in Medicare, and the
federal government spent approximately $236&nbsp;billion in
Medicare benefit payments, according to CMS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently operate managed care health plans in
Florida, New York and Connecticut. Florida and New York have two
of the largest Medicaid and Medicare populations in the United
States.
</FONT>
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    <I><FONT size="2">Florida.</FONT></I><FONT size="2"> Florida has
    the fourth largest population of Medicaid enrollees,
    2.0&nbsp;million, and the second largest population of Medicare
    enrollees, 2.9&nbsp;million. In 2001, total Medicaid spending in
    Florida was approximately $8.6&nbsp;billion, of which the state
    government&#146;s portion totaled approximately
    $3.7&nbsp;billion. During the same period, according to CMS,
    total Medicare spending in Florida totaled approximately
    $21.6&nbsp;billion. According to data from the Henry J. Kaiser
    Family Foundation, in 2002 approximately 63% of
    Medicaid-eligible beneficiaries in Florida participated in
    managed care plans.
    </FONT></TD>
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    <I><FONT size="2">New York.</FONT></I><FONT size="2"> New York
    has the second largest population of Medicaid enrollees,
    3.1&nbsp;million, and the third largest population of Medicare
    enrollees, 2.7&nbsp;million. In 2001, total Medicaid spending in
    New York was approximately $31.4&nbsp;billion, of which the
    state and local governments&#146; portion totaled approximately
    $15.7&nbsp;billion. According to CMS, Medicare spending in New
    York for 2001 was approximately $20.4&nbsp;billion. According to
    data from the Henry J. Kaiser Family Foundation, in 2002
    approximately 45% of Medicaid-eligible beneficiaries in New York
    participated in managed care plans.
    </FONT></TD>
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    <I><FONT size="2">Connecticut.</FONT></I><FONT size="2">
    Connecticut has approximately 376,000 Medicaid enrollees and
    approximately 517,000 Medicare enrollees. In 2001, total
    Medicaid spending in Connecticut was $3.2&nbsp;billion, of which
    the state government&#146;s portion totaled $1.6&nbsp;billion.
    According to CMS, Medicare spending in Connecticut was
    $3.1&nbsp;billion in 2001. According to data from the Henry J.
    Kaiser Family Foundation, in 2002 approximately 76% of
    Medicaid-eligible beneficiaries participated in managed care
    plans.
    </FONT></TD>
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    <B><I><FONT size="2">Emergence of Managed Care</FONT></I></B></TD>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Health maintenance organizations, or HMOs, and
other types of managed care plans were created as a response to
dramatic increases in healthcare-related costs. Managed care
plans generally reduce the cost of health insurance by providing
members with access to a quality, efficient and cost-effective
network of providers. The plans also reduce costs by attempting
to increase member access to timely and preventative healthcare
delivered in the most appropriate healthcare delivery setting.
Since the 1970s, enrollment in managed care has increased
dramatically, especially over the past decade. In 2002, in the
commercial market, 27% of employees who were covered by their
employer&#146;s health benefit plan were enrolled in HMOs. As
part of efforts to control rising costs within
government-sponsored healthcare programs, the federal government
and many states have encouraged the creation of managed care
plans for government programs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Medicaid Managed Care.
</FONT></I><FONT size="2">Medicaid is a joint federal and state
health insurance program for certain low-income individuals. The
amount of total federal outlays for Medicaid has no set limit;
rather, the federal government must match whatever the
particular state provides for its eligible recipients, subject
to limits determined annually by CMS. The percentage matched by
the federal government varies by state. Medicaid is structured
to allow each state to establish, within broad federal
guidelines, its own eligibility standards, benefits package,
payment rates and program administration. In most states, the
threshold requirements for Medicaid eligibility are determined
by the state. In some cases, eligibility criteria are determined
by reference to other federal financial assistance programs,
including Temporary Assistance to Needy Families, or TANF, and
SSI. TANF provides assistance to low-income families with
children. SSI provides assistance to low-income aged, blind or
disabled individuals. States may also broaden eligibility beyond
the requirements for TANF and SSI. Families who exceed the
income thresholds for Medicaid may be able to qualify for the
State Children&#146;s Health Insurance Program, or SCHIP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to data from CMS, from 1970 through
2000, Medicaid spending grew at a 12.8% compound annual growth
rate. According to the Congressional Budget Office, federal
Medicaid is expected to be $169&nbsp;billion in fiscal 2004 with
states contributing an additional $127&nbsp;billion. According
to the Kaiser Commission on Medicaid and the Uninsured, on
average, states spend approximately 15% of their annual budget
on Medicaid, making it the second largest program in most states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, Medicaid operated on a
fee-for-service model, under which the Medicaid programs made
payments directly to providers after delivery of care. We
believe that the fee-for-service model has resulted in
beneficiaries often receiving care on an episodic basis and in
inappropriate, high-cost settings, such as emergency rooms and
hospitals, as opposed to receiving care in a comprehensive
organized manner. To address these concerns, 42 states have now
implemented mandatory Medicaid managed care programs and six
have implemented voluntary managed care programs. In states with
mandatory Medicaid managed care programs, a percentage of
Medicaid recipients are automatically enrolled by the state into
a managed care program. States generally may only mandate
managed care in areas where more than one managed care plan
operates, and the state allocates members among those plans. The
percentage of recipients who are subject to such mandatory
assignment varies by state and is set by law or regulation
within each state from time to time. If Medicaid managed care is
not mandatory, individuals entitled to Medicaid may choose
either the traditional Medicaid fee-for-service program or a
managed care plan, if available.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are two types of managed care programs:
capitated managed care plans and primary care case management
plans. Under capitated managed care programs, which we operate,
the state pays the managed care plan a fixed fee per enrollee
and the plan assumes either full or partial risk for the
financing and delivery of state-specified healthcare services.
Under primary care case management plans, a provider is paid a
per patient monthly case management fee for acting as a
gatekeeper to approve all medical services and does not
</FONT>

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<DIV align="left">
<FONT size="2">assume financial risk for the recipient. The
number of Medicaid beneficiaries enrolled in some form of
managed care program has grown rapidly, from approximately 40%
in 1996 to approximately 58% in 2002, according to CMS. Of the
58% of Medicaid beneficiaries enrolled in managed care in 2002,
17.6% were enrolled in primary care case management programs.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SCHIP is the single largest expansion of health
insurance coverage for children since the enactment of Medicaid,
and some states are expanding the program to include adults.
SCHIP is a federal and state matching program designed to help
states expand health insurance to children whose families earn
too much to qualify for traditional Medicaid yet not enough to
afford private health insurance. States have the option of
administering SCHIP through their existing Medicaid programs,
creating separate programs or combining both approaches.
According to HHS, approximately 4.6&nbsp;million children who
otherwise would not have access to healthcare were covered under
SCHIP in 2001, representing a 38% increase from 2000. In 2002,
according to CMS, there were 5.3&nbsp;million children enrolled
in SCHIP programs. Currently, all 50 states, the District of
Columbia and all U.S. territories have approved SCHIP plans, and
many states continue to submit plan amendments to further expand
coverage under SCHIP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Medicare Managed Care.
</FONT></I><FONT size="2">Medicare is a federal program that
provides eligible retired persons age 65 and over and some
disabled persons a variety of hospital and medical insurance
benefits. Medicare beneficiaries have the option to enroll in a
Medicare+Choice plan, Medicare&#146;s managed care option, in
areas where such a plan is offered. Under this program, managed
care plans can contract with CMS to provide benefits comparable
to those offered under the traditional Medicare program in
exchange for a fixed monthly payment per member that varies
based on the county in which the member resides. Individuals who
elect to participate in the Medicare+Choice program usually
receive greater benefits than traditional Medicare, including
less or no deductible or coinsurance amounts, but are generally
required to use the services and provider network provided by
the HMO exclusively and are required to pay an additional
premium to the federal Medicare program unless the HMO chooses
to pay the premium as a part of its benefit package. These
individuals also may be required to pay a monthly premium to the
health plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The recently enacted Medicare reform legislation,
MMA, expands Medicare&#146;s health options by, among other
things, adding a prescription drug benefit beginning in 2006,
authorizing transitional prescription drug discount cards
beginning in June 2004, and modifying the methods by which
Medicare will pay Medicare managed care plans. MMA also renames
the Medicare+Choice program &#147;Medicare Advantage&#148;
starting in 2006. As of January&nbsp;1, 2004, Medicare+Choice
rates have been increased to 100% of the fee-for-service cost,
meaning that managed care plans will receive 100% of the average
costs that CMS anticipates incurring for a Medicare-eligible
individual that is not enrolled in a managed care program. This
may have the effect of raising the fixed monthly payments made
to managed care organizations by CMS for providing services to
Medicare beneficiaries in some counties. Managed care plans must
use the increased payments to improve the healthcare benefits
they offer or to strengthen their provider networks.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Enrollment in Medicare managed care programs has
declined in recent years, from 6.5&nbsp;million, or 16% of
Medicare beneficiaries, in 2000 to 4.6&nbsp;million, or 11% of
Medicare beneficiaries, in 2002. During this period, many
managed care programs that had contracted with CMS to provide
Medicare managed care plans reduced benefits or withdrew from
markets, as healthcare costs in many areas exceeded payments
received from CMS for their participation in Medicare&#146;s
managed care program. However, as a result of MMA, which
increases reimbursement rates to Medicare managed care plans and
generally will allow Medicare managed care plans to offer more
attractive benefits, we expect enrollment in Medicare&#146;s
managed care programs to increase.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dual-Eligible
Beneficiaries.</FONT></I><FONT size="2"> Individuals who are
eligible to receive both Medicare and Medicaid benefits are
sometimes termed &#147;dual-eligible.&#148; Health plans that
serve dual-eligibles receive a higher premium on account of
those members. According to the Henry J. Kaiser Family
Foundation, in 2002 an estimated 7.2&nbsp;million individuals,
or 14% of Medicaid beneficiaries, were dual-eligible.
Dual-eligible beneficiaries accounted for 42% of total Medicaid
spending in 2002 according to Kaiser, and we believe that
dual-eligibles are an increasingly important sector of the
market.
</FONT>

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<P align="left">
<B><FONT size="2">Our Competitive Advantages</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate health plans focused on
government-sponsored healthcare programs. We believe the
following are our key competitive advantages:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leading Market Presence.
</FONT></I><FONT size="2">We are the leading Medicaid provider
in Florida, with an approximately 50% market share of Medicaid
managed care enrollees and over 475,000 total members. We
believe that this strong market position provides us with
numerous strategic advantages, including:
</FONT>
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    <FONT size="2">enhanced economies of scale;
    </FONT></TD>
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    <TD><FONT size="2"> &#149;</FONT></TD>
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    <FONT size="2">extensive, high-quality provider networks in our
    core markets;
    </FONT></TD>
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    <FONT size="2">strong relationships with our state and local
    government agencies; and
    </FONT></TD>
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    <FONT size="2">the ability to provide a broad range of
    government-sponsored healthcare programs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We are leveraging these advantages to
aggressively grow our operations in New York and Connecticut.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Diversified Government Healthcare
Programs.</FONT></I><FONT size="2"> We offer managed care
services for a diversified range of government programs,
including the SCHIP, SSI and TANF Medicaid programs and
Medicare. This approach helps reduce the impact on us resulting
from rate reductions or other adverse changes that impact one
type of program. We believe that this approach also results in
operational efficiencies and stronger relationships with our
providers and regulators and positions us to capitalize on
growth opportunities in Medicaid, Medicare and other government
programs. Our broad range of programs and our low cost of
operations also allow us to effectively compete for specialized
programs designed to meet the specific needs of certain
jurisdictions. For example, in 2003 we were assigned an
additional 30,000 members under our Florida Healthy Kids program
through a competitive bid process. We were able to win this bid,
in part due to the economies of scale we achieve from our broad
range of product offerings. We believe that our experience in
serving a broad range of beneficiaries of Medicaid, Medicare and
other government-sponsored programs and our strong provider
networks, guided by our medical management programs, position us
to optimally serve this population.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Exclusive Focus on Government Healthcare
Programs.</FONT></I><FONT size="2"> We are focused on designing
and operating our business to serve our government programs
constituents: members, providers and regulators. This allows us
to build our provider networks with a focus on our target
populations, and allows us, in large part, to contract with our
providers using the Medicaid and Medicare fee schedules, which
are generally lower than commercial rates, as a benchmark. Our
approach to contracting has allowed us to build strong provider
networks that have been designed to provide the necessary care
to our members, based on specific benefit designs, in the
appropriate healthcare setting. We also target our sales and
marketing efforts directly to individuals and communities,
rather than employers and other groups targeted by commercial
plans. We have developed internal regulatory affairs expertise
to allow us to work more effectively with the states and other
governments that regulate our programs and services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Centralized and Scalable Operations.
</FONT></I><FONT size="2">We have centralized various functions
across all of our health plans, including claims processing,
member services, information technology, regulatory compliance
and medical management and pharmacy benefits management
programs. We have successfully developed a data reporting system
to help assure that consistent sources of claims and member
information are provided across all of our health plans, which
enables our management team to better assess and control medical
costs. Our processing systems operate on a single technology
platform and have been designed to be scalable to accommodate
growth. In a study performed by the manufacturer, our core
transaction system demonstrated scalability to more than
6.5&nbsp;million members and 2,800 concurrent users. We seek
continuously to improve our administrative and operational
infrastructure to be scalable for rapid and cost-effective
expansion in existing and new markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Localized, Disciplined Sales and Marketing
Efforts. </FONT></I><FONT size="2">Our sales force is designed
to target the diverse ethnic, cultural and linguistic
composition of the communities we serve with over six different
languages spoken. Through the strong relationships our sales
people have with community leaders and healthcare
</FONT>

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<FONT size="2">providers, we are able to access
Medicaid-eligible populations and encourage them to join our
plans, resulting in greater market share than relying solely on
mandatory assignments. Our sales efforts are enhanced by
targeted marketing designed to strengthen our local brands. We
focus on specific media such as community events, direct mail,
radio advertisements and other highly targeted programs. We
believe these marketing programs enhance our leading brands,
such as HealthEase and Staywell in Florida, and will allow us to
further penetrate the Medicare market. Our sales and marketing
team also provides us with increased flexibility in assessing
potential new markets. We believe that we have developed the
requisite infrastructure and expertise to succeed in both
mandatory and non-mandatory Medicaid managed care states.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strong Relationships with Government Agencies.
</FONT></I><FONT size="2">We work closely with the government
agencies that regulate us to help develop the products and
services that we offer. Through this approach, we are able to
offer health plans that deliver cost savings for the states in
which we operate. For example, under our Medicaid contract with
the State of Florida, the state pays us a discounted percentage
of approximately 92% of the fee-for-service rate the state pays
under the traditional Medicaid program. As a result, in 2003, we
estimate that our Medicaid services saved the State of Florida
approximately $54.4&nbsp;million compared to what the state
would have been required to pay under the traditional program.
We have demonstrated to government agencies our ability to
provide quality healthcare services in a cost-effective manner.
As a result, we believe that the government agencies that
regulate us remain committed to the growth of managed care as an
element of an overall plan to control rising healthcare
expenditures.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Partnerships with Providers.
</FONT></I><FONT size="2">We strive to be a low hassle partner
for our providers and to provide them with ongoing health and
related data that allows them to care for our members
effectively and manage their practices efficiently. We
accomplish this by:
</FONT>
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    <FONT size="2">contracting with providers that we consider
    well-suited, based on proximity, languages spoken in their
    communities, culture and experience, to provide high-quality and
    cost-effective services to our members;
    </FONT></TD>
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    <FONT size="2">consulting with our Medicare providers to design
    benefit packages that the providers believe will deliver
    quality, cost-effective services to our Medicare members;
    </FONT></TD>
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    <FONT size="2">sponsoring marketing events, which helps increase
    our member base and, in turn, helps our providers build their
    practices;
    </FONT></TD>
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    <FONT size="2">supplying our providers with risk management
    data, allowing them to provide services to our members more
    efficiently;
    </FONT></TD>
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    <FONT size="2">providing high-quality service to our providers,
    including paying claims on a timely basis, and promptly
    responding to their operational inquiries;
    </FONT></TD>
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    <FONT size="2">reducing the number of procedures requiring
    pre-approval; and
    </FONT></TD>
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    <FONT size="2">utilizing web-based functions to help reduce the
    administrative burden on our providers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">By aligning our incentives with those of our
providers, providing frequent, data-based feedback on
performance, and providing high-quality service, we seek to
develop networks that aid our efforts to attract and retain
members. Using this approach, we have developed the flexibility
to offer both fee-for-service and capitated provider payment
methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Integrated Medical Management.
</FONT></I><FONT size="2">We employ a multi-tiered approach to
medical management to ensure that our members receive
appropriate, high-quality care, while containing our costs and
ensuring an efficient healthcare delivery network. Key elements
of our medical management strategy include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">A focus on preventative
    care.</FONT></I><FONT size="2"> Our approach to contracting
    allows us to align our interests with those of our providers by
    providing financial incentives for preventative health services,
    such as childhood immunizations, well-child check-ups, diabetes
    monitoring and treatment and mammogram screening. We focus on
    helping our members and providers to identify medical problems
    at an early stage, which results in a higher quality of care for
    members while reducing our medical costs. For example, on a
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">45
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">monthly basis, we communicate with our primary
    care providers regarding preventative services that may be
    necessary for the individual members they serve.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Network structure.</FONT></I><FONT size="2">
    Our providers have been selected based on our specific benefit
    design and their willingness to help us manage medical costs. We
    encourage our providers to work closely with their patients and
    proactively manage their healthcare, which we believe has
    resulted in our members receiving the appropriate level of
    healthcare at the appropriate time, rather than on an episodic
    basis.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Careful management of outpatient, inpatient
    and other services.</FONT></I><FONT size="2"> Our medical
    management associates proactively communicate with our providers
    to ensure that our members are receiving the necessary care in
    the appropriate healthcare delivery setting. We also have
    established pharmacy management programs and policies that allow
    us to manage our pharmaceutical costs more effectively. In
    addition, we utilize on site nurses to coordinate with
    hospital-based physicians to promote effective care management.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Case and disease
    management.</FONT></I><FONT size="2"> We have developed case and
    disease management programs that address the particular
    healthcare needs of our members. Our medical directors and
    medical staff actively manage cases of members with specific
    high-risk conditions, such as congestive heart failure and
    diabetes, to help ensure that these members are receiving the
    appropriate level of healthcare given the particular
    circumstances of each case.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We believe that this multi-tiered approach has
helped us improve medical outcomes for our members, which
results in cost savings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Experienced Management Team.
</FONT></I><FONT size="2">Our management has extensive
experience operating managed care plans. Our executive officers
have more than 85&nbsp;years of combined experience in the
healthcare industry with healthcare plans such as Aetna, Cigna,
Humana and Oxford. Our management team is focused on process and
data analytics, which has enabled us to create a culture that
emphasizes effective execution of our business plans and
analysis of results. Members of our medical management team are
board certified in a variety of healthcare disciplines, allowing
us to manage a broad range of healthcare issues more
effectively. We believe that our management&#146;s experience
brings a professional, disciplined approach to the operation of
government-sponsored healthcare plans, resulting in increased
operational efficiencies.
</FONT>

<P align="left">
<B><FONT size="2">Our Growth Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to be the leading provider of
government programs-focused managed care services. To achieve
this objective, we intend to grow our business by:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Expanding our Medicaid Business within
Existing Markets. </FONT></I><FONT size="2">We operate in
markets that present significant opportunities for expanding our
Medicaid membership. We believe that there are significant
growth opportunities in Florida. According to data from the
Henry J. Kaiser Family Foundation, while approximately 63% of
Medicaid-eligible beneficiaries in Florida are enrolled in some
form of managed care program, including primary care management
programs, only 34% of Medicaid-eligible beneficiaries
participate in a fully-capitated, risk-bearing managed health
plan. New York is also a significant market for Medicaid managed
care services, with approximately 3.1&nbsp;million
Medicaid-eligible beneficiaries. According to data from Kaiser,
in New York, only 44% of Medicaid-eligible beneficiaries
participate in a fully-capitated, risk-bearing managed health
plan. Each of the states in which we operate, Florida, New York
and Connecticut, has mandatory assignment of a certain
percentage of Medicaid-eligible individuals to Medicaid managed
care plans. We intend to continue to grow our business in the
markets that we currently serve by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">maintaining and expanding our provider networks;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">deepening relationships with our providers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">providing high-quality, affordable healthcare;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">tailoring our localized marketing efforts to
    reach individuals who are eligible for government healthcare
    programs;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">46
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">encouraging our government partners to increase
    mandatory assignment;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">focusing on the healthcare needs of the aged and
    disabled populations; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">selectively pursuing acquisitions of Medicaid
    membership within our existing markets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leveraging our Established Medicaid Businesses
to Develop Medicare Plans.</FONT></I><FONT size="2"> We intend
to leverage the core competencies, systems and infrastructure
that we have developed through our established Medicaid
businesses to continue to develop Medicare plans. We believe
that there are compelling synergies between Medicaid and
Medicare health plans that make leveraging our Medicaid
businesses attractive, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a similar sales process, focused on individual,
    community-based efforts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">member demographics similar to the Medicaid
    population, particularly the SSI population, characterized by
    lower income, elderly individuals;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a focus on strong provider relationships;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">significant provider network overlap that results
    from the many providers that meet the healthcare needs of both
    Medicaid and Medicare beneficiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a focus on cost-effective networks and operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the importance of disciplined medical management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an ability to leverage our existing licenses and
    investments in required statutory capital; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an emphasis on mutually beneficial relationships
    with regulatory agencies.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that there is a significant
opportunity to continue leveraging our strong Medicaid
businesses, including our marketing and sales processes and our
provider and regulatory relationships in Florida to increase our
Medicare membership in the state. We currently have
approximately 41,000 Medicare members in Florida out of the
approximately 2.9&nbsp;million Medicare enrollees. We believe
that we can also expand our Medicare business organically in the
other states where we currently operate, as well as in
additional markets, without incurring significant expenses. In
our organic expansion efforts, we expect that we will incur
marginal direct expenses, such as personnel and facilities
costs, and may need to provide marginal capital reserves where
we are unable to leverage our current capital reserves. In New
York, we have a successful Medicaid plan and are in the process
of re-launching our Medicare plan. We are also entering new
markets. For example, we are in the process of establishing a
Medicare health plan in Louisiana, where we have identified
providers that are well suited to serve the Medicare population
and where we believe the demographics and reimbursement rates
indicate that we can be successful. We also intend to monitor
the effects of MMA and may consider acquisitions of select
Medicare managed care businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Entering New Medicaid Markets Through Internal
Growth and Acquisitions.</FONT></I><FONT size="2"> We intend to
enter new Medicaid markets, whether or not they have mandatory
assignment, through a combination of internal growth and
acquisitions. Entering new Medicaid markets will provide us with
the opportunity to grow and diversify our revenues, enhance
economies of scale from our centralized administrative
infrastructure, and strengthen our relationships with providers
and government agencies. We expect to grow organically by
expanding our service area and provider network, increasing
awareness of our local brand names and maintaining positive
provider relationships.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also intend to enter new markets by acquiring
existing Medicaid managed care businesses. We expect to focus
our expansion on markets with significant Medicaid populations,
large provider populations, a fragmented competitive landscape
and favorable regulatory conditions. We believe that the managed
care industry, particularly Medicaid-focused plans, is likely to
experience continued consolidation in the future and that this
will provide us an opportunity to acquire existing plans in
attractive markets.
</FONT>

<P align="center"><FONT size="2">47
</FONT>
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<P align="left">
<B><FONT size="2">Our Health Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide managed care services targeted to
government-sponsored healthcare programs in Florida, New York
and Connecticut. We offer a diverse array of products, primarily
Medicaid and related state programs, such as SCHIP, and Medicare
programs. The following tables summarize our membership by state
and our membership by program as of December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">State</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Members</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Florida
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">475,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Connecticut
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Program</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Members</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">512,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are in the process of resuming Medicare
marketing activities in New York and re-launching our Medicare
plan in the state. We are also establishing a Medicare health
plan in Louisiana. We expect to begin operating in Louisiana in
late 2004, subject to receiving final regulatory approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of our plans receives premiums from the
federal or state governments in the markets where we operate. We
generally receive a fixed premium per member per month to
provide healthcare benefits to our members pursuant to our
contracts in each of our markets.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Florida</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are the largest operator of Medicaid managed
care plans in Florida. We began providing Medicaid services in
Florida in 1994, and now operate the two largest Medicaid
managed care plans in the state, Staywell Health Plans, or
Staywell, and HealthEase. Our two distinct Medicaid health plans
have separate brand identities, sales forces, provider networks
and geographic coverage, but both utilize our centralized back
office and claims processing systems. This allows us to benefit
from economies of scale while increasing our coverage and
penetration throughout the state.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Medicaid managed care plans have broad
geographic coverage throughout Florida. Staywell operates in 15
counties, with a particularly strong presence in South Florida.
HealthEase operates in 32 counties and has a significant
presence in Central and South Florida, as well as in counties in
Northern Florida that tend to be more rural.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We began providing Medicare services in Florida
in 2000 and now operate a rapidly growing Medicare plan under
the name WellCare. Our Medicare plan operates in 11 counties in
Florida, and has particularly large membership in South Florida,
which has a large population of Medicare-eligible individuals
and favorable reimbursement rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Medicaid contracts with the State of Florida
for our Staywell and HealthEase plans expire on June&nbsp;30,
2004. Our Medicare contract for our WellCare plan expires on
December&nbsp;31, 2004. We also have a SCHIP contract with the
Florida Healthy Kids Corporation that expires on
September&nbsp;30, 2005. We have been able to successfully renew
our contracts since we began operating in Florida.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">New York</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Medicaid managed care programs in New York,
which we provide under the WellCare name, have grown rapidly
under our management. In 2003, our membership grew from
approximately 45,000 members to approximately
56,000&nbsp;members. During this period, we substantially
increased the size of our provider network, adding eight
hospitals, including six in New York City, and almost 700 new
physicians, including specialists. We currently operate in four
of the boroughs of New York City and in the Hudson Valley region.
</FONT>

<P align="center"><FONT size="2">48
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When we acquired the New York operations in 2002,
we inherited a number of operational deficiencies, including a
prohibition on Medicare marketing previously imposed by CMS in
August 1999 due to a lack of compliance with the terms of our
Medicare contract. We have made significant investments in our
New York operations to address these challenges and to compete
more effectively in this market, including by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">hiring an experienced, local senior management
    team, including a Vice President with more than 10&nbsp;years of
    healthcare experience;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">relocating our New York headquarters from
    Newburgh to Manhattan to access a deeper talent pool of
    associates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">improving our regulatory compliance program,
    including through the implementation of a corporate-wide ethics
    and compliance program, called the Trust Program and by hiring
    local compliance personnel; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reorganizing our operations, including the
    consolidation of certain functions in our Tampa corporate
    headquarters.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we have successfully addressed
most of the regulatory challenges we faced in New York and have
implemented comprehensive corrective action plans that were
approved by both the New York State Department of Health and CMS
in June 2003. As a result, we have commenced the process of
re-launching our Medicare plan in New York, which as of
December&nbsp;31, 2003 had approximately 600 members. We expect
to re-commence marketing efforts in the second half of 2004. In
connection with the re-launch, we are restructuring our Medicare
provider network, with a focus on building strong relationships
with providers and hospitals, and have made significant
investments in quality improvement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Medicaid contracts in New York expire on
September&nbsp;30, 2004. Our Medicare contract with CMS expires
on December&nbsp;31, 2004. We also have a SCHIP contract with
the State of New York that expires on June&nbsp;30, 2004.
Despite the regulatory challenges we have encountered in New
York, we have been able to successfully renew our contracts
since we began operating in that state.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Connecticut</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Connecticut, we operate a Medicaid managed
care plan under the name PreferredOne. In 2003, our PreferredOne
membership grew from 17,000 members to over 24,000 members. We
also significantly expanded our provider network in the state
during that period, adding more than 150&nbsp;primary care
physicians and four hospitals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We began operating in Connecticut in 1995 when we
purchased Yale New Haven Health Plan. We currently offer
services in each of Connecticut&#146;s eight counties. Our
Medicaid contracts with the state expire on September&nbsp;30,
2004. We have been able to successfully renew our contracts
since we began operating in Connecticut.
</FONT>

<P align="center"><FONT size="2">49
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Medical Programs and Services</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The programs and services we offer to our members
vary by state and county and are designed to address the unique
needs of our members within the various communities we serve.
Through our Medicaid plans, we provide our members access to a
broad spectrum of medical benefits. These benefits range from
all facets of primary care and preventative programs to full
hospitalization and tertiary care. Our Medicaid contracts
determine to a large extent the type and scope of healthcare
services that we arrange for our members; however, we do
customize our benefits in the following ways, which we believe
makes our products more attractive:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Benefit</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Florida</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">New York</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Connecticut</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Adults receive unlimited eye exams and unlimited
    eyeglasses with no co- payment.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No difference from standard Medicaid benefits.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No difference from standard Medicaid benefits.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Adults receive x-rays, semi-annual cleanings,
    extractions and fillings, all with no co-payment.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No difference from standard Medicaid benefits.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No difference from standard Medicaid benefits.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Over-the-counter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Monthly over-the-counter benefit&#151; $10 worth
    of products at no charge delivered directly to the member&#146;s
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No difference from standard Medicaid benefits.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Monthly over-the-counter benefit&#151; $10 worth
    of products at no charge delivered directly to the member&#146;s
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Case management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nurse help line
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">24-hour nurse help line.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">24-hour nurse help line.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">24-hour nurse help line.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our approach to contracting has
allowed us to build strong provider networks, which provides our
members with access to physicians to whom they may not otherwise
have access. Members are required to use our network, except in
cases of emergencies, transition of care, or when specialty
providers are unavailable or inadequate to meet a member&#146;s
medical needs, and generally must receive a referral from their
primary care physician in order to receive healthcare from a
specialist, such as an orthopedic surgeon or neurologist.
Members do not pay any premiums, deductibles or co-payments.
</FONT>

<P align="center"><FONT size="2">50
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through our Medicare plans, we also cover a wide
spectrum of medical services. We provide an enhanced level of
services relative to standard fee-for-service Medicare coverage,
ranging from reduced out-of-pocket expenses to prescription drug
coverage. While our Medicare benefits offerings vary by county,
the following is an example of the enhanced level of benefits we
offer in a metropolitan county of Florida in comparison to those
benefits generally available under the Medicare program:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Benefit</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Standard Medicare Fee-For-Service</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Our Medicare Benefits</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Patient must pay out-of-pocket drug costs (or
    obtain supplemental insurance) and 20% of hospital stay.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Predictable healthcare costs, no co- insurance or
    deductibles.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">One pair of glasses, only after cataract surgery.
    Co-insurance costs associated with diseases and conditions of
    eye. No routine eye exams.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vision covered, generally a $10 co- payment for
    glasses and exams. Routine eye exams generally at no charge.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Not covered. 100% out-of-pocket expense or
    patient may obtain supplemental insurance.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Covered&#151; small co-payment for oral exams and
    cleanings. One fluoride treatment per year at no charge. Annual
    x-rays are covered, with small co-payment.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hearing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Not covered. 100% out-of-pocket expense for
    routine exams and hearing aids.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">No co-payment for one pair of hearing aids every
    two years (includes exam with $10 co-payment).
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Routine physicals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Not covered.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">One annual physical covered with no co-payment.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preventative care
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Generally, patient pays 20% of the cost of the
    service.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">100% covered, with no co-payment or co-insurance.
    We proactively contact members and physicians and recommend
    preventative services.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Drug benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Under Medicare reform legislation, not fully
    implemented until 2006. Currently, patients pay 100% or obtain
    supplemental insurance.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Small co-payment for generic drugs. In some
    areas, we also offer a brand name drug benefit for a larger co-
    payment.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Over-the-counter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Not covered.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Monthly over-the-counter benefit&#151; $10 worth
    of products at no charge delivered directly to the member&#146;s
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through these enhanced benefits, the
out-of-pocket expenses incurred by our members are reduced,
which allows them to better predict their healthcare costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our Medicare plans require members to pay
a co-payment for services provided, and the amount of the
co-payment varies by benefit. None of our plans require a
deductible for services. Members are required to use our network
of providers, except in limited cases such as emergencies,
transition of care, or when specialty providers are unavailable
or inadequate to meet a member&#146;s medical needs, and
generally must receive a referral from their primary care
physician in order to receive healthcare from a specialist.
Also, compared to our Medicaid plans, we have more flexibility
in designing benefits packages, and we can charge members a
premium for benefits that the Medicare fee-for-service plan does
not offer.
</FONT>

<P align="center"><FONT size="2">51
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our continuing efforts to improve the
services we offer members, in January 2004 we implemented a drug
discount benefit for members of our Florida Medicare plans. We
introduced a new member identification card that includes a drug
discount card, entitling members to discounts of approximately
19% on brand-name prescription drugs and 28% on generic drugs.
We provided this benefit to our members several months in
advance of CMS&#146;s implementation of the prescription drug
discount card program authorized by MMA. As a result, our
Medicare members are already able to access benefits comparable
to those benefits offered under the new law.
</FONT>

<P align="left">
<B><FONT size="2">Provider Networks</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have longstanding, established relationships
with our network of providers in each of the markets we
currently serve. We continuously upgrade and review our networks
to ensure adequacy of coverage and compliance of individual
providers with our network and operational standards, and we
replace and add providers as appropriate. We arrange for the
provision of healthcare services to our members through mutually
non-exclusive contracts with independent primary care
physicians, specialists, ancillary medical agencies and
professionals and hospitals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our network of primary care physicians plays an
integral role in managing the healthcare of our members. The
relationship between the primary care physician, or PCP, and a
member is critical for the member to make the most effective use
of managed care. Our PCPs are encouraged to discuss care options
with new members during their first visit, and answer questions
they may have about managed care, as well as to assist them in
understanding the role of the PCP. Primary care physicians
include family and general practitioners, pediatricians,
internal medicine physicians and OB/ GYNs. Specialty care
physicians provide medical care to members generally upon
referral by the primary care physicians. The following table
shows the total approximate number of primary care physicians,
specialists and hospitals participating in our network as of
December&nbsp;31, 2003, 2002 and 2001:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Florida</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">New York</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Connecticut</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Primary care physicians
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2003
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2002
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,415</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,718</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2001
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="19"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Specialists
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2003
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2002
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,069</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2001
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="19"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hospitals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2003
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2002
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">2001
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have also contracted with other ancillary
medical providers and professionals for physical therapy, mental
health and chemical dependency care, home healthcare, vision
care, diagnostic laboratory tests, x-ray examinations, ambulance
services and durable medical equipment. Additionally, we have
contracted with a national pharmacy benefit manager that
provides a local pharmacy network in our markets where pharmacy
is a covered benefit. We also offer, using in-house resources,
comprehensive management of mental health and substance abuse
services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We value our relationships with our providers.
Our provider relations strategy is focused on being a low hassle
partner. Examples of the steps we have taken to implement this
strategy include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">paying claims promptly;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">providing web-based access to eligibility
    information;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">delivering useful information to our providers,
    including monthly reports to help providers evaluate their
    performance and increase their efficiency;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">52
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reducing restrictions on network physicians in
    ordering of medical tests and procedures; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sponsoring marketing events designed to increase
    awareness of our plans and the advantages of managed care,
    sometimes with the participation of our providers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also consult with members of our provider
network to obtain their assistance in designing benefit
packages, and we enter into relationships using a range of
contract types, including capitated and fee-for-service
arrangements. See &#147;Provider Payment Methods.&#148; We
believe that our focus on strong provider relationships has
helped us to make our health plans more attractive and increase
our membership.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to help ensure the quality of our
providers, we credential and re-credential our providers using
standards that are required in the states in which we operate.
In order to encourage our PCPs to be proactive in the treatment
of our members, we pay a fee-for-service rate in excess of the
capitation rate to our PCPs who provide specified preventative
health services, such as childhood immunizations, lead screening
and well-child check-ups. In New York, PCPs to whom we pay a
capitation also receive an additional payment, or bill-above,
for supplying us with timely encounter data regarding the nature
of members&#146; visits. We use this data to improve the level
of preventative healthcare we provide, such as vaccinations,
immunizations and health screenings for new-born children. In
Florida and Connecticut, we plan to pay our PCPs bill-aboves for
encounter data beginning in early 2004. This data will also help
us to monitor the amount and level of medical treatment and
improve our compliance with regulatory reporting requirements to
ensure high-quality medical care.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our contracts with hospitals, independent primary
care physicians and specialists are usually for one to two year
periods and automatically renew for successive one-year terms.
The contracts can generally be cancelled by either party upon a
specified prior written notice period, which is typically 60 or
90 days, subject to various conditions. With respect to our
hospital contracts, the hospital is paid for all medically
necessary inpatient and outpatient services, including emergency
services, diagnostic services and therapeutic care provided to
members. With the exception of admissions from the emergency
room, all inpatient hospital services require precertification
from our utilization review staff. All contracted hospitals are
required to participate in our utilization review and quality
improvement programs.
</FONT>

<P align="left">
<B><FONT size="2">Provider Payment Methods</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We utilize three primary methods of payment with
our network providers: capitation, fee-for-service and risk
sharing arrangements, which we utilize in our Medicare business.
We periodically review our payment methods as necessary. Factors
we generally consider in adjusting payment methods include
changes to state Medicaid fee schedules, the competitive
environment, current market conditions, anticipated utilization
patterns and projected medical benefits expense.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Medicaid</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Capitation. </FONT></I><FONT size="2">We pay
most of our PCPs a fixed fee per member, which is referred to as
capitation. Under this arrangement, the PCP is at risk for all
costs related to the services rendered by such physician, with
the exception of those preventative health services that are
paid in addition to the capitation and subject, in some cases,
to stop-loss arrangements. In some instances, certain specialty
physicians are paid on a capitated basis. For the nine months
ended September&nbsp;30, 2003, 16% of our Medicaid payments to
providers were on a capitated basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fee-for-Service. </FONT></I><FONT size="2">We
pay our other providers, including most specialists, based upon
the service performed, which is referred to as fee-for-service.
For the nine months ended September&nbsp;30, 2003, 84% of our
Medicaid payments to providers were on a fee-for-service basis.
The primary fee-for-service arrangements are percentage of
Medicaid payment and per diem and case rates. These arrangements
may also be combined. The following is a description of the
principal arrangements we utilize:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Percentage of Medicaid fee
    schedule.</FONT></I><FONT size="2"> We pay providers a specified
    percentage of the amount Medicaid would pay under the
    fee-for-service program.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">53
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Per diem and case
    rates.</FONT></I><FONT size="2"> Hospital facility costs are
    generally reimbursed at negotiated per diem or case rates, which
    vary depending upon the level of care. Lower intensity services
    are generally paid at a lower rate than high intensity services.
    For example, services provided on behalf of a newborn baby who
    in order to gain weight stays in the hospital a few days longer
    than the mother would typically be paid at a lower rate; whereas
    a neo-natal intensive care unit stay for a baby born with severe
    developmental disabilities would be paid at a higher rate.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A significant percentage of our fee-for-service
contracts with providers allow for automatic adjustments in
payments based upon changes in government reimbursement rates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Medicare</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Risk-sharing
Arrangements.</FONT></I><FONT size="2"> Within our capitation
and fee-for-service arrangements, which account for 27% and 73%,
respectively, of our Medicare payments to providers, a small
number of Medicare providers operate under specialized capitated
risk arrangements in order to more efficiently align our
interests and reduce our risk. Under these arrangements, we
establish a risk fund for each provider based on a percentage of
premium paid, which is evaluated on an individual or group
basis, subject to monitoring and analysis by our actuaries.
Based on this analysis, we estimate the amount, if any, due to
the provider and establish a liability and pay the applicable
provider on a periodic basis, to the extent that the balance
exceeds claim payments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Out-of-Network Providers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When our members receive services for which we
are responsible from a provider with whom we have not
contracted, such as in the case of emergency room services from
non-contracted hospitals, we generally attempt to negotiate a
rate with that provider. In some cases, we are obligated to pay
the full rate billed by the provider.
</FONT>

<P align="left">
<B><FONT size="2">Sales and Marketing Programs</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our sales force consists of 363 associates who
focus their efforts on individuals and communities, as opposed
to employer groups. We believe that our targeted sales and
marketing efforts are primarily responsible for our rapid
membership growth in several of our markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We employ a disciplined approach to sales and
marketing by measuring the return on investment of our key sales
and marketing activities. This approach allows us to emphasize
those activities that we have determined to be effective and
eliminate others than have not provided us with an acceptable
return on investment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, our sales force was
deployed in our markets as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Market</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Associates</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Florida
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Connecticut
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we use third-party brokers and
agents to help us promote our plans in some Medicare markets. In
some cases, these parties receive payment for referrals that our
associates process, while in other cases we pay the brokers and
agents for completing the applications themselves. The
activities of these brokers and agents are regulated by the
states and CMS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our marketing efforts involve designing
attractive benefit packages and generating interest in our
programs among individuals. Our sales efforts involve promoting
the product in the communities we serve at events and in
conversations with eligible individuals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, the lead-generation components of our
marketing efforts are more heavily concentrated on our Medicare
products, where the return on investment for such activities has
proven to be higher. Through our
</FONT>

<P align="center"><FONT size="2">54
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">strong relationships with providers and community
leaders, our Medicaid and Medicare sales teams employ promotions
activities and other techniques to develop interest among
eligible populations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our sales and marketing programs have been
developed on a localized basis with a focus on the communities
in which our members reside. We often conduct our sales programs
in churches, community centers and in coordination with
government agencies. We regularly participate in local events
and festivals and organize community health fairs to promote our
products and the benefits of preventative care. We also utilize
traditional marketing methods such as direct mail,
telemarketing, mass media and cooperative advertising with
participating medical groups to generate leads.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consistent with our community-focused approach,
we employ a culturally diverse sales staff, with more than six
languages represented, including Spanish, Russian and Chinese.
This allows us to target specific demographic markets, including
markets requiring specific language skills and knowledge.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our marketing and sales activities are heavily
regulated by CMS and the states. For example, our sales and
marketing materials must be approved in advance by the
applicable regulatory authority. In addition, our sales
activities are subject to various restrictions. We are allowed
to engage in various selling activities, such as conveying
information regarding the benefits of preventative care,
describing the operations of managed care plans and providing
information about eligibility requirements. In Florida and New
York, we can assist in the enrollment process. See
&#147;Regulation&#148; for a further description of restrictions
on marketing and sales activities.
</FONT>

<P align="left">
<B><FONT size="2">Quality Improvement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We continually strive to improve the quality of
care provided to our members. We believe that continuous
improvement in the delivery of quality care and measurement of
the results of quality improvement efforts will be driving
factors in the continued growth of managed care.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Quality Improvement Program provides the
basis for our quality and utilization management functions and
outlines specific, ongoing processes designed to improve the
delivery of quality healthcare services to our members, as well
as to ensure compliance with regulatory and accreditation
standards. Our Quality Improvement Committee is chaired by our
President and Chief Executive Officer and includes all senior
executive management and other key company associates as
members. The Quality Improvement Committee also has a number of
subcommittees that are charged with monitoring certain aspects
of care and service, such as healthcare utilization, pharmacy
services and provider credentialing/recredentialing. Several of
our subcommittees include physicians as members.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Quality Improvement Program is evaluated
annually and revised as necessary to address recent developments
and areas of improvement. Elements of our Quality Improvement
Program include the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluation of the effects of particular
    preventative measures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">member satisfaction surveys;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">grievance and appeals processes for members and
    providers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">orientation visits to, and site audits of, select
    providers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">provider credentialing and recredentialing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">ongoing member education programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">ongoing provider education programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory compliance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">health plan accreditation; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">medical record audits.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">55
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our Quality Improvement Program, we
have implemented changes to our reimbursement methods to reward
those providers who encourage preventative care, such as
well-child check-ups and prenatal care. In addition, we have
specialized systems to support our quality improvement
activities. Information is drawn from our systems to identify
opportunities to improve care and to track the outcomes of the
services provided to achieve those improvements. Some examples
of our intervention programs include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a prenatal case management program to help women
    with high-risk pregnancies deliver full-term, healthy infants;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a program to reduce the number of inappropriate
    emergency room visits;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a disease management program to decrease the need
    for emergency room visits and hospitalizations for asthma,
    congestive heart failure and diabetes patients; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a wound management program to redirect
    specialized care to the home setting, resulting in improved
    patient outcomes and reduced cost of care.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that these efforts have resulted in
improvements in the quality of care our members receive, while
reducing our medical costs. As a result of our Quality
Improvement Program, we have received accreditation from the
Accreditation Association for Ambulatory Health Care, or AAAHC,
in the State of Florida.
</FONT>

<P align="left">
<B><FONT size="2">Corporate Compliance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the increasingly complex ethical and legal
questions facing all participants in the healthcare industry, we
have unified our corporate ethics and compliance policies by
implementing a comprehensive corporate ethics and compliance
program, called the Trust Program. The Trust Program covers all
aspects of our company and is designed to assist us with
conducting our business in accordance with applicable federal
and state laws and high standards of business ethics. The Trust
Program contains the following elements:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">written standards of conduct;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">designation of a corporate compliance officer and
    compliance committee;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">effective training and education;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">effective lines for reporting and communication;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enforcement of standards through disciplinary
    guidelines and actions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">internal monitoring and auditing; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">prompt response to detected offenses and
    development of corrective action plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors has designated our General
Counsel to serve as our Chief Compliance Officer, with the
assistance of a Corporate Compliance Committee, to have the
authority to implement the Trust Program. The Chief Compliance
Officer is responsible for coordinating the efforts of all
associates involved in the Trust Program. Additionally, our
board of directors has authorized the Chief Compliance Officer
to convene a Corporate Compliance Committee consisting of
several of our senior executives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our associates who handle corporate compliance
work within our Legal Services area and assist the Corporate
Compliance Committee in implementing and monitoring the Trust
Program. All associates within the Legal Services area, all
department directors in each area, and certain others as needed,
are designated as &#147;Compliance Coordinators&#148; to assist
in implementing and monitoring the Trust Program. In that
capacity, the Compliance Coordinators are responsible for
ensuring compliance within their areas of operations and for
reporting suspected violations of the Trust Program, applicable
federal and state laws, and our high standards of business
ethics.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain and update training and monitoring
programs to educate our directors, associates and independent
contractors on the legal and regulatory requirements of their
respective duties and positions and to detect possible
violations. These programs include additional written policies,
informational handouts and
</FONT>

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<DIV align="left">
<FONT size="2">memoranda or, when appropriate, training seminars
in selected areas. We will continue to monitor and promote
compliance with new federal and state laws and regulations. To
help ensure compliance with the Trust Program, we also conduct
regular, periodic compliance audits by internal and external
auditors and compliance staff who have expertise in federal and
state healthcare laws and regulations.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the Medicaid managed care market, our
principal competitors for state contracts, members and providers
include the following types of organizations:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Primary Care Case Management Programs.
    </FONT></I><FONT size="2">Programs established by the states
    through contracts with primary care providers to provide to the
    Medicaid recipient primary care services, on a non-capitated,
    non-risk basis, as well as to provide limited oversight over
    other services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Commercial HMOs.
    </FONT></I><FONT size="2">National and regional commercial
    managed care organizations that have Medicaid members in
    addition to members in private commercial plans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Medicaid HMOs.
    </FONT></I><FONT size="2">Managed care organizations that focus
    solely on providing healthcare services to Medicaid recipients,
    typically on a capitated, full-risk basis. Many of these
    competitors operate in a single or small number of geographic
    locations. There are a few multi-state Medicaid-only
    organizations that tend to be larger in size and therefore able
    to leverage their infrastructure over a larger membership base.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the Medicare managed care market, our primary
competitors for contracts, members and providers are national
and regional commercial managed care organizations that serve
Medicare recipients and provider-sponsored organizations. MMA
may cause a number of commercial managed care organizations
already in our service areas to decide to enter the Medicare
market. MMA also creates a new competitive bidding process
beginning in 2006 for setting the payment and the beneficiary
premium and benefits, without limiting the number of bidders
that may provide the benefits. We are currently evaluating the
effects of MMA and the implications for our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will continue to face varying levels of
competition as we expand in our existing service areas or enter
new markets. However, the licensing requirements and bidding and
contracting procedures in some states present barriers to entry
into the Medicaid and Medicare managed care markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our competitors are large companies that
have greater financial, technological and marketing resources
than we do. The competition we face in each of our markets is as
follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Florida: Our Medicaid plans collectively have
    approximately 50%&nbsp;market share in Florida, based on
    membership. These plans face competition from approximately
    14&nbsp;competitors statewide, including Amerigroup Corporation,
    with approximately 20% of the market, and Humana, Inc., with
    approximately 8%&nbsp;of the market. Our Medicare plan in
    Florida has an approximately 8%&nbsp;market share, the fourth
    largest in the state. We compete with 15&nbsp;other Medicare
    managed care plans in Florida including Humana, Inc.,
    UnitedHealthcare of Florida, Inc. and CarePlus Health Plans,
    Inc., which collectively have an approximately 58%&nbsp;market
    share.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">New York: Our Medicaid plans have approximately
    2.2% market share in New York. Our plans face competition from
    over 30&nbsp;competitors in New&nbsp;York, including HIP Health
    Plan of New&nbsp;York, with approximately 11%&nbsp;of the
    market, Fidelis Care New&nbsp;York, with approximately
    10%&nbsp;of the market, and others such as Healthfirst, Inc.,
    Health Plus PHSP, Inc., MetroPlus Health Plan, Inc., CarePlus
    Health Plan and Affinity Health Plan, each with less than
    10%&nbsp;of the market.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Connecticut: Our Medicaid plans have
    approximately 5%&nbsp;market share in Connecticut, and face
    competition from three main competitors: Anthem Blue Cross and
    Blue Shield, with approximately 41% of the market, HealthNet,
    Incorporated, with approximately 36% of the market, and
    Community Health Network of Connecticut, with approximately 18%
    of the market.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">57
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We compete with other managed care organizations
for public-sector healthcare program contracts, members and
providers. States and the federal government generally use
either a competitive bidding process or award individual
contracts to any applicant that can demonstrate that it meets
the government&#146;s requirements. To select a winning bid or
award a contract, state governments and the federal government
consider many factors, including the plan&#146;s provider
network, quality and utilization management processes,
responsiveness to member complaints and grievances, timeliness
of claims payment and financial resources.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">People who wish to enroll in a managed care plan
or change plans typically choose a plan based on a specific
provider being part of the network, the quality of care and
service offered, ease of access to services and the availability
of supplemental benefits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, beginning in 2006, a new regional
Medicare Preferred Provider Organization, or Medicare PPO,
program will be implemented pursuant to MMA. Medicare PPOs would
allow their members more flexibility to select physicians than
the current Medicare+Choice plans, which are HMOs that require
members to coordinate with a primary care physician. The
regional Medicare PPO program will compete with local
Medicare+Choice HMO plans, including the plans we offer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also compete with other managed care
organizations to enter into contracts with physicians, physician
groups and other providers. We believe the factors that
independent physicians, physician groups and other providers
consider in deciding whether to contract with us include
potential member volume, payment methods, timeliness of claims
payment, incentive programs and administrative service
capabilities.
</FONT>

<P align="left">
<B><FONT size="2">Regulation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our healthcare operations are regulated by both
state and federal government agencies. Regulation of managed
care products and healthcare services is an evolving area of law
that varies from jurisdiction to jurisdiction. Regulatory
agencies generally have discretion to issue regulations and
interpret and enforce laws and rules. Changes in applicable laws
and rules occur frequently.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to operate a health plan, we must apply
for and obtain a certificate of authority or license from each
state in which we intend to operate. However, starting in 2006,
regional Medicare Advantage plans that operate in more than one
state will initially only need a license from one state within a
region. Our health plans are licensed to operate as health
maintenance organizations in Florida, New York and Connecticut,
and we have an application pending in Louisiana. In those
jurisdictions, we are regulated by both the state insurance
departments and another state agency with responsibility for
oversight of health management organizations. The licensing
requirements are the same for us as they are for commercial
managed healthcare organizations. We must demonstrate to the
state that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we have an adequate provider network;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our quality and utilization management processes
    comply with state requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we have procedures in place for responding to
    member and provider complaints and grievances;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our systems are capable of processing
    providers&#146; claims in a timely fashion and for collecting
    and analyzing the information needed to manage our business; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we have the financial resources necessary to pay
    our anticipated medical care expenses and the infrastructure
    needed to account for our costs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of our health plans is required to report
quarterly, if not monthly, on its performance to the appropriate
regulatory agency in the state in which the health plan is
licensed. Each plan also undergoes periodic examinations and
reviews by the applicable state. The plans generally must obtain
approval from the state before declaring dividends in excess of
certain thresholds. Each plan must maintain a net worth in an
amount determined by statute or regulation and we may only
invest in types of investments approved by the state. Any
acquisition of another plan&#146;s members must also be approved
by the state in which the plan is located.
</FONT>

<P align="center"><FONT size="2">58
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our Medicaid and SCHIP activities
are regulated by each state&#146;s department of health services
or equivalent agency, and our Medicare activities are regulated
by CMS. These agencies typically require demonstration of the
same capabilities mentioned above and perform periodic audits of
performance, usually annually.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Medicaid</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicaid was established under the U.S. Social
Security Act of 1965 to provide medical assistance to low income
and disabled citizens. It is state-operated and implemented,
although it is funded by both the state and federal governments.
Our contracts with the state Medicaid programs place additional
requirements on us. Within broad guidelines established by the
federal government, each state:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">establishes its own eligibility standards;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">determines the type, amount, duration and scope
    of services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sets the rate of payment for services; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">administers its own program.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some states, such as those in which we operate,
award contracts to applicants that can demonstrate that they
meet the state&#146;s requirements. Other states engage in a
competitive bidding process for all or certain programs. We must
demonstrate to the satisfaction of the state Medicaid program
that we are able to meet the state&#146;s operational and
financial requirements. These requirements are in addition to
those required for a license and are targeted to the specific
needs of the Medicaid population. For example:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must measure provider access and availability
    in terms of the time needed to reach the doctor&#146;s office
    using public transportation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our quality improvement programs must emphasize
    member education and outreach and include measures designed to
    promote utilization of preventative services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must have linkages with schools, city or
    county health departments, and other community-based providers
    of healthcare, in order to demonstrate our ability to coordinate
    all of the sources from which our members may receive care;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we must have the capability to meet the needs of
    the disabled and others with &#147;special needs;&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our providers and member service representatives
    must be able to communicate with members who do not speak
    English or who are deaf; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our member handbook, newsletters and other
    communications must be written at the prescribed reading level
    and must be available in languages other than English.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we must demonstrate that we have the
systems required to process enrollment information, to report on
care and services provided, and to process claims for payment in
a timely fashion. We must also have adequate financial resources
needed to protect the state, our providers and our members
against the risk of our insolvency.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Once awarded, our contracts generally have terms
of one to two years, with renewal options at the discretion of
the states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the operating requirements listed
above, the contracts with the states and regulatory provisions
applicable to us generally set forth in great detail provisions
relating to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">subcontractors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">marketing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">safeguarding of member information;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">59
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">fraud and abuse reporting; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">grievance procedures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our health plans are subject to periodic
financial and informational reporting and comprehensive quality
assurance evaluations. We submit periodic utilization reports
and other information to the state or county Medicaid program of
our operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Medicare</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medicare is a federal program that provides
eligible persons age 65 and over and some disabled persons a
variety of hospital and medical insurance benefits. Medicare
beneficiaries have the option to enroll in a Medicare+Choice
plan as an HMO benefit. Under Medicare+Choice, managed care
plans contract with CMS to provide comparable Medicare benefits
as a traditional fee-for-service Medicare in exchange for a
fixed monthly payment per member that varies based on the county
in which a member resides.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;8, 2003, President Bush signed
MMA, which made numerous changes to the Medicare program,
including expanding the Medicare program to include a
prescription drug benefit beginning in 2006, a transitional drug
discount card that will enable Medicare beneficiaries, beginning
in June 2004, to obtain discounts on drugs prior to receiving
drug coverage in 2006, and expanding the Medicare+Choice Program
and renaming it &#147;Medicare Advantage&#148; beginning in
2006. Medicare+Choice plans are eligible to sponsor the drug
discount card and transitional assistance program as well as the
new prescription drug plan. CMS, however, may limit the number
of prescription drug plan sponsors and endorsed drug card
sponsors that are selected in a particular area.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MMA creates the drug discount card and
transitional assistance program as an interim program until the
new drug benefit goes into effect January&nbsp;1, 2006. The
voluntary drug discount card program will enable Medicare
beneficiaries to pay a fixed fee to access discounts on drugs.
Certain low income beneficiaries may enroll in the transitional
assistance program and receive a subsidy of up to $600&nbsp;per
year for their drugs that are purchased using the drug discount
card. A Medicare+Choice plan may apply to be an endorsed sponsor
of the drug card as a stand alone product or may apply to offer
the drug discount card exclusively to its enrollees. The drug
discount card program is supposed go into effect by June&nbsp;1,
2004 and sponsors may continue to enroll eligible individuals
through December&nbsp;31, 2005. In 2006, endorsed card sponsors
must honor the drug card until the end of a transition period
which runs until the date of the individual&#146;s enrollment in
a new drug benefit or the end of the drug benefit enrollment
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under MMA, commencing in 2006, a new voluntary
prescription drug benefit will be available under Medicare.
Medicare beneficiaries will pay a monthly premium for the
covered outpatient drug benefit. The drug benefit is subject to
certain cost sharing. Under the standard drug coverage, for
2006, the cost sharing is a $250 deductible, 25% coinsurance for
annual drug costs reimbursed by Medicare, up to $2,250, and no
reimbursement for drug costs above $2,250, until the beneficiary
has paid $3,600. After that, MMA provides catastrophic stop loss
coverage for annual incurred drug costs in excess of $3,600,
subject to nominal cost-sharing. Plans are not required to
mirror these limits; instead, drug plans are required to provide
coverage that is at least actuarially equivalent to plans that
incorporate the limits. These numbers will be adjusted on an
annual basis. MMA provides subsidies and the reduction or
elimination of cost sharing for certain low-income
beneficiaries, including dual-eligible individuals, who receive
benefits under both Medicare and Medicaid. This new drug benefit
will be offered by new regional prescription drug plans.
Medicare Advantage organizations must offer a plan with the drug
benefit. In addition, Medicare Advantage plans may bid to offer
a stand-alone prescription drug plan that beneficiaries who have
fee for service Medicare may elect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MMA also revises payment methodologies for
Medicare+Choice plans beginning in 2004, and in 2006 MMA expands
the Medicare Advantage program to include, in addition to the
traditional coordinated care plans established by county, new
regional plans which will provide out-of-network benefits in
addition to in-network benefits. The Secretary of HHS will
create 10 to 50 regions, each of which may include more than one
state or portions of a particular state. MMA creates a new
competitive bidding process beginning in 2006 for both the local
HMO plan and the new regional plan for setting the payment to
the Medicare Advantage
</FONT>

<P align="center"><FONT size="2">60
</FONT>

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<DIV align="left">
<FONT size="2">plan and the beneficiary premium and benefits.
The bidding process does not limit the number of plans that may
participate in the Medicare Advantage program.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MMA shifts coverage responsibility for the drug
benefit for dual-eligible individuals. Starting January&nbsp;1,
2006, dual-eligibles will receive their drug coverage from the
Medicare program and not the Medicaid program.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">SCHIP Programs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The State Children&#146;s Health Insurance
Program, or SCHIP, is a federal and state matching program
designed to help states expand health insurance to children
whose families earn too much to qualify for traditional
Medicaid, yet not enough to afford private health insurance.
States have the option of administering SCHIP through their
existing Medicaid programs, creating separate programs or
combining both strategies. The SCHIP programs in Florida, New
York and Connecticut are administered by the same agency that
administers the state&#146;s Medicaid program. Currently, all
50&nbsp;states, the District of Columbia and all U.S.
territories have approved SCHIP plans, and many states continue
to submit plan amendments to further expand coverage under SCHIP.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">HIPAA</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1996, Congress enacted the Health Insurance
Portability and Accountability Act of 1996, or HIPAA. HIPAA is
intended to improve the portability and continuity of health
insurance coverage and simplify the administration of health
insurance claims. All health plans, including ours, are subject
to HIPAA. HIPAA generally requires health plans to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">protect the privacy of patient health information
    through physical and electronic security measures; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">establish the capability to receive and transmit
    electronically certain administrative healthcare transactions,
    such as claims payments, in a standardized format.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we have achieved substantial
compliance with HIPAA by the applicable deadlines. However,
given its complexity, the recent adoption of some final
regulations, the possibility that the regulations may change and
may be subject to changing, and perhaps conflicting,
interpretation, our ability to comply with all of the HIPAA
requirements is uncertain.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fraud and Abuse Laws</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Federal and state governments have made a
priority of investigating and prosecuting healthcare fraud and
abuse. Fraud and abuse prohibitions encompass a wide range of
operating activities, including kickbacks for referral of
members, billing for unnecessary medical services, improper
marketing and violation of patient privacy rights. Companies
involved in public healthcare programs such as Medicaid are
often the subject of fraud and abuse investigations. The
regulations and contractual requirements applicable to
participants in these public-sector programs are complex and
subject to change. Although we believe that our compliance
efforts are adequate, ongoing vigorous law enforcement and the
highly technical regulatory scheme mean that our compliance
efforts in this area will continue to require significant
resources.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Required Statutory Capital</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">By law, regulation and government policy, our HMO
subsidiaries, which we refer to as our regulated subsidiaries,
are required to maintain minimum levels of statutory net worth.
The minimum statutory net worth requirements differ by state and
are generally based on a percentage of annualized premium
revenue, a percentage of annualized healthcare costs or
risk-based capital, or RBC, requirements. The RBC requirements
are based on guidelines established by the National Association
of Insurance Commissioners, or NAIC, and are administered by the
states. Currently, only our Connecticut subsidiary is subject to
RBC requirements. If adopted, the RBC requirements may be
modified as each state legislature deems appropriate for that
state. The RBC formula, based on asset risk, underwriting risk,
credit risk, business risk and other factors,
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">generates the authorized control level, or ACL,
which represents the amount of net worth believed to be required
to support the regulated entity&#146;s business. For states in
which the RBC requirements have been adopted, the regulated
entity typically must maintain a minimum of the greater of the
required ACL or the minimum statutory net worth requirement
calculated pursuant to pre-RBC guidelines. In addition to the
foregoing requirements, our regulated subsidiaries are subject
to restrictions on their ability to make dividend payments,
loans and other transfers of cash.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The statutory framework for our regulated
subsidiaries&#146; statutory net worth requirements may change
over time. For instance, RBC requirements may be adopted by the
states in which we operate. These subsidiaries are also subject
to their state regulators&#146; overall oversight powers. Those
regulators could require our subsidiaries to maintain minimum
levels of statutory net worth in excess of the amount required
under the applicable state laws if the regulators determine that
maintaining such additional statutory net worth is in the best
interest of our members.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Marketing</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The marketing activities of Medicare managed care
plans are strictly regulated by CMS. CMS must approve all
marketing materials before they can be used unless a plan uses
standard marketing materials that have already been approved by
CMS. The Federal Balanced Budget Act of 1997 precludes states
from imposing additional marketing restrictions on Medicare
managed care plans. However, states remain free to regulate, and
typically do regulate, the marketing activities of plans that
enroll Medicaid and commercial beneficiaries. Each of the states
in which we operate regulates Medicaid marketing efforts.
</FONT>

<P align="left">
<B><FONT size="2">Technology</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A foundation of our approach to managed care is
the accurate and timely capture, processing and analysis of
critical data. Focusing on data is essential to our being able
to operate our business in a cost effective manner. Data
processing and data-driven decision making are key components of
both administrative efficiency and medical cost management. We
have successfully developed a system that enables our management
team to better assess and control medical costs. Our system
gathers information from our centralized computer-based
information system, Perot Systems&#146; Diamond&nbsp;950
software, an enterprise software solution designed to be
scalable to accommodate growth. In a study by the manufacturer,
the Diamond system demonstrated scalability to more than
6.5&nbsp;million members and 2,800 concurrent users. This system
supports our core transaction processing functions and is
designed to be scalable to accommodate internal growth and
growth from acquisitions. Its integrated database architecture
helps to assure that consistent sources of claim and member
information are provided across all of our health plans. We use
our information system for premium billing, claims processing,
utilization management, reporting, medical cost trending,
planning and analysis. The system also supports member and
provider service functions, including enrollment, member
eligibility verification, primary care and specialist physician
roster access, claims status inquiries, and referrals and
authorizations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are in the process of implementing a
comprehensive disaster recovery and business continuity plan. We
have contracted with SunGard Recovery Services LP to provide
these services, and expect the disaster recovery and emergency
mode operations systems to be fully implemented by April 2004.
We expect that our business continuity plan will be completed by
the end of 2004.
</FONT>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had
approximately 1,148&nbsp;full-time associates. Our associates
are not represented by any collective bargaining agreement, and
we have never experienced a work stoppage. We believe we have
good relations with our associates.
</FONT>

<P align="left">
<B><FONT size="2">Facilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal administrative, sales and marketing
facilities are located at our headquarters in Tampa, Florida. We
currently occupy approximately 92,000&nbsp;square feet of office
space in the Tampa facility. We have
</FONT>

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</FONT>
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<DIV align="left">
<FONT size="2">negotiated a termination of our current lease,
effective December 2004. We intend to lease new office space for
our corporate headquarters in the second quarter of 2004. We
also lease office space for our health plans in New York, New
York and North Haven, Connecticut, as well as in other locations
within those states. We believe these facilities are suitable
and provide the appropriate level of capacity for our current
operations.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In early 1999, an action was filed against one of
our HMO subsidiaries by a sales agency that had contracted to
market our predecessor&#146;s commercial health plan. The
action, entitled <I>E.S. Thomas vs. Well Care HMO, Inc.</I>, was
brought in Circuit Court in Hillsborough County, Florida, Case
No.&nbsp;01001408. The plaintiff alleges that its contract
requires our Well Care HMO subsidiary to allow the plaintiff to
serve as a sales agent for Well Care HMO&#146;s Medicare health
plans and seeks an unspecified amount of damages, including lost
profits, based on our refusal to do so. A trial is scheduled to
commence in February 2004. We intend to defend this matter
vigorously.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we are involved in legal actions in
the normal course of business, some of which seek monetary
damages, including claims for punitive damages, which are not
covered by insurance. These actions, including the
<I>E.S.&nbsp;Thomas </I>litigation, when finally concluded and
determined, will not, in our opinion, have a material adverse
effect on our financial position, results of operations or cash
flows.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we have provided adequate
reserves, where appropriate, in connection with these legal
proceedings.
</FONT>

<P align="center"><FONT size="2">63
</FONT>
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<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our directors, executive officers and other
management associates and their respective ages and positions as
of February&nbsp;13, 2004 are as follows.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Executive Officers and Directors:</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Todd S. Farha
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President and Chief Executive Officer, Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul L. Behrens
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thaddeus Bereday
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and General Counsel
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Heath Schiesser
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Marketing&nbsp;&#38; Sales
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rupesh Shah
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Market Expansion
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Randall Zomermaand
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Health Services
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert Slepin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Information Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Regina Herzlinger
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Hickey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alif Hourani
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glen R. Johnson, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ruben Jose King-Shaw, Jr.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Christian P. Michalik
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Neal Moszkowski
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Key Associates:</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gretchen Demartini
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Human Resources
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin P. Enterlein
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Provider Contracting
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John J. Esslinger, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Medical Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Enrique Diaz-Granados
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Corporate Sales
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas Hayward
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Connecticut
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William L. Kale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Behavioral Health
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vince P. Kunz, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Medical Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen W. Ogilvie
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Operations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Daniel Parietti
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, New York
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John L. Sirera
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Pharmacy
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Brendan R. Shanahan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Financial Planning and Analysis
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alan R. Smith, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Medical Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David K. Smith
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Finance
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert G. Strickland
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Process Improvement
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William S. White
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Corporate Controller
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diane Wilkosz
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice President, Provider Relations&#151; Florida
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Executive Officers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Todd S. Farha </FONT></I><FONT size="2">has
served as our President and Chief Executive Officer and as a
member of our board of directors since May 2002. From 2000 to
2001, Mr.&nbsp;Farha served as Chief Executive Officer of Best
Doctors, Inc., a provider of information and referral services
for patients suffering from critical illnesses. Prior to that,
from 1998 to 2002, Mr.&nbsp;Farha served as President and Chief
Executive Officer of a company he founded, Medical Technology
Management LLC, a provider of shared medical equipment and
services for physicians and hospitals. From 1996 to 1998,
Mr.&nbsp;Farha served as Chief Executive Officer of Oxford
Specialty Management, a subsidiary of Oxford Health Plans
focusing on the management of acute clinical conditions in six
specialty areas. In 1995, Mr.&nbsp;Farha served in the Office of
the Chief Executive Officer of Oxford Health Plans. Prior to
that, from 1990 to 1993, he held various positions with
Physician Corporation of America, a
</FONT>

<P align="center"><FONT size="2">64
</FONT>
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<DIV align="left">
<FONT size="2">Florida-based health plan focused on Medicaid
recipients. Mr.&nbsp;Farha received his undergraduate degree
from Trinity University and a masters of business administration
from Harvard Business School. Mr.&nbsp;Farha is a cousin of
Mr.&nbsp;Hourani.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Paul L. Behrens </FONT></I><FONT size="2">has
served as our Senior Vice President and Chief Financial Officer
since September 2003. Prior to that, Mr.&nbsp;Behrens was a
partner in the healthcare practice of Ernst &#38; Young LLP,
which he joined in 1983. Mr.&nbsp;Behrens received his
undergraduate degree from Dana College. Mr.&nbsp;Behrens is a
certified public accountant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Thaddeus Bereday </FONT></I><FONT size="2">has
served as our Senior Vice President and General Counsel since
November 2002. From 2001 to 2002, Mr.&nbsp;Bereday was a partner
at Brobeck, Phleger &#38; Harrison, LLP, and from 2000 to 2001,
he was a partner at Morgan, Lewis &#38; Bockius, LLP. From 1998
to 1999, Mr.&nbsp;Bereday served as Vice President and General
Counsel of SmarTalk TeleServices, Inc., a publicly-traded
telecommunications company, and as its President and Acting
General Counsel from 1999 to 2000, after the company filed for
Chapter&nbsp;11 bankruptcy protection. Mr.&nbsp;Bereday received
his undergraduate degree from Brown University and a juris
doctor, <I>magna cum laude,</I> from Case Western Reserve
University School of Law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Heath Schiesser </FONT></I><FONT size="2">has
served as our Senior Vice President, Marketing&nbsp;&#38; Sales
since July 2002. Prior to that, from May 2002 to July 2002,
Mr.&nbsp;Schiesser was a consultant to us. For part of 2001,
Mr.&nbsp;Schiesser served as Vice President of the Emerging
Business Group at Enron Corporation. In 2000 and 2001,
Mr.&nbsp;Schiesser served as a Managing Director at Idealab, an
investment firm that developed and funded seed-stage businesses.
During 2000, he lead the turnaround and sale of an Idealab
portfolio company, iExchange, as President and Chief Executive
Officer. From 1998 to 1999, he co-founded and served as the
Vice-President of Business Development for YourPharmacy.com,
which was sold in October 1999. From 1993 to 1998,
Mr.&nbsp;Schiesser worked at McKinsey &#38; Company, an
international management consulting firm. Mr.&nbsp;Schiesser
received his undergraduate degree from Trinity University and a
masters of business administration from Harvard Business School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Rupesh Shah </FONT></I><FONT size="2">has
served as our Senior Vice President, Market Expansion since July
2002. From 1994 to 2002, he served as the Chief Executive
Officer of Well&nbsp;Care HMO, Inc., one of our predecessor
companies, of which he was also a co-founder. Mr.&nbsp;Shah
received his bachelor&#146;s degrees from St.&nbsp;Xavier&#146;s
College and Gujarat University in India and received his masters
of business administration from the University of South Florida.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Randall Zomermaand
</FONT></I><FONT size="2">has served as our Senior Vice
President, Health Services since May 2003. From October 1997 to
May 2003, Mr.&nbsp;Zomermaand served as President of Zomermaand
Management Services, Inc., a healthcare consulting company,
where he worked with numerous healthcare companies, including us
from September 2002 to May 2003. Mr.&nbsp;Zomermaand received
his undergraduate degree from Hope College and his masters of
business administration from Fordham University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Robert Slepin </FONT></I><FONT size="2">has
served as our Chief Information Officer since May 2003. From
January 2001 to May 2003, Mr.&nbsp;Slepin served as Vice
President, Computer Operations of Deltnanet, Inc., an
information technology company focused on the healthcare
industry. From March 1998 to December 2000, he served as Vice
President and Chief Information Officer for Sutter Health,
not-for-profit network of community-based health care providers.
Mr.&nbsp;Slepin received his undergraduate degree from Duke
University.
</FONT>

<P align="left">
<B><FONT size="2">Non-Employee Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Regina Herzlinger
</FONT></I><FONT size="2">has been a member of our board of
directors since August 2003. Dr.&nbsp;Herzlinger is the Nancy R.
McPherson Professor of Business Administration at the Harvard
Business School and has been teaching at Harvard since 1971. She
is a member of the boards of directors of C.R. Bard, Inc., Noven
Pharmaceuticals, Inc. and Zimmer Holdings, Inc.
Dr.&nbsp;Herzlinger received her undergraduate degree from
Massachusetts Institute of Technology and her doctorate from the
Harvard Business School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Kevin Hickey </FONT></I><FONT size="2">has
been a member of our board of directors since November 2002.
Since 1999, Mr.&nbsp;Hickey has served as the Chairman and Chief
Executive Officer of IntelliClaim, Inc., a privately-held
application service provider that provides insurance payors with
capabilities for enhancing claim processing
</FONT>

<P align="center"><FONT size="2">65
</FONT>

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<DIV align="left">
<FONT size="2">efficiency and productivity. From 1997 until
1998, Mr.&nbsp;Hickey was Executive Vice President of Operations
and Technology for Oxford Health Plans. Mr. Hickey has also
served as a director of the American Association of Preferred
Provider Organizations from 1999 until 2002; a director of First
Health/ HealtheSolutions, a privately-held company, since 1982;
a director of Benefit Management Group, a privately-held
company, since 1997; a director of Healthaxis Inc., a technology
and business process services firm for the health benefits
industry, since 2001; and a director of HealthMarket, Inc., a
consumer directed health plan, since 2002. Mr.&nbsp;Hickey
received his undergraduate degree from Harvard University, a
masters in health services administration from the University of
Michigan and a juris doctor from Loyola College of Law.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Alif Hourani </FONT></I><FONT size="2">has
been a member of our board of directors since August 2003. Since
1997, Mr.&nbsp;Hourani has served as Chairman and Chief
Executive Officer of Pulse Systems, Inc. a practice management
and clinical records software company. From 1987 to 1997,
Mr.&nbsp;Hourani held various positions, including Chief
Executive Officer of Physician Corporation of America/ Data
Systems, Senior Vice President of Management Information Systems
of Physician Corporation of America, and Manager of Computer
Engineering at the Wolf Creek Nuclear Operating Corporation.
Mr.&nbsp;Hourani received his undergraduate degree from the
University of Lyon and his masters of science degree and
doctorate degrees from the University of Strasbourg.
Mr.&nbsp;Hourani is a cousin of Mr.&nbsp;Farha.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Glen R. Johnson, M.D.
</FONT></I><FONT size="2">has been a member of our board of
directors since January 2004. Since May 1998, Dr.&nbsp;Johnson
has served as President and Chief Executive Officer of Community
Health Choice, Inc., a managed health care organization that
provides healthcare services to Medicaid members in the Houston,
Texas area. Since March 2003, Dr.&nbsp;Johnson has also served
as an expert consultant to the Texas State Board of Medical
Examiners, and since 1999 he has been a clinical associate
professor in the Department of Family Medicine at Baylor College
of Medicine in Houston. From 1990 to October 1997,
Dr.&nbsp;Johnson served as Senior Vice President for Medical
Affairs and as Corporate Chief Medical Officer of Physician
Corporation of America. Dr.&nbsp;Johnson is a delegate of the
American Academy of Family Physicians to the American Medical
Association and is the former Vice President of The American
Academy of Family Physicians. Dr.&nbsp;Johnson received his
undergraduate degree and his doctorate from Howard University,
and is a certified physician executive.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ruben Jose King-Shaw, Jr.
</FONT></I><FONT size="2">has been a member of our board of
directors since August 2003. Mr.&nbsp;King-Shaw served as Senior
Advisor to the Secretary of the Department of the Treasury from
January 2003 to June 2003. From July 2001 to April 2003,
Mr.&nbsp;King-Shaw served as Chief Operating Officer and Deputy
Administrator of CMS. Prior to that, from January 1999 to July
2001, he served as Secretary of the Agency for Health Care
Administration of the State of Florida. Mr.&nbsp;King-Shaw
received his undergraduate degree from Cornell University and a
masters of business administration from Florida International
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Christian P. Michalik
</FONT></I><FONT size="2">has been a member of our Board of
Directors since May 2002. Mr.&nbsp;Michalik is currently a
private investor and was a partner in Soros Private Equity
Partners LLC, the private equity investment business of Soros
Fund Management LLC, from 1999 through 2003. From 1997 to 1999,
Mr.&nbsp;Michalik was an investment manager with Capital
Resource Partners, a private equity investment firm. From 1995
to 1996, Mr.&nbsp;Michalik was an associate at Colony Capital, a
real estate investment firm. Mr.&nbsp;Michalik currently serves
as a director of DISA, Inc., a third party administrator of
employee screening services; Oculan Corporation, a provider of
network, system and security management solutions for small and
medium-sized businesses; and RLX Technologies, Inc., a provider
of modular computing solutions. Mr.&nbsp;Michalik received his
undergraduate degree from Yale University and his masters of
business administration from Harvard Business School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Neal Moszkowski </FONT></I><FONT size="2">has
been the Chairman of our board of directors since May 2002.
Mr.&nbsp;Moszkowski is the Co-Head of Soros Private Equity
Partners LLC, the private equity investment business of Soros
Fund Management LLC, where he has been a partner since August
1998. From August 1993 to August 1998, Mr.&nbsp;Moszkowski
worked for Goldman, Sachs &#38; Co. and affiliates, where he
served as a Vice President and an Executive Director in the
Principal Investment Area. Mr.&nbsp;Moszkowski currently serves
as a director of Bluefly, Inc., an online discount apparel
retailer; Integra LifeSciences Holdings Corporation, a developer
and marketer of medical products primarily for surgical and
neurosurgical applications, and JetBlue Airways
</FONT>

<P align="center"><FONT size="2">66
</FONT>
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<DIV align="left">
<FONT size="2">Corporation, a passenger airline.
Mr.&nbsp;Moszkowski received his undergraduate degree from
Amherst College and his masters of business administration from
the Graduate School of Business of Stanford University.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Key Associates</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Gretchen Demartini
</FONT></I><FONT size="2">has served as our Vice President,
Human Resources since February 2003. From 2001 to 2003,
Ms.&nbsp;Demartini was a consultant and did volunteer work,
including serving on the boards of directors of local agencies.
From 1995 to 2001, Ms.&nbsp;Demartini served as Vice President
of Human Resources for First American Real Estate Information
Services, a division of First American Corporation.
Ms.&nbsp;Demartini received her undergraduate degree from
Montclair State College and a masters degree from Stevens
Institute of Technology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Kevin P. Enterlein
</FONT></I><FONT size="2">has served as our Vice President,
Provider Contracting since December 2003. From 1998 to 2003,
Mr.&nbsp;Enterlein worked with Aetna, Inc. in several
capacities, including as Regional Vice President, Network
Management. Mr.&nbsp;Enterlein received a degree from
Westchester Community College.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John J. Esslinger, M.D.
</FONT></I><FONT size="2">has served as one of our Medical
Directors since January 2004. From 2001 to 2003,
Dr.&nbsp;Esslinger served as Medical Director of Aetna
Healthcare, Inc. Prior to that, from 1999 to 2001,
Dr.&nbsp;Esslinger served as Medical Director of Paidos Health
Management Services, Inc., a neonatal disease management
company. Dr.&nbsp;Esslinger received his undergraduate degree
and an M.D. from the University of Minnesota and a masters
degree from Tulane University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Enrique Diaz-Granados
</FONT></I><FONT size="2">has served as our Vice President,
Corporate Sales since December 2003. From February 2003 through
December 2003, Mr.&nbsp;Granados served as President of
Diversified Consultant Services, a business that conducted sales
efforts on behalf of Medicare plans (including ours) and sold
other insurance products. From 1992 to 2003, Mr.&nbsp;Granados
worked with Humana Health Care Plans in several capacities,
including as Regional Vice President, Sales Public Programs.
Mr.&nbsp;Granados received his undergraduate degree from the
University of Tennessee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Douglas Hayward </FONT></I><FONT size="2">has
served as the Vice President of our Connecticut business since
July 2003. From 1998 until June 2003, Mr.&nbsp;Hayward served as
Chief Executive Officer of InvestCare, an independent consulting
firm that provided consulting services to our Connecticut
operations. From 1996 to 1998, Mr.&nbsp;Hayward served as
President and Chief Executive Officer of WellCare of
Connecticut. Mr.&nbsp;Hayward received his undergraduate and
masters degrees from the University of Michigan and completed a
fellowship in HMO management at Georgetown University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William L. Kale</FONT></I><FONT size="2"> has
served as our Vice President, Behavioral Health since November
2002 and was our Director of Behavioral Health from 1999 until
November 2002. From 1985 to 1996, Dr.&nbsp;Kale was President of
Professional Psychological Services, a behavioral health
management company, which was sold to Horizon Health
Corporation, where he continued as President until 1998. Dr.
Kale received his undergraduate degree from Ohio State
University and his masters and doctorate degrees from the
University of South Florida.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Vince P. Kunz, M.D.</FONT></I><FONT size="2">
has served as one of our Medical Directors since February 2003.
From 2000 to 2003, Dr.&nbsp;Kunz served as Market and Network
Medical Director of CIGNA HealthCare of Florida. Prior to that,
from 1998 to 2000, Dr.&nbsp;Kunz served as Medical Director of
MVP Health Care, a not-for-profit health plan. Dr.&nbsp;Kunz
received his undergraduate degree from College of Holy Cross and
his M.D. from New Jersey Medical School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stephen W. Ogilvie</FONT></I><FONT size="2">
has served as our Vice President, Operations since October 2003.
In 2003, Mr.&nbsp;Ogilvie served as Senior Account Manager,
Healthcare Group of Perot Systems Corporation, a provider of
information technology services and business solutions. From
1998 to 2002, Mr.&nbsp;Ogilvie was Director&#151; Government
Business Practice and Director&#151; Healthplan Practice of
First Consulting Group, a provider of consulting, technology,
applied research and outsourcing services to healthcare
providers, health plan insurers, government healthcare and life
sciences companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Daniel Parietti</FONT></I><FONT size="2"> has
served as Vice President of our New York business since
September 2002. From 2001 to 2002, Mr.&nbsp;Parietti served as
Chief Operating Officer of La Cruz Azul de Puerto Rico, a large
health plan in
</FONT>

<P align="center"><FONT size="2">67
</FONT>

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<DIV align="left">
<FONT size="2">Puerto Rico. Prior to that, from 2000 to 2001,
Mr.&nbsp;Parietti service as Vice President, Network and
Delivery Systems Management with Health Net, Inc. From 1993 to
2001, Mr.&nbsp;Parietti worked with Humana, Inc. in several
capacities, including as Associate Executive Director, Humana
Puerto Rico. Mr.&nbsp;Parietti received his undergraduate degree
from the United States Military Academy at West Point, and a
masters of business administration from George Mason University.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John L. Sirera</FONT></I><FONT size="2"> has
served as our Vice President, Pharmacy since September 2002.
From 2000 to 2002, Mr.&nbsp;Sirera served as Regional Account
Manager for Managed Markets Organization for Pharmacia
Corporation. From 1999 to 2000, Mr.&nbsp;Sirera was a consultant
to AMD Specialty Pharmacy, where he acted as Vice President of
Managed Care Services and a consultant to Florida Health Choice,
where he acted as Pharmacy Director. From 1998 to 1999,
Mr.&nbsp;Sirera served as Operations Director, Eastern Region
for Integrated Pharmaceutical Services. Mr.&nbsp;Sirera received
his undergraduate degree from the University of Pittsburgh.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Brendan R. Shanahan
</FONT></I><FONT size="2">has served as our Vice President,
Financial Planning and Analysis since August 2003. From 2002 to
August 2003, Mr.&nbsp;Shanahan was the Chief Financial Officer
of Destiny Health, a consumer-focused health insurer. From 1998
to 2002, Mr.&nbsp;Shanahan served as the Chief Financial Officer
of IntelliClaim, Inc., a privately-held application service
provider that provides insurance payors with capabilities for
enhancing claim processing efficiency and productivity.
Mr.&nbsp;Shanahan received his undergraduate degree from The
Citadel and a masters in business administration from Hofstra
University. Mr. Shanahan is a certified public accountant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Alan R. Smith, M.D.
</FONT></I><FONT size="2">has served as one of our Medical
Directors since February 2003. From 1996 to 2003, Dr.&nbsp;Smith
served as Senior Regional Quality Management Medical Director
for Aetna U.S. Healthcare, Southeast Region. Since 1998,
Dr.&nbsp;Smith has served as a surveyor and advisor for the
Patient Advisory Group of the National Committee for Quality
Assurance. Dr.&nbsp;Smith received his undergraduate degree and
M.D. from the University of Chicago.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David K. Smith </FONT></I><FONT size="2">has
served as our Vice President, Finance since August 2002. From
2000 to July 2002, Mr.&nbsp;Smith was President of David Kelsey
Smith &#38; Associates, an independent healthcare consultancy.
Prior to that, from 1998 to 2000, Mr.&nbsp;Smith served as
President and Chief Executive Officer of Pioneer Eye Care, a
specialty physician practice management and managed care
company. Mr. Smith received his undergraduate degree from
Suffolk University and a masters degree from Cambridge College.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Robert Strickland
</FONT></I><FONT size="2">has served as our Vice President,
Process Improvement since October 2003. From 2000 to 2003,
Mr.&nbsp;Strickland worked with Healthplan Southeast (a Division
of Vista Healthplan) in several capacities, including Executive
Director. Prior to that, from 1993 to 2000, Mr.&nbsp;Strickland
worked with Wheaton Franciscan Services, a not-for-profit health
care and housing company, in several capacities, including as
Senior Vice President, Operations. Mr.&nbsp;Strickland received
his undergraduate and masters degrees from Florida State
University and his masters of management from Northwestern
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William S. White </FONT></I><FONT size="2">has
served as our Corporate Controller since March 2003. From 1997
to 2002, Mr.&nbsp;White held several positions, including
Corporate Controller, at Blue Cross and Blue Shield of North
Carolina. Prior to that, Mr.&nbsp;White was a senior manager in
the financial services practice of Price Waterhouse, LLP.
Mr.&nbsp;White received his undergraduate degree from
North&nbsp;Carolina Wesleyan College. Mr.&nbsp;White is a
certified public accountant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Diane Wilkosz </FONT></I><FONT size="2">has
served as our Vice President, Provider Relations since February
2003. From 1981 to 2002, Ms.&nbsp;Wilkosz worked with CIGNA
HealthCare of Florida in several capacities, including as Vice
President, Executive Director, Practice Management.
Ms.&nbsp;Wilkosz received her undergraduate degree from the
University of Buffalo and a masters of business administration
from the University of Tampa.
</FONT>

<P align="left">
<B><FONT size="2">Terms of Office</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At present, all directors are elected and serve
until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal. Our executive
officers are elected by, and serve until dismissed by, the board
of directors.
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of this offering, our board
will be divided into three classes, as nearly equal in number as
possible, with each director serving a three-year term and one
class being elected at each year&#146;s annual meeting of
stockholders. Messrs.&nbsp;Farha and Hickey and
Dr.&nbsp;Herzlinger will be in the class of directors whose term
expires at the 2005 annual meeting of our stockholders.
Messrs.&nbsp;King-Shaw and Michalik and Dr.&nbsp;Johnson will be
in the class of directors whose term expires at the 2006 annual
meeting of our stockholders. Messrs. Hourani and Moszkowski will
be in the class of directors whose term expires at the 2007
annual meeting of our stockholders. At each annual meeting of
our stockholders, successors to the class of directors whose
term expires at such meeting will be elected to serve for
three-year terms or until their respective successors are
elected and qualified.
</FONT>

<P align="left">
<B><FONT size="2">Board Committees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The audit committee of the board of directors
makes recommendations concerning the engagement of independent
public accountants. The audit committee charter mandates that
the audit committee approve all audit, audit-related, tax and
other services conducted by our independent accountants. In
addition, the committee reviews the plans, results and fees of
the audit engagement with our independent public accountants,
and any independence issues with our independent public
accountants. The audit committee also reviews the adequacy of
our internal accounting controls. The current members of the
audit committee are Messrs.&nbsp;Hickey and Michalik and
Dr.&nbsp;Herzlinger.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The compensation committee of the board of
directors determines compensation for our executive officers and
administers our equity plans. The compensation committee
currently consists of Messrs.&nbsp;Hickey, Hourani and
Moszkowski.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The nominating and corporate governance committee
of the board of directors nominates candidates for election to
the board of directors and oversees corporate governance
processes. The nominating and corporate governance committee
currently consists of Messrs.&nbsp;Hourani, Michalik and
Moszkowski.
</FONT>

<P align="left">
<B><FONT size="2">Employment Contracts, Termination of
Employment and Change-in-Control Arrangements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Todd&nbsp;S. Farha serves as our Chief Executive
Officer, President and a member of our board of directors
pursuant to an employment agreement dated July&nbsp;31, 2002.
The agreement has an initial term of three years, and will
automatically renew for an additional three-year period unless
either party notifies the other that the term will not be
extended. Under the agreement, Mr.&nbsp;Farha is entitled to an
annual salary of $300,000, subject to annual review and
potential increase by our board of directors. In addition,
Mr.&nbsp;Farha is eligible to receive an annual cash bonus,
based upon the satisfaction of performance criteria to be
established annually by our compensation committee. If
Mr.&nbsp;Farha&#146;s employment is terminated by us without
cause, or by Mr.&nbsp;Farha for good reason, then Mr.&nbsp;Farha
will be entitled to continue to receive his base salary for the
shorter of 12&nbsp;months (or 24&nbsp;months if the termination
occurs after a change of control) or the then-remaining portion
of the term of the agreement. He will also be entitled to
receive an amount equal to his target bonus for the year in
which the termination occurs, payable one year after the date of
termination, as well as continuation of benefits for
12&nbsp;months following termination. Mr.&nbsp;Farha has agreed
not to compete with us during the term of his employment and for
one year thereafter, except that if Mr.&nbsp;Farha&#146;s
employment terminates because we notify him that the term of his
agreement will not be renewed, the non-competition covenant will
not apply following the term unless we elect to continue to pay
him his base salary during that period. In addition, if we
terminate his employment without cause within one year prior to
the end of the term of the agreement, then the non-competition
covenant will not apply during the period following the end of
the term of the agreement, unless we elect to continue to pay
him his base salary during that period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Paul Behrens serves as our Senior Vice President
and Chief Financial Officer, Thaddeus Bereday serves as our
Senior Vice President and General Counsel, and Heath Schiesser
serves as our Senior Vice President, Marketing &#38; Sales,
pursuant to employment agreements with us. Each agreement has an
initial term of three years, and will automatically renew for
successive additional one-year periods thereafter unless either
party notifies the other that the term will not be extended.
Under the agreements, Mr.&nbsp;Behrens is entitled to an annual
salary of $275,000, Mr.&nbsp;Bereday is entitled to an annual
salary of $250,000, and Mr.&nbsp;Schiesser is
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">entitled to an annual salary of $250,000, in each
case subject to annual review and potential increase by our
board of directors. In addition, each is eligible to receive an
annual bonus, payable in the form of cash or equity, based upon
the satisfaction of performance criteria to be established
annually by our compensation committee. If the employment of any
of these executives is terminated by us without cause, or by the
executive for good reason, the executive will be entitled to
continue to receive his base salary and benefits for
12&nbsp;months following the date of termination. In addition,
in the case of Mr.&nbsp;Schiesser, if the termination occurs
within six months after a change of control has occurred or a
definitive agreement providing for a change of control has been
signed, or if a definitive agreement providing for a change of
control is signed within six months after the date of
termination, he would also be entitled to receive an amount
equal to his expected potential bonus payable for the 12-month
period following the termination. Each of the executives has
agreed not to compete with us during the term of his employment
and for one year thereafter.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No member of the compensation committee serves as
a member of the board of directors or compensation committee of
any other entity that has one or more executive officers serving
as a member of our board of directors or compensation committee.
</FONT>

<P align="left">
<B><FONT size="2">Director Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We reimburse each member of our board of
directors for out-of-pocket expenses incurred in connection with
attending board meetings. We pay each member of our board who is
not an associate an annual director&#146;s fee of $25,000 for
attending meetings of the board of directors and committee
meetings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, certain of our directors were given
the opportunity to purchase a specified number of Class&nbsp;A
Common Units. As a result of those purchases, those directors
were granted, for no additional consideration, a specified
number of Class&nbsp;C Common Units, subject to vesting over a
four-year period from the date of grant. Upon the completion of
our reorganization, all of these units will convert into shares
of our common stock, and the vesting restrictions will remain in
place. In May 2003, Mr.&nbsp;Hickey
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
under this program, and in September 2003, Dr.&nbsp;Herzlinger
and Messrs.&nbsp;King-Shaw and Hourani each
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
under this program. In addition, in December 2003,
Mr.&nbsp;Michalik
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, and was granted options to purchase an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
at an exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, subject to vesting over a four-year period commencing in
June 2003. The aggregate price paid by each director for the
shares purchased by him or her in 2003 was $50,000.
</FONT>

<P align="center"><FONT size="2">70
</FONT>
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<P align="left">
<B><FONT size="2">Executive Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below summarizes information concerning
the compensation earned during 2003 for services rendered to us
in all capacities by our chief executive officer and each of the
executive officers listed below. The compensation table excludes
other compensation in the form of perquisites and other personal
benefits to a named executive officer where that compensation
constituted less than the lesser of $50,000 or 10% of his total
annual salary and bonus for such fiscal year. We have prepared
this table as if our reorganization as a corporation had already
occurred at the time that the restricted stock awards were made.
None of the named executive officers were granted any options to
acquire our stock in 2003.
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Term</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other Annual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Restricted Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Awards($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Todd S. Farha
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,427</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(6)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(12)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">554</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(17)</FONT></SUP></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President and Chief Executive Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul L. Behrens
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,750</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,286</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(7)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(13)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and Chief Financial Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thaddeus Bereday
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(8)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(14)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and General Counsel
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Heath Schiesser
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,808</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(9)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(15)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,400</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(17)</FONT></SUP></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Marketing &#38; Sales
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rupesh Shah
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,969</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(10)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Market Expansion
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Randall Zomermaand
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,846</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,749</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(11)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(16)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,256</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(18)</FONT></SUP></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Health Services
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Behrens commenced employment with us on
    September&nbsp;15, 2003. His annual salary is $275,000.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Zomermaand commenced employment with us
    on May&nbsp;1, 2003. His annual salary is $220,000.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The amount of bonus earned in 2003 is not
    calculable as of the date of the filing of this registration
    statement.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(4)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes a signing bonus of $75,000. The
    remaining portion of the amount of bonus earned in 2003 is not
    calculable as of the date of the filing of this registration
    statement.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(5)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The remaining portion of the amount of bonus
    earned in 2003 is not calculable as of the date of the filing of
    this registration statement.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(6)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents a housing allowance of $35,980, an
    automobile allowance of $9,921 and a gross up payment for income
    taxes relating to these allowances of $19,526.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(7)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents a reimbursement for relocation
    expenses of $12,088 and a gross up payment for income taxes
    relating to this reimbursement of $7,198.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(8)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents a reimbursement for relocation
    expenses of $59,433 and a gross up payment for income taxes
    relating to this reimbursement of $23,708.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><SUP><FONT size="2">(9)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents a reimbursement for relocation
    expenses of $42,138 and a gross up payment for income taxes
    relating to this reimbursement of $18,670.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(10)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents an automobile allowance.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(11)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents a reimbursement for relocation
    expenses of $27,978 and a gross up payment for income taxes
    relating to the reimbursement of $2,771.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(12)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On September&nbsp;6, 2002, Mr.&nbsp;Farha
    received an award
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
    shares of common stock, of which
    were &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;unvested
    as of December&nbsp;31, 2003. The value of the aggregate
    unvested restricted shares held by Mr.&nbsp;Farha as of
    December&nbsp;31, 2003 was $3,060,507, based on the fair market
    value of our common stock on December&nbsp;31, 2003. The
    restricted stock award was 25% vested on the date of grant, and
    the remainder vests over a three-year period, at a rate of
    2.0833% upon the end of each full calendar
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">71
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">month after the grant date. The grant would
    immediately vest in full upon a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(13)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On September&nbsp;30, 2003, Mr.&nbsp;Behrens
    received an award
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
    shares of common stock, all of which were unvested as of
    December&nbsp;31, 2003. The value of this award as reflected in
    the Summary Compensation Table is based on the fair market value
    of our common stock on the date of grant. The value of the
    aggregate unvested restricted shares held by Mr.&nbsp;Behrens as
    of December&nbsp;31, 2003 was $1,962,531, based on the fair
    market value of our common stock on December&nbsp;31, 2003. The
    restricted stock award vests over a four-year period, at a rate
    of 25% on September&nbsp;15, 2004 and 2.0833% upon the end of
    each full calendar month thereafter. The grant would immediately
    vest in full upon the termination of Mr.&nbsp;Behrens&#146;
    employment by WellCare without cause, or by Mr.&nbsp;Behrens for
    good reason, following a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(14)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On May&nbsp;31, 2003, Mr.&nbsp;Bereday received a
    grant
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
    shares of common stock, shares of which were unvested as of
    December&nbsp;31, 2003. The value of this award as reflected in
    the Summary Compensation Table is based on the fair market value
    of our common stock on the date of grant. The value of the
    aggregate unvested restricted shares held by Mr.&nbsp;Bereday as
    of December&nbsp;31, 2003 was $1,022,151 based on the fair
    market value of our common stock on December 31, 2003. The
    restricted stock award vests over a four-year period, at a rate
    of 2.0833% upon the end of each full calendar month following
    the date of grant. The grant would immediately vest in full upon
    the termination of Mr.&nbsp;Bereday&#146;s employment by
    WellCare without cause, or by Mr.&nbsp;Bereday for good reason,
    within 12&nbsp;months following a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(15)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On May&nbsp;30, 2003, Mr.&nbsp;Schiesser received
    a grant of restricted shares of common stock, shares of which
    were unvested as of December&nbsp;31, 2003. The value of this
    award as reflected in the Summary Compensation Table is based on
    the fair market value of our common stock on the date of grant.
    The value of the aggregate unvested restricted shares held by
    Mr.&nbsp;Schiesser as of December&nbsp;31, 2003 was $1,308,353,
    based on the fair market value of our common stock on
    December&nbsp;31, 2003. The restricted stock award vests over a
    four-year period, at a rate of 2.0833% upon the end of each full
    calendar month following the date of grant. The grant would
    immediately vest in full upon the termination of
    Mr.&nbsp;Schiesser&#146;s employment by WellCare without cause,
    or by Mr.&nbsp;Schiesser for good reason, within six months of a
    change of control of WellCare. Dividends, if any are declared,
    will be paid on the restricted shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(16)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">On May&nbsp;30, 2003, Mr.&nbsp;Zomermaand
    received a grant of restricted shares of common stock, all of
    which were unvested as of December&nbsp;31, 2003. The value of
    this award as reflected in the Summary Compensation Table is
    based on the fair market value of our common stock on the date
    of grant. The value of the aggregate unvested restricted shares
    held by Mr.&nbsp;Zomermaand as of December&nbsp;31, 2003 was
    $348,000, based on the fair market value of our common stock on
    December&nbsp;31, 2003. The restricted stock award vests over a
    four-year period, at a rate of 25% on May&nbsp;1, 2004 and
    2.0833% upon the end of each full calendar month thereafter.
    Dividends, if any are declared, will be paid on the restricted
    shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(17)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents company matching of 401(k)
    contributions.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(18)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents consulting fees paid prior to becoming
    an associate.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Employee Benefit Plans</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Equity Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our reorganization as a
corporation immediately prior to the closing of this offering,
our board of directors plans to adopt and submit to our
stockholders for approval our 2004 Equity Incentive Plan, which
will be effective immediately prior to the closing of our
reorganization. The Equity Incentive Plan is designed to enable
us to attract, retain and motivate our directors, officers,
associates and consultants, and to further align their interests
with those of our stockholders, by providing for or increasing
their ownership interests in our company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Administration.</FONT></I><FONT size="2"> The
Equity Incentive Plan will be administered by the compensation
committee of our board of directors. Our board may, however, at
any time resolve to administer the Equity Incentive Plan.
Subject to the specific provisions of the Equity Incentive Plan,
the compensation committee is authorized to select persons to
participate in the Equity Incentive Plan, determine the form and
substance of grants made under the Equity Incentive Plan to each
participant, and otherwise make all determinations for the
administration of the Equity Incentive Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Participation.</FONT></I><FONT size="2">
Individuals who will be eligible to participate in the Equity
Incentive Plan will be directors (including non-employee
directors), officers (including non-employee officers) and
employees of, and other individuals performing services for, or
to whom an offer of employment has been extended by, us or our
subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Type of Awards.</FONT></I><FONT size="2"> The
Equity Incentive Plan will provide for the issuance of stock
options, stock appreciation rights, or SARs, restricted stock,
deferred stock, dividend equivalents, other stock-based awards
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">and performance awards. Performance awards may be
based on the achievement of certain business or personal
criteria or goals, as determined by the compensation committee.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Available Shares.</FONT></I><FONT size="2"> An
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be reserved for issuance under the
Equity Incentive Plan, subject to certain adjustments reflecting
changes in our capitalization. If any grant under the Equity
Incentive Plan expires or terminates unexercised, becomes
unexercisable or is forfeited as to any shares, or is tendered
or withheld as to any shares in payment of the exercise price of
the grant or the taxes payable with respect to the exercise,
then such unpurchased, forfeited, tendered or withheld shares
will thereafter be available for further grants under the Equity
Incentive Plan unless, in the case of options granted under the
Equity Incentive Plan, related SARs are exercised. The Equity
Incentive Plan will provide that the compensation committee
shall not grant, in any one calendar year, to any one
participant awards to purchase or acquire a number of shares of
common stock in excess
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares authorized for issuance under the
Equity Incentive Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Option Grants.</FONT></I><FONT size="2">
Options granted under the Equity Incentive Plan may be either
incentive stock options within the meaning of Section&nbsp;422
of the Internal Revenue Code or non-qualified stock options, as
the compensation committee may determine. The exercise price per
share for each option will be established by the compensation
committee, except that in the case of the grant of any incentive
stock option, the exercise price may not be less than 100% of
the fair market value of a share of common stock as of the date
of grant of the option. In the case of the grant of any
incentive stock option to an employee who, at the time of the
grant, owns more than 10% of the total combined voting power of
all of our classes of stock, the exercise price may not be less
than 110% of the fair market value of a share of common stock as
of the date of grant of the option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Terms of Options.</FONT></I><FONT size="2">
The term during which each option may be exercised will be
determined by the compensation committee, but if required by the
Internal Revenue Code and except as otherwise provided in the
Equity Incentive Plan, no option will be exercisable in whole or
in part more than ten years from the date it is granted, and no
incentive stock option granted to an employee who at the time of
the grant owns more than 10% of the total combined voting power
of all of our classes of stock will be exercisable more than
five years from the date it is granted. All rights to purchase
shares pursuant to an option will, unless sooner terminated,
expire at the date designated by the compensation committee. The
compensation committee will determine the date on which each
option will become exercisable and may provide that an option
will become exercisable in installments. The shares constituting
each installment may be purchased in whole or in part at any
time after such installment becomes exercisable, subject to such
minimum exercise requirements as may be designated by the
compensation committee. Prior to the exercise of an option and
delivery of the shares represented thereby, the optionee will
have no rights as a stockholder, including any dividend or
voting rights, with respect to any shares covered by such
outstanding option. If required by the Internal Revenue Code,
the aggregate fair market value, determined as of the grant
date, of shares for which an incentive stock option is
exercisable for the first time during any calendar year under
all of our equity incentive plans may not exceed $100,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Termination of
Options.</FONT></I><FONT size="2"> Unless otherwise determined
by the compensation committee, and subject to certain exemptions
and conditions, if a participant ceases to be a director,
officer or employee of, or to otherwise perform services for us
for any reason other than death, disability, retirement or
termination for cause, all of the participant&#146;s options and
SARs that were exercisable on the date of such cessation will
remain exercisable for, and will otherwise terminate at the end
of, a period of 30 days after the date of such cessation. In the
case of death or disability, all of the participant&#146;s
options and SARs that were exercisable on the date of such death
or disability will remain so for a period of 180&nbsp;days from
the date of such death or disability. In the case of retirement,
all of the participant&#146;s options and SARs that were
exercisable on the date of retirement will remain exercisable
for, and shall otherwise terminate at the end of, a period of
90&nbsp;days after the date of retirement. In the case of a
termination for cause, or if a participant does not become a
director, officer or employee of, or does not begin performing
other services for us for any reason, all of the
participant&#146;s options and SARs will expire and be forfeited
immediately upon such cessation or non-commencement, whether or
not then exercisable.
</FONT>

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</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Amendment of Options and Amendment/
Termination of Plan.</FONT></I><FONT size="2"> The board of
directors or the compensation committee generally will have the
power and authority to amend or terminate the Equity Incentive
Plan at any time without approval from our stockholders. The
compensation committee generally will have the authority to
amend the terms of any outstanding award under the plan,
including, without limitation, the ability to reduce the
exercise price of any options or SARs or to accelerate the dates
on which they become exercisable or vest, at any time without
approval from our stockholders. No amendment will become
effective without the prior approval of our stockholders if
stockholder approval would be required by applicable law or
regulations, including if required for continued compliance with
the performance-based compensation exception of
Section&nbsp;162(m) of the Internal Revenue Code, under
provisions of Section&nbsp;422 of the Internal Revenue Code or
by any listing requirement of the principal stock exchange on
which our common stock is then listed. Unless previously
terminated by the board or the committee, the Equity Incentive
Plan will terminate on the tenth anniversary of its adoption. No
termination of the Equity Incentive Plan will materially and
adversely affect any of the rights or obligations of any person,
without his or her written consent, under any grant of options
or other incentives theretofore granted under the Equity
Incentive Plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2002 Equity Plans</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2002 Senior Executive Equity Plan and our
2002 Employee Option Plan were both adopted by the board of
directors and became effective in September 2002. A maximum
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in the aggregate were reserved for issuances to
associates under the plans. Both plans are administered by our
board of directors and the compensation committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Senior Executive Equity Plan, each
participant was given the opportunity to purchase a specified
number of what were, prior to our reorganization as a
corporation, Class&nbsp;A Common Units. As a result of that
purchase, each participant was granted, for no consideration, a
specified number of what were Class&nbsp;C Common Units. Under
the Employee Option Plan, each participant was granted an option
to purchase a specified number of what were Class&nbsp;A Common
Units. The securities that were granted under both plans are
subject to the terms, including vesting, set forth in each
subscription agreement or option agreement, as applicable. All
securities granted pursuant to the plans are subject to
repurchase by us at fair market value if the participant ceases
to be employed by us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of our reorganization as a
corporation, the Class&nbsp;C Common Units granted under the
Senior Executive Equity Plan will be converted automatically
into shares of our common stock, and the options granted under
the Employee Option Plan will be converted automatically into
equivalent options to purchase our common stock. Each granted
share and option will be subject to the same vesting terms as in
each holder&#146;s original subscription or option agreement, as
applicable. The number of shares subject to each option and
their exercise price will be adjusted to reflect any stock split
effected in connection with the restructuring. Following our
restructuring
transactions, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our employees will hold a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
under our Senior Executive Equity Plan, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be vested. In
addition, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
our employees will hold options under our Employee Option Plan
exercisable for
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, at a weighted average exercise price
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be vested. We do not intend to issue any additional securities
under either of these plans.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Employee Stock Purchase
    Plan</FONT></I></B><FONT size="2">.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">2004 Employee Stock Purchase
Plan.</FONT></I><FONT size="2"> Our board of directors plans to
adopt and submit to our stockholders for approval our 2004
Employee Stock Purchase Plan. The purpose of the plan is to
provide an incentive for our employees (and employees of our
subsidiaries designated by our board of directors) to purchase
our common stock and acquire a proprietary interest in us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Administration.</FONT></I><FONT size="2"> A
committee designated by our board will administer the plan. The
plan vests the committee with the authority to interpret the
plan, to prescribe, amend, and rescind rules and regulations
relating to the plan, and to make all other determinations
necessary or advisable for the administration of the plan,
although our board of directors may exercise any such authority
in lieu of the committee. In all cases, the plan will be
required to be administered in such a manner as to comply with
applicable requirements of
</FONT>

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<DIV align="left">
<FONT size="2">Rule&nbsp;16b-3 of the Securities Exchange Act of
1934, as amended, and Section&nbsp;423 of the Internal Revenue
Code of 1986, as amended.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Eligibility and
Participation.</FONT></I><FONT size="2"> As of the date of this
offering, each person who is employed either by us or by one of
our designated subsidiaries and is expected on a
regularly-scheduled basis to work more than 20&nbsp;hours per
week for more than five months per calendar year, automatically
will be enrolled in the plan. Persons who subsequently become
employed by us or one of our designated subsidiaries will be
eligible once they have completed three months of service,
provided they are expected on a regularly-scheduled basis to
work more than 20&nbsp;hours per week for more than five months
per calendar year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Options to Purchase/ Purchase of
Shares.</FONT></I><FONT size="2"> Each participant will be
granted an option to purchase shares of our common stock at the
beginning of each 24-month &#147;offering period&#148; under the
plan, on each &#147;exercise date,&#148; during the offering
period. Exercise dates will occur on each June&nbsp;30 and
December&nbsp;31. Participants will purchase the shares of our
common stock through after-tax payroll deductions, not to
exceed &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the participant&#146;s total base salary. No participant may
purchase more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock on any one exercise date, or more than $25,000
of common stock in any one calendar year. The purchase price for
each share will generally be the lower of 85% of the fair market
value of a share on the first day of the offering period, or 85%
of the fair market value on the exercise date. If the fair
market value on any exercise date during an offering period is
lower than it was on the first day of the offering period, that
offering period will automatically terminate and a new 24-month
offering period will commence on the next July&nbsp;1 or
January&nbsp;1, as applicable. If a participant&#146;s
employment with us or one of our designated subsidiaries
terminates, any outstanding option of that participant also will
terminate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Share
Reserve.</FONT></I><FONT size="2"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be reserved for issuance over the term
of the plan. That amount will be increased each year by the
lowest
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
all shares outstanding at the end of the previous year, or a
lower amount determined by our board. If any option to purchase
reserved shares is not exercised by a participant for any
reason, or if the option terminates, the shares that were not
purchased shall again become available under the plan. The
number of shares available under the plan also will be subject
to periodic adjustment for changes in the outstanding common
stock occasioned by stock splits, stock dividends,
recapitalizations or other similar changes affecting our
outstanding common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Amendment and
Termination.</FONT></I><FONT size="2"> Our board or the
committee generally will have the power and authority to amend
the plan from time to time in any respect without the approval
of our stockholders. However, no amendment will become effective
without the prior approval of our stockholders if stockholder
approval would be required by applicable law or regulation,
including Rule&nbsp;16b-3 under the Securities Exchange Act of
1934, Section&nbsp;423 of the Internal Revenue Code, or any
listing requirement of the principal stock exchange on which our
common stock is then listed. Additionally, no amendment may make
any change to an option already granted that adversely affects
the rights of any participant. The plan will terminate at the
earliest of the tenth anniversary of its implementation, the
time when there are no remaining reserved shares available for
purchase under the plan, or an earlier time that our board may
determine.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>401(k) Profit
Sharing Plan.</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have adopted a tax-qualified employee savings
and retirement plan, the 401(k) Profit Sharing Plan, for
eligible associates. Eligible associates may elect to defer a
portion of their eligible compensation, subject to the
statutorily prescribed annual limit. We may make matching
contributions on behalf of all participants who have elected to
make deferrals to the 401(k) Profit Sharing Plan in an amount
determined annually by us. Any contributions to the plan by us
or the participants are paid to a trustee. The contributions
made by us, if any, are subject to a vesting schedule; all other
contributions are fully vested at all times. The 401(k) Profit
Sharing Plan, and the accompanying trust, is intended to qualify
under Sections&nbsp;401(k) and 501 of the Internal Revenue Code,
so that contributions by us or by associates and income earned
(if any) on plan contributions are not taxable to associates
until withdrawn and contributions by us, if any, will be
deductible by the company when made. At the direction of each
participant, the trustee invests the contributions made to the
401(k) Profit Sharing Plan in any number of investment options.
</FONT>

<P align="center"><FONT size="2">75
</FONT>

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<P align="left">
<B><FONT size="2">Limitations on Liability of Directors and
Officers and Indemnification</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitation of Liability</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation which will take
effect upon completion of this offering will provide that our
officers and directors will not be personally liable to us or
our stockholders for monetary damages resulting from a breach of
fiduciary duty, to the maximum extent permitted by Delaware law.
Under Delaware law, directors of a corporation will not be
personally liable for monetary damages for breach of their
fiduciary duties as directors, except for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any breach of the duty of loyalty to the
    corporation or its stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">unlawful payments of dividends or unlawful stock
    repurchases or redemptions; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any transaction from which the director derived
    an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This limitation of liability does not apply to
non-monetary remedies that may be available, such as injunctive
relief or rescission, nor does it relieve our officers and
directors from complying with federal or state securities laws.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Indemnification</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and bylaws will
provide that we shall indemnify our directors and executive
officers, and may indemnify our other corporate agents, to the
fullest extent permitted by law. An officer or director shall
not be entitled to indemnification if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the officer or director did not act in good faith
    and in a manner reasonably believed to be in, or not opposed to
    our best interests; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the officer or director is subject to criminal
    action or proceedings and had reasonable cause to believe the
    conduct was unlawful.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into agreements to indemnify our
directors and certain executive officers in addition to the
indemnification provided for in our certificate of incorporation
and our bylaws. These agreements, among other things, provide
for indemnification of our directors and officers for expenses
specified in the agreements, including attorneys&#146; fees,
judgments, fines and settlement amounts incurred by any of these
persons in any action or proceeding arising out of these
persons&#146; services as a director or officer for us, any of
our subsidiaries or any other entity to which the person
provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain
qualified persons as directors and officers.
</FONT>

<P align="center"><FONT size="2">76
</FONT>
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<DIV align="left">
<A name='112'></A>
</DIV>

<!-- link1 "CERTAIN TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The summaries of the agreements described below
are not complete and you should read the agreements in their
entirety. These agreements have been filed as exhibits to the
registration statement of which this prospectus is a part.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other than the transactions described below, for
the last three full fiscal years there has not been, nor is
there currently proposed, any transaction or series of similar
transactions to which we are or will be a party in which the
amount involved exceeded or will exceed $60,000, and in which
any director, executive officer, holder of more than 5% of our
common stock on an as-converted basis or any member of their
immediate family has or will have a direct or indirect material
interest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we do not have a separate conflicts
policy, we comply with Delaware law with respect to transactions
involving potential conflicts. Delaware law requires that all
transactions between us and any director or executive officer
are subject to full disclosure and approval of the majority of
the disinterested members of our board of directors, approval of
the majority of our stockholders or the determination that the
contract or transaction is intrinsically fair to us.
</FONT>

<P align="left">
<B><FONT size="2">Acquisition Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were formed in May 2002 for the purpose of
acquiring the WellCare group of companies. That acquisition was
completed in July 2002, through two transactions. In the first,
we acquired our Florida operations, including our Well Care HMO
and HealthEase subsidiaries, in a stock purchase from Rupesh
Shah and certain other stockholders, pursuant to a purchase
agreement. The purchase price for this transaction consisted of:
</FONT>
<P>

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    <TD width="4%"></TD>
    <TD width="93%"></TD>
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    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">$50&nbsp;million in cash;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance of a senior subordinated
    non-negotiable promissory note in the original principal amount
    of $53&nbsp;million, subject to adjustments for earnouts and
    other purchase price adjustments; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase 2,287,037 Class&nbsp;B
    Common Units of WellCare Holdings, LLC.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purchase price was subject to adjustment,
based upon a number of earn-outs and other calculations. In
February 2004, the remaining principal amount of the note was
fixed at $119.7&nbsp;million pursuant to the terms of a
settlement agreement with the selling stockholders. See
&#147;&#151;&nbsp;Amendment and Settlement Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the second transaction, we acquired The
WellCare Management Group, Inc., a publicly-traded holding
company and the parent company of our New York and Connecticut
operations, by means of a merger of that company into a
wholly-owned subsidiary of ours, pursuant to an agreement and
plan of merger. The purchase price for this transaction
consisted of approximately $7.72&nbsp;million in cash.
</FONT>

<P align="left">
<B><FONT size="2">Other Agreements with Selling
Stockholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our acquisition of our Florida
business pursuant to the purchase agreement, we entered into the
following agreements with Mr.&nbsp;Shah and the other selling
stockholders:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Seller Note.</FONT></I><FONT size="2"> As part
of the consideration for the acquisition, we issued a senior
subordinated promissory note in the original principal amount of
$53&nbsp;million to the stockholder representative on behalf of
the stockholders of the Florida business, including
Mr.&nbsp;Shah. In February 2004, the remaining principal amount
of the note was fixed at $119.7&nbsp;million pursuant to the
terms of a settlement agreement with the selling stockholders.
See &#147;&#151;&nbsp;Amendment and Settlement Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Warrants.</FONT></I><FONT size="2"> As further
consideration for the acquisition, we entered into an equity and
warrant agreement with Mr.&nbsp;Shah and two other selling
stockholders. Under the equity and warrant agreement, the
stockholders were issued warrants to purchase an aggregate of
2,287,037 Class&nbsp;B Common Units. The warrants were fully
exercised in December 2003.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Investor Rights
Agreement.</FONT></I><FONT size="2"> We entered into an investor
rights agreement with Mr.&nbsp;Shah and the two other selling
stockholders who received warrants under the equity and warrant
agreement. Under the investor rights agreement, after this
offering the stockholders will have &#147;piggyback&#148;
registration rights to include their shares in any registration
statement we file on our own behalf (other than for employee
benefit plans and other exceptions) or on behalf of other
stockholders, subject to other stockholders&#146; priority
rights of registration. The stockholders also have the right to
require us to register their shares on Form&nbsp;S-3, if
available for such an offering and if the aggregate price of the
shares to be sold would be at least $1.0&nbsp;million, not more
than once during any 12-month period. The stockholders would be
responsible for the expenses of any such registration on
Form&nbsp;S-3. The stockholders also received information rights
and a right to participate in some types of sales by us of our
equity securities. Those rights will terminate upon the closing
of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Pledge and Escrow
Agreements.</FONT></I><FONT size="2"> As security for our
obligations under the seller note, we entered into a pledge
agreement with the stockholder representative on behalf of the
stockholders of the Florida business, including Mr.&nbsp;Shah,
pursuant to which we pledged a portion of the shares of capital
stock of WellCare Health Plans, Inc. held by us. Initially, 100%
of the shares were subject to the pledge. After the payment of a
portion of the principal amount under the note with a portion of
the proceeds from this offering, 49% of the shares will be
released and the remaining 51% will remain subject to the
pledge. Upon the payment in full of the note, all of the shares
will be released.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Amendment and Settlement
Agreement.</FONT></I><FONT size="2"> In February 2004, we
entered into a settlement agreement with Mr.&nbsp;Shah and the
other selling stockholders that fixed the remaining amount of
the seller note at $119.7&nbsp;million. Under the terms of the
settlement agreement, the aggregate indemnification obligations
of the selling stockholders under the purchase agreement were
reduced, subject to certain exceptions.
</FONT>

<P align="left">
<B><FONT size="2">Agreements with SPEI</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Initial Capitalization and Contribution
Agreement.</FONT></I><FONT size="2"> We were formed in
May&nbsp;2002 by our equity sponsor, Soros Private Equity
Investors LP. At that time, SPEI contributed $1,000 in cash to
us in exchange for one Class&nbsp;A Common Unit. In
July&nbsp;2002, in connection with the consummation of the
acquisition of the WellCare businesses, SPEI contributed an
additional $70.0&nbsp;million in cash to us, in exchange for
additional Class&nbsp;A Common Units, pursuant to a contribution
agreement. Under that agreement, we also granted SPEI certain
information rights. Those rights will terminate upon the closing
of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Registration Rights
Agreement.</FONT></I><FONT size="2"> We are party to a
registration rights agreement with SPEI, Todd Farha and some of
our other stockholders, pursuant to which we granted
registration rights to those stockholders. Under the agreement,
holders of a majority of shares held by SPEI or any of its
affiliates may require us to effect the registration of their
shares from time to time. In addition, the stockholders party to
the agreement have &#147;piggyback&#148; registration rights to
include their shares in any registration statement we file on
our own behalf (other than for employee benefit plans and other
exceptions) or on behalf of other stockholders. We are required
to pay all registration expenses in connection with any demand
or piggyback registrations. Notwithstanding the other provisions
of the agreement, we are not obligated to effect any demand
registration within 180&nbsp;days after the effective date of
either:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any registration we effect on Form&nbsp;S-1, or
    any similar &#147;long-form&#148; registration (including this
    offering); or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any other offering in which stockholders party to
    the agreement were given &#147;piggyback&#148; rights pursuant
    to the agreement, if the offering includes at least 80% of the
    number of shares requested by the stockholders to be included.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Reorganization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, upon our incorporation, we
issued 100 shares of common stock to WellCare Holdings, LLC in
exchange for $1,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, the Board of Directors of
WellCare Holdings, LLC authorized a plan to reorganize WellCare
Holdings, LLC as a corporation, by means of a merger of WellCare
Holdings, LLC with and into
</FONT>

<P align="center"><FONT size="2">78
</FONT>

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<DIV align="left">
<FONT size="2">WellCare Group, Inc. Upon the consummation of the
reorganization, which will take place immediately prior to the
closing of this offering:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">assuming an initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, we will issue an aggregate
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in exchange
    for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;A
    Common
    Units, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;B
    Common Units
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;C
    Common Units of WellCare Holdings, LLC;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all outstanding options issued by WellCare
    Holdings, LLC will automatically be converted into options to
    acquire shares of our common stock; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our name will be changed to WellCare Health
    Plans, Inc.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Equity Sales and Grants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The executive officers and directors listed below
purchased what were, prior to our reorganization as a
corporation, our Class&nbsp;A Common Units. As a result of those
purchases, those officers and directors were granted, for no
additional consideration, a specified number of what were
Class&nbsp;C Common Units, subject to vesting restrictions. Upon
the completion of our reorganization, all of these units will
convert into shares of our common stock, and the vesting
restrictions will remain in place. The information below is
presented as if our reorganization as a corporation had already
occurred at the time the grants were made.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;6, 2002, Todd Farha
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;30, 2003, Kevin Hickey
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;30, 2003, Heath Schiesser
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $10,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;30, 2003, Randall Zomermaand
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $5,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;31, 2003, Thaddeus Bereday
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $10,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;30, 2003, Paul&nbsp;L. Behrens
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;30, 2003, Regina Herzlinger
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;30, 2003, Ruben King-Shaw
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;30, 2003, Alif Hourani
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
for an aggregate purchase price of $50,000, and was
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;restricted
shares.
</FONT>

<P align="left">
<B><FONT size="2">Option Grants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The executive officers and directors listed below
were granted options to purchase what were, prior to our
reorganization as a corporation, Class&nbsp;A Common Units,
subject to vesting over a four-year period. Upon the completion
of our reorganization, these options will become exercisable to
purchase shares of our common stock, and the vesting
restrictions will remain in place. The information below is
presented as if our reorganization as a corporation had already
occurred at the time the grants were made.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;31, 2003, September&nbsp;30, 2003 and
January&nbsp;2, 2004, Robert Slepin was granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
respectively, at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
$&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
respectively, pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;31, 2003, Christian Michalik was
granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;2, 2004, Todd Farha was granted
options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;2, 2004, Paul Behrens was granted
options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;2, 2004, Thaddeus Bereday was
granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;2, 2004, Heath Schiesser was
granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;2, 2004, Randall Zomermaand was
granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
pursuant to our 2002 Employee Option Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;5, 2004, Glen Johnson was
granted options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
at a per share exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<B><FONT size="2">Other Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">IntelliClaim.</FONT></I><FONT size="2"> In
March 2003, we entered into an agreement with IntelliClaim,
Inc., pursuant to which we license software, and obtain
maintenance, support and related services, from IntelliClaim.
Kevin Hickey, a member of our board of directors, is the
Chairman and Chief Executive Officer of IntelliClaim. In 2003,
we paid $225,000 in the aggregate to IntelliClaim under this
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ruben King-Shaw, Jr.</FONT></I><FONT size="2">
In November 2003, we entered into a consulting agreement with
Ruben King-Shaw, Jr., one of our directors, pursuant to which
Mr.&nbsp;King-Shaw oversees governmental and regulatory issues
for us, including current and proposed federal and state
legislation and federal and state government affairs activities.
In 2003, we paid $6,000 to Mr.&nbsp;King-Shaw under this
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Randall Zomermaand.</FONT></I><FONT size="2">
In September 2002, we entered into a consulting agreement with
Randall Zomermaand, our Senior Vice President, Health Services.
Under the agreement, Mr.&nbsp;Zomermaand provided healthcare
consulting services to us relating to our health services area,
including quality improvement, utilization management and
pharmacy and behavioral health services. In 2003, we paid
$66,256 to Mr.&nbsp;Zomermaand under this agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Employment
Agreements.</FONT></I><FONT size="2"> We have entered into
employment agreements with some of our executive officers, as
described in &#147;Management&#151; Employment Contracts,
Termination of Employment and Change-in-Control
Arrangements.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Indemnification
Agreements.</FONT></I><FONT size="2"> We have entered into
indemnification agreements with our directors and some of our
executive officers, as described in &#147;Management&#151;
Limitations on Liability of Directors and Officers and
Indemnification.&#148;
</FONT>

<P align="center"><FONT size="2">80
</FONT>

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<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
regarding the beneficial ownership of our common stock as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004 after giving effect to our reorganization as a corporation
and the resultant conversion of all outstanding limited
liability company units for shares of our common stock by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person or entity who is known by us to own
    beneficially more than 5% of our outstanding common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our executive officers named in the
    Summary Compensation Table;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our directors; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all directors and executive officers as a group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common
stock subject to options held by that person that are currently
exercisable or will become exercisable within 60&nbsp;days
after &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, are deemed outstanding, while the shares are not deemed
outstanding for purposes of computing percentage ownership of
any other person. Unless otherwise indicated in the footnotes
below, the persons and entities named in the table have sole
voting or investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number and percentage of shares beneficially
owned are based on the aggregate of
(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, after giving effect to our reorganization as a corporation
and the resultant conversion of all outstanding limited
liability company units for shares of our common stock and
(ii)&nbsp;shares of common stock issued in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise indicated, the principal address
of each of the stockholders below is c/o&nbsp;WellCare Health
Plans, Inc., 6800 North Dale Mabry Highway, Suite&nbsp;268,
Tampa, Florida 33614.
</FONT>

<CENTER>
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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Beneficially Owned</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned Prior to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Before</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">the Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Executive Officers and Directors</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Todd S. Farha<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Regina Herzlinger
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Hickey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alif Hourani
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glen R. Johnson, M.D.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ruben Jose King-Shaw, Jr.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Christian P. Michalik
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Neal Moszkowski
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul Behrens
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thaddeus Bereday
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Heath Schiesser
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Rupesh Shah
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Randall Zomermaand
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All directors and officers as a group
    (14&nbsp;persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Other 5%&nbsp;Stockholders</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Soros Private Equity Investors LP<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    subject to stock options exercisable within 60&nbsp;days
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Soros Private Equity Investors LP
    (&#147;SPEI&#148;) is a Delaware limited partnership. Its
    general partner is SPEP General Partner LP, a Delaware limited
    partnership (&#147;SPEP GP LP&#148;). An investment committee of
    SPEP GP LP exercises exclusive decision-making authority with
    regard to the acquisition and disposition of, and voting power
    with respect to, investments by SPEI. SPEP GP LP&#146;s general
    partner is SPEP General Partner LLC, a Delaware limited
    liability company, whose managing member is QIH
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">81
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">Management Investor, L.P., a Delaware limited
    partnership, whose sole general partner is QIH Management LLC, a
    Delaware limited liability company, whose sole managing member
    is Soros Fund Management LLC, a Delaware limited liability
    company (&#147;SFM&#148;). George Soros is the Chairman of SFM
    and, in such capacity, may be deemed to have voting and
    dispositive power over securities held for the account of SPEI.
    Each has their principal office at 888&nbsp;Seventh Avenue,
    33rd&nbsp;Floor, New&nbsp;York, New&nbsp;York 10106.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">82
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "SELLING STOCKHOLDER" -->

<P align="center">
<B><FONT size="2">SELLING STOCKHOLDER</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents certain information
regarding the beneficial ownership of our common stock
outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004 (but without giving effect to the underwriters&#146;
exercise of the over-allotment option) by the selling
stockholder. Please see &#147;Certain Transactions&#148; for a
description of the material relationships between us and the
selling stockholder.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Owned Prior to the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Owned After the</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares Being</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sold in the</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Soros Private Equity Investors LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">83
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='115'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description of our common stock and
preferred stock and the relevant provisions of our amended and
restated certificate of incorporation and amended and restated
bylaws as will be in effect upon the closing of this offering
are summaries and are qualified by reference to these documents.
Forms have been filed with the Securities and Exchange
Commission as exhibits to our registration statement, of which
this prospectus forms a part.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, our authorized
capital stock will consist
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $.01 per share
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value $.01 per share.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately following our reorganization as a
corporation, there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding held of record
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders.
Based upon the number of shares outstanding as of that date and
giving effect to the sale of shares of common stock in this
offering, assuming no exercise of the underwriters&#146;
over-allotment option and no exercise of outstanding options
after &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, there will be
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding at the closing of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of common stock are entitled to one vote
per share on all matters submitted to a vote
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders.
Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to receive dividends as may
be declared from time to time by the board of directors out of
funds legally available for the payment of dividends, subject to
the preferences that apply to any outstanding preferred stock.
See &#147;Dividend Policy.&#148; Upon our liquidation,
dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment
of liabilities and after giving effect to the liquidation
preference of any outstanding preferred stock. The common stock
has no preemptive or conversion rights and no additional
subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable. The
shares issued in this offering will be fully paid and
nonassessable.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation authorizes the
board of directors, without stockholder action, to designate and
issue from time to time shares of preferred stock in one or more
series. The board of directors may designate the price, rights,
preferences and privileges of the shares of each series of
preferred stock, which may be greater than the rights of the
common stock. It is not possible to state the actual effect of
the issuance of any shares of preferred stock upon the rights of
holders of common stock until the board of directors determines
the specific rights of the preferred stock. However, possible
effects of issuing preferred stock with voting and conversion
rights include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricting dividends on common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">diluting the voting power of common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">impairing the liquidation rights of the common
    stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">delaying or preventing a change of control of us
    without stockholder action; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">harming the market price of common stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, no shares of
our preferred stock will be outstanding. We have no present
plans to issue any shares of preferred stock.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, including SPEI, are entitled to demand
registration rights requiring us to register the sale of their
shares under the Securities Act of 1933, under the terms of an
agreement between us and the holders of these shares. The
holders of a majority of the shares held by SPEI or its
affiliates are entitled to demand that we register their shares
under the Securities Act, subject to various
</FONT>

<P align="center"><FONT size="2">84
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">limitations. In addition, these holders are
entitled to piggyback registration rights with respect to the
registration of their shares under the Securities Act, subject
to various limitations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the holders of an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be entitled to piggyback registration
rights, subject to various limitations. Further, at any time
after we become eligible to file a registration statement on
Form&nbsp;S-3, these holders may require us to file registration
statements on Form&nbsp;S-3 under the Securities Act with
respect to their shares of common stock. These registration
rights are subject to certain conditions and limitations, among
them the right of the underwriters of an offering to limit the
number of shares of common stock held by these holders with
registration rights to be included in a registration. We are
generally required to bear all of the expenses of all of these
registrations, except underwriting discounts and selling
commissions. Registration of any of the shares of common stock
held by these holders with registration rights would result in
shares becoming freely tradable without restriction under the
Securities Act immediately upon effectiveness of such
registration.
</FONT>

<P align="left">
<B><FONT size="2">Delaware Anti-Takeover Law and Provisions in
Our Charter and Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Delaware Anti-Takeover
Statute.</FONT></I><FONT size="2"> We are subject to
Section&nbsp;203 of the Delaware General Corporation Law. In
general, these provisions prohibit a Delaware corporation from
engaging in any business combination with any interested
stockholder for a period of three years following the date that
the stockholder became an interested stockholder, unless the
transaction in which the person became an interested stockholder
is approved in a manner presented in Section&nbsp;203 of the
Delaware General Corporation Law. Generally, a &#147;business
combination&#148; is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a
stockholder. In general, an &#147;interested stockholder&#148;
is a person who, together with affiliates and associates, owns,
or within three years, did own, 15% or more of a
corporation&#146;s voting stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Certificate of
Incorporation.</FONT></I><FONT size="2"> Upon the closing of
this offering, our certificate of incorporation will provide
that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our board of directors may issue, without further
    action by the stockholders, up
    to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of undesignated preferred stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any action to be taken by our stockholders must
    be effected at a duly called annual or special meeting and not
    by a consent in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our board of directors shall be divided into
    three classes, with each class serving for a term of three years;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">vacancies on the board, including newly created
    directorships, can be filled by a majority of the directors then
    in office; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our directors may be removed only for cause.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Bylaws. </FONT></I><FONT size="2">Our bylaws
will provide that stockholders seeking to bring business before
an annual meeting of stockholders or to nominate candidates for
election as directors at an annual meeting of stockholders, must
provide timely notice to use in writing. To be timely, a
stockholder&#146;s notice must be received at our principal
executive offices not less than 90&nbsp;days nor more than
120&nbsp;days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. In the event that the
annual meeting is called for a date that is not within
30&nbsp;days before or 60&nbsp;days after the anniversary date,
in order to be timely notice from the stockholder must be
received:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">not earlier than 120&nbsp;days prior to the
    annual meeting of stockholders; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">not later than 90&nbsp;days prior to the annual
    meeting of stockholders or the tenth day following the date on
    which notice of the annual meeting was made public.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">85
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the case of a special meeting of stockholders
called for the purpose of electing directors, notice by the
stockholder, in order to be timely, must be received:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">not earlier than 120&nbsp;days prior to the
    special meeting;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">not later than 90&nbsp;days prior to the special
    meeting or the close of business on the tenth day following the
    day on which public disclosure of the date of the special
    meeting was made.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our bylaws will also specify requirements as to
the form and content of a stockholder&#146;s notice. These
provisions may preclude stockholders from bringing matters
before an annual or special meeting of stockholders or from
making nominations for directors at an annual or special meeting
of stockholders or from making nominations for directors at an
annual or special meeting of stockholders. In addition, a
two-thirds supermajority vote of stockholders will be required
to amend our amended and restated bylaws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provisions in our certificate of
incorporation and our bylaws are intended to enhance the
likelihood of continuity and stability in the composition of the
board of directors and in the policies formulated by the board
of directors and to discourage certain types of transactions
that may involve an actual or threatened change of control of
WellCare. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for a takeover of
WellCare that does not contemplate the acquisition of all of its
outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of WellCare. These
provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of
WellCare. They may also have the effect of preventing changes in
our management.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transfer agent and registrar for our common
stock
is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">
<B><FONT size="2">Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied to list our common stock on the
New York Stock Exchange under the symbol&nbsp;&#147;WCG.&#148;
</FONT>

<P align="center"><FONT size="2">86
</FONT>

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<DIV align="left">
<A name='116'></A>
</DIV>

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<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there was no market for
our common stock. We cannot predict the effect, if any, that the
sale of our common stock or the availability of shares of common
stock for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of
common stock in the public market following the offering could
adversely affect the market price of the common stock and
adversely affect our ability to raise capital at a time and on
terms favorable to&nbsp;us.
</FONT>

<P align="left">
<B><FONT size="2">Sale of Restricted Shares</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding, assuming no exercise of the
underwriters&#146; over-allotment option. Of these shares of
common stock,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock being sold in this offering, plus any shares
sold upon exercise of the underwriters&#146; over-allotment
option, will be freely tradeable without restriction under the
Securities Act, except for any such shares which may be held or
acquired by an &#147;affiliate&#148; of ours, as that term is
defined in Rule&nbsp;144 under the Securities Act, which shares
will be subject to the volume limitations and other restrictions
of Rule&nbsp;144 described below. The remaining shares of common
stock held by our existing stockholders upon completion of the
offering will be &#147;restricted securities,&#148; as that
phrase is defined in Rule 144, and may not be resold in the
absence of registration under the Securities Act or pursuant to
an exemption from such registration, including among others, the
exemptions provided by Rule&nbsp;144, 144(k) or 701 under the
Securities Act, which rules, are summarized below. Taking into
account the lock-up agreements described below and the
provisions of Rules&nbsp;144, 144(k) and 701, additional shares
will be available for sale in the public market as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares will be available for immediate sale on
    the date of this prospectus;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares will be available for sale 180&nbsp;days
    after the date of this prospectus, the expiration date for the
    lock-up agreements, pursuant to Rules&nbsp;144, 144(k) and 701
    in the event stockholders are entitled to tack their respective
    holding periods of the limited liability company units; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares will be available for sale on the first
    anniversary of the date of the prospectus pursuant to
    Rule&nbsp;144 in the event stockholders are not entitled to tack
    their respective holding periods of the limited liability
    company units.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 as currently in
effect, a person who has beneficially owned shares for at least
one year, including an &#147;affiliate,&#148; as that term is
defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the
greater&nbsp;of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">one percent of the then outstanding shares of our
    common stock
    (approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    immediately following the offering);&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the average weekly trading volume during the four
    calendar weeks preceding filing of notice of such sale.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales under Rule&nbsp;144 are also subject to
certain manner of sale provisions, notice requirements and the
availability of current public information about us. A
stockholder who is deemed not to have been an
&#147;affiliate&#148; of ours at any time during the
90&nbsp;days preceding a sale, and who has beneficially owned
restricted shares for at least two years, would be entitled to
sell such shares under Rule&nbsp;144(k) without regard to the
volume, limitations, manner of sale provisions or public
information requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities issued in reliance on Rule&nbsp;701
are also restricted and may be sold by stockholders other than
affiliates of ours subject only to the manner of sale provisions
of Rule&nbsp;144 and by affiliates under Rule&nbsp;144 without
compliance with its one-year holding period requirement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our affiliates have agreed to further
restrict their shares by entering into lock-up arrangements
discussed below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted options to purchase shares of our
common stock under our equity plans. As of December&nbsp;31,
2003, after giving effect to our reorganization, options to
purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock were fully vested and exercisable. An
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
were
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">reserved for issuance under our equity plans. We
intend to register the shares of common stock issuable or
reserved for issuance under the plan within 180&nbsp;days after
the date of this prospectus.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Lock-up Arrangements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our officers and directors, associates and other
stockholders have agreed not to sell or otherwise dispose of any
shares of common stock for a period of 180&nbsp;days after the
date of this prospectus without the prior written consent of
Morgan Stanley &#38; Co. Incorporated, on behalf of the
underwriters. Upon the expiration of these lock-up agreements,
additional shares will be available for sale in the public
market.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After completion of this offering, the holders of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be entitled to certain rights with
respect to the registration of such shares under the Securities
Act. See &#147;Certain Transactions&#151; Agreements with
SPEI.&#148; All holders with registration rights have agreed not
to exercise their rights until 180&nbsp;days following the date
of this prospectus without the prior written consent of Morgan
Stanley&nbsp;&#38; Co. Incorporated, on behalf of the
underwriters.
</FONT>

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</FONT>

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<DIV align="left">
<A name='125'></A>
</DIV>

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<P align="center">
<B><FONT size="2">CERTAIN UNITED STATES TAX
CONSEQUENCES</FONT></B>

<DIV align="center">
<B><FONT size="2">TO NON-UNITED STATES HOLDERS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a general discussion of the
material U.S.&nbsp;federal income and estate tax consequences of
the ownership and disposition of our common stock by a non-U.S.
holder. As used in this discussion, the term &#147;non-U.S.
holder&#148; means a beneficial owner of our common stock that
is not, for U.S.&nbsp;federal income tax purposes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an individual who is a citizen or resident of the
    United States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a corporation created or organized in or under
    the laws of the United States or any political subdivision of
    the United States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">an estate whose income is includible in gross
    income for U.S.&nbsp;federal income tax purposes regardless of
    its source; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a trust, in general, if (i)&nbsp;a U.S. court is
    able to exercise primary supervision over the administration of
    the trust, and one or more United States persons have the
    authority to control all substantial decisions of the trust, or
    (ii)&nbsp;the trust was in existence on August&nbsp;20, 1996 and
    properly elected to continue to be treated as a United States
    person.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If an entity classified as a partnership for
U.S.&nbsp;federal income tax purposes holds our common stock,
the tax treatment of a partner generally will depend on the
status of the partner and the activities of the partnership. If
you are a partnership holding our common stock, or a partner in
such a partnership, you should consult your tax advisers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual may be treated as a resident of the
United States in any calendar year for U.S.&nbsp;federal income
tax purposes, instead of a nonresident, by, among other ways,
being present in the United States on at least 31&nbsp;days in
that calendar year and for an aggregate of at least
183&nbsp;days during the current calendar year and the two
immediately preceding calendar years. For purposes of this
calculation, you would count all of the days present in the
current year, one-third of the days present in the immediately
preceding year and one-sixth of the days present in the second
preceding year. Residents are taxed for U.S.&nbsp;federal income
purposes as if they were U.S.&nbsp;citizens.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This discussion does not consider:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">U.S. state and local or non-U.S. tax consequences;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">specific facts and circumstances that may be
    relevant to a particular non-U.S. holder&#146;s tax position,
    including, if the non-U.S. holder is a partnership, that the
    U.S.&nbsp;tax consequences of holding and disposing of our
    common stock may be affected by certain determinations made at
    the partner level;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the tax consequences to the stockholders or
    beneficiaries of a non-U.S. holder;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">special tax rules that may apply to particular
    non-U.S. holders, including financial institutions, insurance
    companies, tax-exempt organizations, U.S.&nbsp;expatriates,
    broker-dealers and traders in securities;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">special tax rules that may apply to a non-U.S.
    holder that holds our common stock as part of a
    &#147;straddle,&#148; &#147;hedge,&#148; &#147;conversion
    transaction,&#148; &#147;synthetic security&#148; or other
    integrated investment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following discussion is based on provisions
of the U.S.&nbsp;Internal Revenue Code of 1986, as amended,
applicable U.S.&nbsp;Treasury regulations and administrative and
judicial interpretations, all as in effect on the date of this
prospectus, and all of which are subject to change,
retroactively or prospectively. The following discussion also
assumes that a non-U.S. holder holds our common stock as a
capital asset. <B>EACH NON-U.S. HOLDER SHOULD CONSULT ITS TAX
ADVISER REGARDING THE U.S.&nbsp;FEDERAL, STATE, LOCAL, AND
NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING
AND DISPOSING OF SHARES OF OUR COMMON STOCK.</B>
</FONT>

<P align="center"><FONT size="2">89
</FONT>

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<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The gross amount of dividends paid to a
non-U.S.&nbsp;holder of our common stock ordinarily will be
subject to withholding of U.S.&nbsp;federal income tax at a 30%
rate, or at a lower rate if an applicable income tax treaty so
provides and we have received proper certification of the
application of that treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends that are effectively connected with a
non-U.S.&nbsp;holder&#146;s conduct of trade or business in the
United States and, if provided in an applicable income tax
treaty, attributable to a permanent establishment or fixed base
in the United States, are not subject to the U.S.&nbsp;federal
withholding tax but instead are taxed in the manner applicable
to United States persons. In that case, we will not have to
withhold U.S.&nbsp;federal withholding tax provided the non-U.S.
holder complies with applicable certification and disclosure
requirements. In addition, dividends received by a foreign
corporation that are effectively connected with the conduct of
trade or business in the United States may be subject to a
branch profits tax at a 30% rate, or at a lower rate if provided
by an applicable income tax treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Non-U.S.&nbsp;holders should consult their tax
advisers regarding their entitlement to benefits under an
applicable income tax treaty and the manner of claiming the
benefits of the treaty. A non-U.S.&nbsp;holder that is eligible
for a reduced rate of U.S. federal withholding tax under an
income tax treaty may obtain a refund or credit of any excess
amounts withheld by timely filing an appropriate claim for a
refund with the&nbsp;IRS.
</FONT>

<P align="left">
<B><FONT size="2">Gain on Disposition of Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder generally will not be
taxed on gain recognized on a disposition of our common stock
unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the non-U.S.&nbsp;holder is an individual who
    holds our common stock as a capital asset, is present in the
    United States for 183&nbsp;days or more during the taxable year
    of the disposition and meets certain other conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the gain is effectively connected with the
    non-U.S.&nbsp;holder&#146;s conduct of trade or business in the
    United States and, in some instances if an income tax treaty
    applies, is attributable to a permanent establishment or fixed
    base maintained by the non-U.S.&nbsp;holder in the United
    States;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are or have been a &#147;United States real
    property holding corporation&#148; for U.S.&nbsp;federal income
    tax purposes at any time during the shorter of the five-year
    period ending on the date of disposition and the period that the
    non-U.S.&nbsp;holder held our common stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We have determined that we are not, and we
believe we will not become, a United States real property
holding corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual non-U.S.&nbsp;holder described in
the first bullet point immediately above is taxed on his gains
(including gain from the sale of our common stock, net of
applicable U.S. losses incurred on sales or exchanges of other
capital assets during the year) at a flat rate of 30%. Other
non-U.S.&nbsp;holders who may be subject to U.S.&nbsp;federal
income tax on the disposition of our common stock will be taxed
on the disposition in the same manner in which citizens or
residents of the United States would be taxed.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Common stock owned or treated as owned by an
individual who is not a U.S.&nbsp;citizen will be included in
the individual&#146;s gross estate for U.S.&nbsp;federal estate
tax purposes and may be subject to U.S.&nbsp;federal estate tax
unless an applicable estate tax treaty provides otherwise.
U.S.&nbsp;federal legislation enacted in the spring of 2001
provides for reductions in the U.S.&nbsp;federal estate tax
through 2009 and the elimination of the tax entirely in 2010.
Under the legislation, the U.S.&nbsp;federal estate tax would be
fully reinstated, as in effect prior to the reductions,
in&nbsp;2011.
</FONT>

<P align="center"><FONT size="2">90
</FONT>

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<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">U.S.&nbsp;information reporting requirements and
backup withholding tax will not apply to dividends paid on our
common stock to a non-U.S. holder, provided that the non-U.S.
holder provides a Form&nbsp;W-8BEN (or satisfies certain
documentary evidence requirements for establishing that it is
not a United States person) or otherwise establishes an
exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and backup withholding also
generally will not apply to a payment of the proceeds of a sale
of common stock effected outside the United States by a foreign
office of a foreign broker. However, information reporting
requirements (but not backup withholding) will apply to a
payment of the proceeds of a sale of common stock effected
outside the United&nbsp;States by a foreign office of a broker
if the broker (i)&nbsp;is a United&nbsp;States person,
(ii)&nbsp;derives 50% or more of its gross income for certain
periods from the conduct of trade or business in the United
States, (iii)&nbsp;is a &#147;controlled foreign
corporation&#148; as to the United States or (iv)&nbsp;is a
foreign partnership that, at any time during its taxable year,
is more than 50% (by income or capital interest) owned by United
States persons or is engaged in the conduct of a U.S. trade or
business, unless in any such case the broker has documentary
evidence in its records that the holder is a non-U.S. holder and
certain conditions are met, or the holder otherwise establishes
an exemption. Payment by a U.S.&nbsp;office of a broker of the
proceeds of a sale of common stock will be subject to both
backup withholding and information reporting unless the holder
certifies under penalties of perjury that it is not a United
States person or otherwise establishes an exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISERS REGARDING THE APPLICATION OF THE INFORMATION REPORTING
AND BACKUP WITHHOLDING RULES TO THEM.</FONT></B>

<P align="center"><FONT size="2">91
</FONT>

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<DIV align="left">
<A name='117'></A>
</DIV>

<!-- link1 "UNDERWRITERS" -->

<P align="center">
<B><FONT size="2">UNDERWRITERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in the underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Morgan
Stanley &#38; Co. Incorporated, Credit Suisse First Boston LLC,
SG Cowen Securities Corporation and Raymond James&nbsp;&#38;
Associates, Inc. are acting as representatives, have severally
agreed to purchase, and we have agreed to sell to them,
severally, the number of shares of common stock indicated below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morgan Stanley &#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit Suisse First Boston LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SG Cowen Securities Corporation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Raymond James&nbsp;&#38; Associates,
    Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters and the representatives are
collectively referred to as the &#147;underwriters&#148; and the
&#147;representatives,&#148; respectively. The underwriters are
offering the shares of common stock subject to their acceptance
of the shares from us and subject to prior sale. The
underwriting agreement provides that the obligations of the
several underwriters to pay for and accept delivery of the
shares of our common stock offered by this prospectus are
subject to the approval of legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered by this
prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters&#146; over-allotment option
described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering
price and other selling terms may from time to time be varied by
the representatives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted to the underwriters an option,
exercisable for 30&nbsp;days from the date of this prospectus,
to purchase up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock at the public offering price listed
on the cover page of this prospectus, less underwriting
discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of our
common stock offered by this prospectus. To the extent the
option is exercised, each underwriter will become obligated,
subject to limited conditions, to purchase approximately the
same percentage of the additional shares of our common stock as
the number listed next to the underwriter&#146;s name in the
preceding table bears to the total number of shares of our
common stock listed next to the names of all underwriters in the
preceding table. If the underwriters&#146; over-allotment option
is exercised in full, the total price to the public would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
the total underwriters&#146; discounts and commissions would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
and the total proceeds to us would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the total expenses of this
offering, excluding underwriting discounts and commissions, will
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed
five&nbsp;percent of the total number of shares of our common
stock offered by them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have applied for listing of our common stock
on the NYSE under the symbol &#147;WCG.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of us, our directors, executive officers,
certain of our other stockholders and certain other stockholders
has agreed that, without the prior written consent of Morgan
Stanley &#38; Co. Incorporated on
</FONT>

<P align="center"><FONT size="2">92
</FONT>

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<DIV align="left">
<FONT size="2">behalf of the underwriters, each of us will not,
during the period ending 180&nbsp;days after the date of this
prospectus:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of our common stock or any securities convertible into or
    exercisable or exchangeable for our common stock; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The restrictions described in the preceding
paragraph do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares to the underwriters;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">transaction by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">certain gratuitous transfers by any person other
    than us to family member, trusts and/or controlled entities of
    such person in connection with estate planning or charitable
    contributions, provided that each transferee also agrees to the
    restrictions described above.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of our common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of our common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position in our common stock for their own
account. A short sale is covered if the short position is no
greater than the number of shares available for purchase by the
underwriters under the over-allotment option. The underwriters
can close out a covered short sale by exercising the
over-allotment option or purchasing shares in the open market.
In determining the source of shares to close out a covered short
sale, the underwriters will consider, among other things, the
open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell
shares in excess of the over-allotment option, creating a naked
short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
our common stock in the open market after pricing that could
adversely affect investors who purchase in the offering. In
addition, in order to cover any over-allotments or to stabilize
the price of our common stock, the underwriters may bid for, and
purchase, shares of our common stock in the open market.
Finally, the underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for
distributing our common stock in the offering, if the syndicate
repurchases previously distributed shares of our common stock to
cover syndicate short positions or to stabilize the price of the
common stock. Any of these activities may stabilize or maintain
the market price of our common stock above independent market
levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the underwriters have each agreed to
indemnify each other against specified liabilities, including
liabilities under the Securities Act.
</FONT>

<P align="left">
<B><FONT size="2">Directed Share Program</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At our request, the underwriters have reserved
for sale, at the initial public offering price, up to
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock to our directors, officers, associates,
customers and other business associates. The number of shares of
common stock available for sale to the general public will be
</FONT>

<P align="center"><FONT size="2">93
</FONT>

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<DIV align="left">
<FONT size="2">reduced to the extent these parties purchase the
reserved shares. Any reserved shares that are not so purchased
will be offered by the underwriters to the general public on the
same basis as the other shares offered by this prospectus.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Pricing of the Offering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for the shares of our common stock. The initial public
offering price will be determined by negotiations between us and
the representatives of the underwriters. Among the factors to be
considered in determining the initial public offering price will
be:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">future prospects of our company and our industry
    in general;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our record of operations and our current
    financial position;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the experience of our management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sales, earnings and certain of our other
    financial and operating information in recent periods; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the price-earnings ratios, price-sales ratios,
    market prices of securities and financial and operating
    information of companies engaged in activities similar to ours.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<A name='118'></A>
</DIV>

<!-- link1 "VALIDITY" -->

<P align="center">
<B><FONT size="2">VALIDITY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Greenberg Traurig, LLP, Washington, D.C., will
provide WellCare an opinion relating to the validity of the
common stock issued in this offering. Cleary, Gottlieb, Steen
&#38; Hamilton, New York, New York will provide the underwriters
an opinion relating to the validity of the common stock issued
in this offering.
</FONT>

<DIV align="left">
<A name='119'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements included in this
prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by
Deloitte &#38; Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration
statement, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
</FONT>

<DIV align="left">
<A name='120'></A>
</DIV>

<!-- link1 "ADDITIONAL INFORMATION" -->

<P align="center">
<B><FONT size="2">ADDITIONAL INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Commission a registration
statement on Form&nbsp;S-1 with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information
set forth in the registration statement or the exhibits and
schedules which are part of the registration statement. For
further information with respect us and the common stock,
reference is made to the registration statement and the exhibits
and schedules thereto. You may read and copy any document we
file at the Commission&#146;s public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further
information about the public reference rooms. Our SEC filings
are also available to the public from the Commission&#146;s Web
site at http://www.sec.gov. Upon completion of this offering, we
will become subject to the information and periodic reporting
requirements of the Securities Exchange Act and, in accordance
therewith, will file periodic reports, proxy statements and
other information with the Commission. Such periodic reports,
proxy statements and other information will be available for
inspection and copying at the Commission&#146;s public reference
rooms and the Web site of the Commission referred to above.
</FONT>

<P align="center"><FONT size="2">94
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">INDEX TO FINANCIAL STATEMENTS</FONT></B>

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent Auditors&#146; Report
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Balance Sheets as of
    December&nbsp;31, 2003 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Income for the year
    ended December&nbsp;31, 2003 and five-month period ended
    December&nbsp;31, 2002, and Combined Predecessor Statements of
    Income for the seven-month period ended July&nbsp;31, 2002 and
    the year ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Changes in
    Members&#146; Equity and Comprehensive Income for the year ended
    December&nbsp;31, 2003 and five-month period ended
    December&nbsp;31, 2002, and Combined Predecessor Statements of
    Changes in Stockholders&#146; Equity and Comprehensive Income
    for the seven-month period ended July&nbsp;31, 2002 and the year
    ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Cash Flows for the
    year ended December&nbsp;31, 2003 and five-month period ended
    December&nbsp;31, 2002, and Combined Predecessor Statements of
    Cash Flows for the seven-month period ended July&nbsp;31, 2002
    and the year ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Consolidated and Combined Financial
    Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">WELLCARE GROUP, INC.</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="92%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent Auditors&#146; Report
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance Sheet as of February&nbsp;9, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">Independent Auditors&#146; Report</FONT></B>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of
Directors and Members of
</FONT>

<DIV align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WellCare Holdings,
LLC
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tampa, Florida
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheets of WellCare Holdings, LLC (the Company) as of
December&nbsp;31, 2003 and 2002, and the related consolidated
statements of income, of changes in members&#146; equity, and of
cash flows for the year ended December&nbsp;31, 2003 and the
five-month period ended December&nbsp;31, 2002, and the combined
statements of income, of changes in stockholders&#146; equity,
and of cash flows for the seven-month period ended July&nbsp;31,
2002 and the year ended December&nbsp;31, 2001 of The WellCare
Management Group, Inc and subsidiaries, Well Care HMO, Inc.,
HealthEase of Florida, Inc., Comprehensive Health Management,
Inc. and Comprehensive Health Management of Florida, L.C.; these
companies are under common ownership and common management (the
Predecessor). Our audits also included the financial statement
schedule listed in the Index at Item&nbsp;16. These financial
statements and financial statement schedule are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion such consolidated and combined
financial statements present fairly, in all material respects,
the consolidated financial position of WellCare Holdings, LLC as
of December&nbsp;31, 2003 and 2002, and the results of their
operations and cash flows for the year ended December&nbsp;31,
2003 and the five-month period ended December&nbsp;31, 2002, and
the Predecessor combined results of operations and cash flows
for the seven-month period ended July&nbsp;31, 2002 and the year
ended December&nbsp;31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated and combined
financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
</FONT>

<P align="left">
<FONT size="2">/S/ DELOITTE &#38; TOUCHE LLP
</FONT>

<P align="left">
<FONT size="2">Tampa, Florida
</FONT>

<DIV align="left">
<FONT size="2">February&nbsp;12, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- link1 "WELLCARE HOLDINGS, LLC CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except unit data)" -->

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">(Dollars in thousands, except unit
data)</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current Assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums and other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299,590</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other intangibles, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">409,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Liabilities and Members&#146; Equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current Liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of notes payable to related party
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable to related party
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">397,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and Contingencies (Note 7)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Members&#146; Equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common Units (23,507,839 and
    23,351,667 units issued and outstanding, no par)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B Common Units (No units issued and
    outstanding, no par)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C Common Units (4,842,508 and
    2,093,518 units issued and outstanding, no par)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred Units (No units issued or outstanding)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total members&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Liabilities and Members&#146; Equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">409,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See notes to consolidated and combined
financial statements.</FONT></I>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- link1 "WELLCARE HOLDINGS, LLC CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (Dollars in thousands, except per unit data)" -->

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">(Dollars in thousands, except per unit
data)</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,042,852</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">517,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,472</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,045,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,513</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,005,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">392,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">728,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,301</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common unit
    (Note&nbsp;1):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common
    unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common
    unit&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See notes to consolidated and combined
financial statements.</FONT></I>

<P align="center"><FONT size="2">F-4
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- link1 "WELLCARE HOLDINGS, LLC CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS&#146; AND STOCKHOLDERS&#146; EQUITY AND COMPREHENSIVE INCOME" -->

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
MEMBERS&#146; AND STOCKHOLDERS&#146; EQUITY</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">AND COMPREHENSIVE INCOME</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">(Dollars in thousands, except unit and share
data)</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Predecessor:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,283</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(241</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shareholder withdrawals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in unrealized gain/loss on investments,
    net of deferred taxes of $243
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at July&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,352</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Units</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Members&#146;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class B</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class C</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <B><FONT size="2">Balance at May&nbsp;8, 2002<BR>
    (date of inception)</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,351,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,093,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in unrealized gain/loss on investments,
    net of deferred taxes of $20
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,351,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,093,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">174,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,287,037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,910,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Receivables from related parties
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,287,037</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of treasury units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,333</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(161,127</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(91</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(91</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in unrealized gain/loss on investments,
    net of deferred taxes of $20
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,507,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,842,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See notes to consolidated and combined
financial statements.</FONT></I>

<P align="center"><FONT size="2">F-5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- link1 "WELLCARE HOLDINGS, LLC CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS" -->

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSOLIDATED AND COMBINED STATEMENTS OF CASH
FLOWS</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">(Dollars in thousands)</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash from operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Write-off of fixed assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock compensation expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for doubtful receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating accounts:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,365</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,852</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Advances to providers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,268</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other accounts receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,132</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,142</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,286</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,377</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Claims payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,958</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payables and other accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,371</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Taxes payable and deferred liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,409</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,029</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(414</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash from investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale and maturities of investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,399</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,761</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,205</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases and dispositions of restricted
    investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(709</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,395</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additions to property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,042</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,252</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash (used in) provided by investing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,313</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,724</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash from financing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shareholder withdrawals
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Contribution of capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from debt issuance, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,069</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,483</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(371</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,040</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash (used in) provided by financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,515</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,230</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase during period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SUPPLEMENTAL DISCLOSURES OF CASH FLOW
    INFORMATION&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid for taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid for interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See notes to consolidated and combined
financial statements.</FONT></I>

<P align="center"><FONT size="2">F-6
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">Year ended December&nbsp;31, 2003, five-month
period ended December&nbsp;31, 2002,</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">predecessor seven-month period ended
July&nbsp;31, 2002, and predecessor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">year ended December&nbsp;31, 2001</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">(Dollars in thousands, except unit and per
unit data)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">ORGANIZATION, BASIS OF PRESENTATION AND
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Wellcare Holdings, LLC (the &#147;Company&#148;)
is a Delaware limited liability corporation formed on
May&nbsp;8, 2002 (date of inception) for the purpose of
acquiring various subsidiaries that operate health plans focused
on government programs in various states. The Company began
operating on August&nbsp;1, 2002 in conjunction with the
acquisition of its indirect operating subsidiaries and did not
have any activity from May&nbsp;8, 2002 (date of inception)
through July&nbsp;31, 2002. The Company&#146;s direct and
indirect subsidiaries are WellCare Health Plans, Inc.
(&#147;WHP&#148;); Well Care HMO, Inc. (&#147;WC&#148;) and
HealthEase of Florida, Inc. (&#147;HE&#148;), both
Florida-licensed health maintenance organizations
(&#147;HMOs&#148;); WellCare of New York, Inc.
(&#147;WCNY&#148;), a New York-licensed HMO; FirstChoice
HealthPlans of Connecticut, Inc. (&#147;FC&#148;), a
Connecticut-licensed HMO; The WellCare Management Group, Inc.
(&#147;WCMG&#148;), a New York-domiciled holding company;
Comprehensive Health Management, Inc. (&#147;CHMI&#148;), a
Florida-domiciled third-party administrator (&#147;TPA&#148;);
Comprehensive Health Management of Florida, L.C.
(&#147;LLC&#148;), a Florida-domiciled guaranty company;
WellCare of Louisiana, Inc. (&#147;LA&#148;); WellCare
Behavioral Health, Inc. (&#147;BH&#148;); and WellCare Group,
Inc. (&#147;WCG&#148;) (collectively, &#147;the
Subsidiaries&#148;). WC, HE, WCNY, FC, WCMG, CHMI and LLC are
referred to collectively as the &#147;Acquired
Subsidiaries.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through its operating subsidiaries, the Company
provides managed care programs and related benefits to over
555,000 individuals under Medicaid, Medicare and other state
sponsored children and family health insurance programs. Through
its indirect subsidiaries, the Company operates HMOs in the
states of Florida, New York and Connecticut. LA has applied for
a HMO license in Louisiana and plans to begin its start-up
operations in that state during late 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis of
Presentation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Acquired Subsidiaries, as they existed under
common control prior to their July&nbsp;31, 2002 acquisition by
WHP, are referred to collectively as &#147;Predecessor.&#148;
The Company, as it existed on and after July&nbsp;31, 2002, is
referred to as the &#147;Company&#148; or &#147;Successor.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated balance sheets, statements of
income, changes in members&#146; equity and comprehensive income
and cash flows include the accounts of the Successor and all of
its subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined balance sheets, statements of
income, changes in stockholders&#146; equity and comprehensive
income and cash flows include all of the accounts of the
Predecessor prior to the July&nbsp;31, 2002 acquisition of the
Acquired Subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying Predecessor&#146;s historical
combined financial statements for the periods ended
July&nbsp;31, 2002 and prior represent the financial position
and corporate structure as of the dates indicated. The
Predecessor&#146;s historical combined financial statements do
not reflect the effects of the Company&#146;s new capital
structure (debt and equity), C Corporation tax structure
(previously an S Corporation), purchase accounting as a result
of the acquisition of the Acquired Subsidiaries, and accounting
for the acquired intangible assets and goodwill.
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table describes the periods
presented in these consolidated and combined financial
statements and related notes thereto:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Referred to as:</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated results for the Successor from
    January&nbsp;1, 2003 through December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#147;Year ended December&nbsp;31, 2003&#148;
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated results for the Successor from
    August&nbsp;1, 2002 through December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#147;Five-month period ended December&nbsp;31,
    2002&#148;
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined results for the Predecessor from
    January&nbsp;1, 2002 through July&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#147;Predecessor seven-month period ended
    July&nbsp;31,&nbsp;2002&#148;
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined results for the Predecessor from
    January&nbsp;1, 2002 through July&nbsp;31, 2002 and results for
    the Successor from August&nbsp;1, 2002 through December&nbsp;31,
    2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#147;Combined year ended December&nbsp;31,
    2002&#148;
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined results for the Predecessor from
    January&nbsp;1, 2001 through December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#147;Predecessor year ended December&nbsp;31,
    2001&#148;
    </FONT></DIV>
    </TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use of
Estimates</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated and combined financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States
(&#147;GAAP&#148;). The preparation of financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
and combined financial statements and accompanying notes. These
estimates are based on knowledge of current events and
anticipated future events and accordingly, actual results may
differ from those estimates.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash
Equivalents</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash and cash equivalents include cash and
short-term investments with original maturities of three months
or less. These amounts are recorded at cost, which approximates
fair value.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s investments are classified as
available-for-sale securities and are reported at fair value
based on quoted market prices. Unrealized gains and losses on
available-for-sale securities are excluded from earnings and are
reported as a separate component of members&#146; and
stockholders&#146; equity as accumulated other comprehensive
income, net of income tax effects. The Company evaluates
securities for other-than-temporary impairment on a periodic
basis and principally considers the type of security, the
severity of the decline in fair value and the duration of the
decline in fair value in determining whether a security&#146;s
decline in fair value is other-than-temporary. Realized gains
and losses from the sale or write-down for other-than-temporary
impairments of available-for-sale debt and equity securities are
calculated using the specific identification method.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted
Assets</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Restricted assets consist of cash, cash
equivalents, and investments required by various state statutes
to be deposited or pledged to state agencies. At
December&nbsp;31, 2003 and 2002, all restricted assets consisted
of cash and cash equivalents. Restricted assets are classified
as long-term, regardless of the contractual maturity date due to
the nature of the states&#146; requirements.
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums and
Other Receivables</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Premiums and other receivables consist of
premiums due from federal and state agencies. Additionally,
premiums and other receivables consist of amounts advanced to
hospitals that are under contract with the Company to provide
medical services to members. Such advances provided funding to
these providers for medical benefits payable. The Company&#146;s
allowance for uncollectible premiums and other receivables was
approximately $4,827 and $580 at December&nbsp;31, 2003 and
2002, respectively.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and
Equipment</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment is stated at cost, less
accumulated depreciation. Depreciation for financial reporting
purposes is computed using the straight-line method over the
estimated useful lives of the related assets, which is five
years for computer equipment and software and five years for
furniture and other equipment. Maintenance and repairs are
charged to operating expense when incurred. Major improvements
that extend the lives of the assets are capitalized. On an
on-going basis, the Company reviews events or changes in
circumstances that may indicate that the carrying value of an
asset may not be recoverable. If the carrying value of an asset
exceeds the sum of estimated undiscounted future cash flows,
then an impairment loss is recognized in the current period for
the difference between estimated fair value and carrying value.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and
Intangible Assets</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Goodwill represents the excess of the cost over
the fair market value of net assets acquired. The Company&#146;s
intangible assets were obtained as a result of its acquisitions
of the Acquired Subsidiaries and include provider networks,
membership contracts, trademark, noncompete agreements, state
contracts, licenses and permits. The Company&#146;s intangible
assets are amortized over their estimated useful lives ranging
from one to 15&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company reviews goodwill and intangible
assets for impairment at least annually or sooner if events or
changes in circumstances occur that may affect the estimated
useful life or the recoverability of the remaining balance of
goodwill. At December&nbsp;31, 2003, the Company&#146;s
management believes that no impairment of goodwill or intangible
assets has occurred.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purchase of the Acquired Subsidiaries was
partially financed through a contingent note (&#147;Seller
Note&#148;) due to the former stockholders of WC, HE, CHMI and
LLC (collectively the &#147;Florida Companies&#148;). As more
fully described in Note 6, the principal amount of the Seller
Note was subject to adjustment for various contingencies
including the capital of various subsidiaries, the actual
medical benefits payable of certain subsidiaries and the
earnings (or losses) of certain subsidiaries and other potential
indemnification claims under the purchase agreement. Adjustments
to the Seller Note resulted in changes in the purchase price and
the amount of goodwill acquired. The Company entered into a
settlement agreement on February&nbsp;12, 2004, that fixed the
amount of the Seller Note and finalized the settlement of all
purchase price adjustments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate amount of goodwill acquired in 2002
was $117,064 and was increased in 2003 by $41,630 to account for
the aforementioned purchase price adjustment. Goodwill was
assigned to its two reporting units, which are also its
reporting segments. At December&nbsp;31, 2003, goodwill of
$78,339 was assigned to the Medicare reporting unit and $80,386
was assigned to the Medicaid reporting unit. The purchase price
adjustment during 2003 was assigned to each unit based upon the
corresponding impact of the Seller Note adjustments. The fair
value of each reporting unit is estimated using the expected
present value of future cash flows.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medical
Benefits</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company contracts with various healthcare
providers for the provision of certain medical care services to
its members and generally compensates those providers on a
fee-for-service basis or pursuant to certain risk-sharing
arrangements. Medical benefits expense consists of capitation
expenses and health benefit claims. Capitation represents fixed
payments on a per member per month basis to participating
physicians and other medical specialists, as compensation for
providing comprehensive health services. Participating physician
capitation payments for the year ended December&nbsp;31, 2003,
five-month period ended December&nbsp;31, 2002, seven-month
period ended July&nbsp;31, 2002, year ended December&nbsp;31,
2001 were 12%, 12%, 10% and 10%, respectively, of total medical
benefits expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits payables consist primarily of
liabilities established for reported and unreported claims and
accrued capitation fees and adjustments, which are unpaid as of
the balance sheet date, and contractual liabilities under risk
sharing arrangements established through an estimation process
utilizing company-specific, industry-wide, and general economic
information and data. The estimation process also involves
continuous monitoring and evaluation of the submission,
adjudication, and payment cycles of claims. The Company&#146;s
year-end medical benefits payable is substantially satisfied
through claims payment in the subsequent year. The Company
estimates ultimate claims based upon historical experience and
other available information as well as assumptions about
emerging trends, which vary by business segment. Significant
assumptions used in the estimation process include trends in
benefit costs, seasonality, changes in member demographics,
utilization, provider contract terms and reimbursement
strategies, frequency and severity of claims incurred, known and
adjudicated claims and changes in the timing of the reporting of
claims. Additionally, as part of the review, the Company
estimates and accrues for the costs necessary to process unpaid
claims.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company records reserves for estimated
referral claims related to medical groups under contract with
the Company who are financially troubled or insolvent and who
may not be able to honor their obligations for the costs of
medical services provided by other providers. In these
instances, the Company may be required to honor these
obligations for legal or business reasons. Based on our current
assessment of providers under contract with the Company, such
losses are not expected to be significant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the numerous factors influencing this
liability, the Company develops a series of estimates based upon
generally accepted actuarial projection methodologies using
various scenarios with respect to claim submission and payment
patterns and cost trends. The Company&#146;s policy is to record
management&#146;s best estimate of medical and other benefits
payable that adequately provides for future payments of claims
incurred but not paid under moderately adverse conditions.
Deviations, whether positive or negative, between actual
experience and estimates used to establish the liability are
recorded in the period of claim payment on a consistent basis.
The Company continually monitors the reasonableness of the
assumptions and judgments used in prior estimates by comparison
with actual claim patterns and considers this information in
future estimates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical and other benefits paid can also be
significantly impacted by outcomes from court decisions,
interpretations by regulatory authorities, and legislative
changes involving healthcare matters. As a result, amounts
ultimately paid may differ from initial estimates that did not
consider such outcomes, interpretations and changes.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premium
Deficiency Reserves</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Premium deficiency reserves are recognized when
it is probable that the future costs associated with a group of
existing contracts will exceed the anticipated future premiums,
investment income and stop-loss reinsurance recoveries on those
contracts. For purposes of determining whether a premium
deficiency exists, contracts are grouped in a manner consistent
with the Company&#146;s method of acquiring, servicing and
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">measuring profitability of such contracts. At
December&nbsp;31, 2003 and 2002, the Company recorded premium
deficiency reserves of $500 and $1,875, respectively.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred tax assets and liabilities are
recognized for the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is recognized
when, based on available evidence, it is more likely than not
that the deferred tax assets may not be realized.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
Recognition</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company generally receives premiums in
advance of providing services, and recognizes premium revenue
during the period in which the Company is obligated to provide
services to its members. Premiums are billed monthly for
coverage in the following month and are recognized as revenue in
the month for which insurance coverage is provided. Premiums
collected in advance are deferred and reported as unearned
premiums in the accompanying Consolidated Balance Sheet. Any
amounts that have not been received by the end of the period
remain on the balance sheet classified as premium receivables.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reinsurance</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain premiums and medical benefits are ceded
to other insurance companies under various reinsurance
agreements. The ceded reinsurance agreements provide the Company
with increased capacity to write larger risks and maintain its
exposure to loss within its capital resources. The Company is
contingently liable in the event that the reinsurers do not meet
their contractual obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance premiums and medical benefits are
accounted for consistently with the accounting for the original
policies issued and other terms of the reinsurance contracts.
The Company had payments of $2,724, $1,071, $1,616 and $3,337,
respectively, for the year ended December&nbsp;31, 2003, the
five-month period ended December&nbsp;31, 2002, the Predecessor
seven-month period ended July&nbsp;31, 2002 and the Predecessor
year ended December&nbsp;31, 2001. The Company had recoveries of
$715, $985, $1,751 and $1,700, respectively, for the year ended
December&nbsp;31, 2003, the five-month period ended December 31,
2002, the Predecessor seven-month period ended July&nbsp;31,
2002 and the Predecessor year ended December&nbsp;31, 2001.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Member
Acquisition Costs</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Member acquisition costs consist of
administrative costs that the Company incurs to acquire new
business. The Company does not defer member acquisition costs.
Member acquisition costs are expensed in the period in which
they are incurred.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unit-Based
Compensation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2003, the Company has two
equity-based employee compensation plans, which are described
more fully in Note 8. The Company accounts for these plans under
the recognition and measurement principles (the intrinsic-value
method) prescribed in Accounting Principles Board
(&#147;APB&#148;) Opinion No.&nbsp;25, &#147;Accounting for
Stock Issued to Employees,&#148; and related interpretations.
Compensation cost for unit options is reflected in net income
and is measured as the excess of the market price of the
Company&#146;s unit at the date of grant over the amount an
employee must pay to acquire the unit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, SFAS No.&nbsp;148,
&#147;Accounting for Stock-Based Compensation&#151;Transition
and Disclosure&#148; was issued. SFAS No.&nbsp;148 provides
alternative methods of transition to the fair value method of
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">accounting for equity-based employee
compensation. It also amends and expands the disclosure
provisions of SFAS No.&nbsp;123 and APB Opinion No.&nbsp;28,
&#147;Interim Financial Reporting,&#148; to require disclosure
in the summary of significant accounting policies of the effects
of an entity&#146;s accounting policy with respect to
equity-based employee compensation on reported net income and
earnings per stock in annual and interim financial statements.
While SFAS No.&nbsp;148 does not require companies to account
for employee equity options using the fair-value method, the
disclosure provisions of SFAS No.&nbsp;148 are applicable to all
companies with equity-based employee compensation, regardless of
whether they account for that compensation using the fair-value
method of SFAS No.&nbsp;123 or the intrinsic-value method of APB
Opinion No.&nbsp;25. The Company has adopted the disclosure
requirements of SFAS No.&nbsp;148.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates the effect on net
income and net income attributable to common units if the
Company had applied the fair value recognition provisions to
equity-based employee compensation.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reconciling items (net of tax effects):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: equity-based employee compensation expense
    determined under the intrinsic-value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: equity-based employee compensation
    expense determined under the fair-value based method for all
    awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,152</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net adjustment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income, as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common unit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common unit:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic-as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic-as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted-as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted-as adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Predecessor seven-month period ended
July&nbsp;31, 2002 and the Predecessor year ended
December&nbsp;31, 2001 did not have any equity-based employee
compensation and as a result, those periods are not displayed in
the table above.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Income
Attributable Per Unit</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic net income attributable per unit is
computed by dividing the net income less the Class&nbsp;A common
unit yield for the period by the weighted average number of
units outstanding during the period, less units outstanding that
are unvested and subject to provisions that allow the Company to
repurchase units at its sole discretion. Diluted net income
attributable per unit is computed by dividing the net income for
the period less the Class&nbsp;A common unit yield by the
weighted average number of units outstanding during the period,
including the unvested units that are subject to provisions that
allow the Company to repurchase units at its sole discretion.
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents the calculation of
net income attributable per common units&#151; basic and diluted:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Numerator:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common unit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,301</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Denominator</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average units outstanding&nbsp;&#151;
    basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,398,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,752,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments for unvested outstanding Class&nbsp;C
    Common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,039,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,486,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average units outstanding&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,438,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,239,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common unit:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per unit&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated
Other Comprehensive Income</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accumulated other comprehensive income consists
of gains and losses that are not recorded in the statements of
income but instead are recorded directly to members&#146; and
stockholders&#146; equity. The Company&#146;s components of
accumulated other comprehensive income include net unrealized
gain (loss)&nbsp;on available-for-sale securities, net of tax.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concentrations</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The operations of the Company&#146;s subsidiaries
in Florida represent a significant concentration of the
Company&#146;s revenues. The following table illustrates the
Company&#146;s Florida subsidiaries&#146; revenue as a
percentage of the revenue for each segment and in total.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July,&nbsp;31</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company expects that the Florida
subsidiaries&#146; Medicare and Medicaid contracts, which expire
on various dates between June 2004 and September 2005, will be
renewed. The Company&#146;s operating results could be
significantly constrained in the event that the compensation
provided under its Florida subsidiaries&#146; Medicare and
Medicaid contracts is inadequate to fund medical benefits
expense or in the event that these contracts are not renewed.
</FONT>

<P align="center"><FONT size="2">F-13
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair Value
Information</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s Consolidated Balance Sheets
include the following financial instruments: cash and cash
equivalents, receivables, investments, accounts payable, medical
benefits payable, and notes payable. The carrying amounts of
current assets and liabilities approximate their fair value
because of the relatively short period of time between the
origination of these instruments and their expected realization.
The carrying value of the notes payable to related party is
estimated by management to approximate fair value based upon the
term, nature of the obligation and the arms-length negotiations
conducted during the purchase transaction. The carrying value of
other long-term debt obligations approximates their fair value
based on borrowing rates currently available to the Company for
instruments with similar terms and remaining maturities.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent
Accounting Pronouncements</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the FASB issued SFAS No.&nbsp;146,
&#147;Accounting for Costs Associated with Exit or Disposal
Activities,&#148; which addresses accounting for restructuring
and similar costs. SFAS No.&nbsp;146 supersedes previous
accounting guidance, principally Emerging Issues Task Force
(&#147;EITF&#148;) Issue No.&nbsp;94-3 &#147;Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).&#148; SFAS No.&nbsp;146 requires recognition of
the liability for costs associated with an exit or disposal
activity when a company exits a facility, whereas under EITF
Issue No.&nbsp;94-3, a liability for an exit cost is recognized
at the date a company commits to an exit plan. In addition, SFAS
No.&nbsp;146 establishes that the liability should initially be
measured and recorded at fair value. Accordingly, SFAS
No.&nbsp;146 may affect the timing of recognizing future
restructuring costs, as well as the amounts recognized.
Application of SFAS No.&nbsp;146 was required for restructuring
activities initiated after December&nbsp;31, 2002. Adoption of
this standard did not impact the Company&#146;s financial
statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, the FASB issued Interpretation
No.&nbsp;45, &#147;Guarantor&#146;s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others &#151; an Interpretation of FASB
Statements No.&nbsp;5, 57, and 107 and Rescission of FASB
Interpretation No.&nbsp;34.&#148; The interpretation elaborates
on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. In general, the interpretation applies to contracts
or indemnification agreements that contingently require the
guarantor to make payments to the guaranteed party based on
changes in an underlying obligation that is related to an asset,
liability or an equity security of the guaranteed party. The
initial recognition and measurement provisions of the
interpretation apply to guarantees issued or modified after
December&nbsp;31, 2002. The adoption of this interpretation in
fiscal 2003 did not have an impact on the Company&#146;s
financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued Interpretation
No.&nbsp;46, &#147;Consolidation of Variable Interest
Entities.&#148; This interpretation of Accounting Research
Bulletin No.&nbsp;51, &#147;Consolidated Financial
Statements,&#148; addresses consolidation by business
enterprises of variable interest entities (&#147;VIEs&#148;)
when the VIEs either: (1)&nbsp;do not have sufficient equity
investment at risk to permit the entity to finance its
activities without additional subordinated financial support, or
(2)&nbsp;the equity investors lack an essential characteristic
of a controlling financial interest. As of December&nbsp;31,
2003, the Company does not have any entities that require
disclosure or new consolidation as a result of adopting the
provisions of FASB Interpretation No.&nbsp;46.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued SFAS No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.&#148; SFAS
No.&nbsp;150 requires that certain financial instruments,
including mandatorily redeemable financial instruments, be
classified as liabilities. For existing financial instruments,
the standard is applicable for the first quarter beginning after
June&nbsp;15, 2003. The adoption of SFAS No.&nbsp;150 has not
impacted the Company&#146;s financial statements.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BUSINESS
ACQUISITION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;31, 2002, the Company acquired
(directly or indirectly) 100&nbsp;percent of the outstanding
stock or other ownership interests of the Acquired Subsidiaries.
The results of the Acquired Subsidiaries&#146; operations have
been included in the consolidated financial statements since
that date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The aggregate purchase price was estimated to be
$170,060, including cash compensation of $57,719, Seller Note,
which had an estimated initial aggregate principal amount of
$107,343 (see Note&nbsp;6), transaction expenses of $4,748, and
a warrant to purchase 2,287,037 Class&nbsp;B Common Units at an
adjusted purchase price of $3.00 per unit (see Note&nbsp;8).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the
date of acquisition, July&nbsp;31, 2002. Because the value of
the Seller Note was contingent upon various factors, the amount
of goodwill was subject to future adjustment.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums receivable and advances to providers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment and other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">347,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Claims payable and unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(108,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term debt and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(69,580</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(177,779</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The acquisition was accounted for under the
provisions of Internal Revenue Code Section&nbsp;338(h)10, thus
management believes the entire goodwill balance of $117,064 is
expected to be deductible for tax purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Seller Note contained the following
contingencies and adjustments that were to be established at or
around September&nbsp;15, 2003 and 2004, in each case in
accordance with the definitions and procedures set forth in the
purchase agreement for the acquisition of the Florida Companies
(&#147;purchase agreement&#148;):
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2">Florida HMO Capital
    Adjustment</FONT></I></B><FONT size="2">&#151;the Seller Note
    was adjusted for the difference between aggregate actual and
    required capital at HE and WC at July&nbsp;31, 2002, as
    determined in accordance with statutory accounting principles.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2">Medical Benefits
    Payable</FONT></I></B><FONT size="2">&#151;the Seller Note was
    adjusted for any deficiency between aggregate estimated and
    actual medical benefits payable at WCNY and FC at June&nbsp;30,
    2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2">CHMI Capital
    Adjustment</FONT></I></B><FONT size="2">&#151;the Seller Note
    was adjusted for the difference between CHMI&#146;s actual net
    worth and $1,000 at July&nbsp;31, 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2">Medicare
    Adjustment</FONT></I></B><FONT size="2">&#151;the Seller Note
    was adjusted for 3.25 times Medicare earnings, as defined in the
    purchase agreement, for the period January&nbsp;1, 2002 through
    December&nbsp;31, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><I><FONT size="2">Commercial
    Adjustment</FONT></I></B><FONT size="2">&#151;the Seller Note
    was adjusted for commercial earnings or losses, as defined in
    the purchase agreement, for the periods January&nbsp;1, 2002
    through December&nbsp;31, 2002 and January&nbsp;1, 2003 through
    December&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-15
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Seller Note is subject to
adjustment based on the Company&#146;s claims for
indemnification arising under the purchase agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of the acquired
intangible assets resulting from the business acquisition as of
December&nbsp;31, 2003 and 2002:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortization</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortization</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provider network
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">($</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,274</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">($375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Membership contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,870</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trademark
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(661</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(194</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncompete agreements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(652</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(192</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Licenses and permits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">($</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,567</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">($</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,030</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization expense for the year ended
December&nbsp;31, 2003 and the five-month period ended
December&nbsp;31, 2002 was $4,537 and $3,030 respectively. The
Company did not have any amortization expense for the
predecessor seven-month period ended July&nbsp;31, 2002 or for
the predecessor year ended December&nbsp;31, 2001. Amortization
expense expected to be recognized during fiscal years subsequent
to December&nbsp;31, 2003 is as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2009 and thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted-average amortization periods of the
acquired intangible assets resulting from the business
acquisition are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortization</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(In Years)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provider network
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Membership contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trademark
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncompete agreements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Licenses and permits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total intangibles
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following unaudited pro forma financial
information is presented for illustrative purposes only, to give
effect to the acquisition of the Acquired Subsidiaries as if it
had been completed on January&nbsp;1, 2001, and is not
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">necessarily indicative of the operating results
that would have actually occurred had the acquisition been
completed on that date, nor are they indicative of future
operating results.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Pro forma Combined</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">921,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,062</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,351</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common
    unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable per common
    unit&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average units outstanding&nbsp;&#151;
    basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,398,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,398,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average units outstanding&nbsp;&#151;
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,438,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,438,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INVESTMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and estimated fair values of
investments at December&nbsp;31, 2003 and 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Available for sale:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certificates of deposit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Available for sale:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. Treasury securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. Government agency securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certificates of deposit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the Company&#146;s investments at
December&nbsp;31, 2003 and 2002 are due within one year.
</FONT>

<P align="center"><FONT size="2">F-17
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY AND
EQUIPMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment at December&nbsp;31, 2003
and 2002 is summarized as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computer equipment and software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture and other equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,389</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,275</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,743</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognized depreciation expense on
property and equipment of $2,547, $703, $1,239 and $2,192 for
the year ended December&nbsp;31, 2003, the five-month period
ended December&nbsp;31, 2002, the predecessor seven-month period
ended July&nbsp;31, 2002 and the predecessor year ended
December&nbsp;31, 2001, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company committed to a plan to exit its
current corporate office in November 2003. All leasehold
improvements, which will remain with the lessor, were assigned a
remaining useful of eight months to coincide with the planned
exit date. This change in estimate resulted in an increase to
depreciation expense of approximately $1,019 for the year ended
December&nbsp;31, 2003.
</FONT>

<P align="left">
<B><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MEDICAL
BENEFITS PAYABLE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides a reconciliation of
the beginning and ending balance of medical benefits payable for
the following periods:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances as of beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits incurred related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">884,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">348,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">436,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">634,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prior periods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,316</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,520</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical benefits paid related to:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(751,826</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(249,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(335,938</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(538,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prior periods
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,071</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,401</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(826,426</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(337,147</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(424,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(625,906</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balances as of end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical benefits payable at December&nbsp;31,
2002 and July&nbsp;31, 2002 developed favorably in the
respective periods by $23,650 and $6,316 primarily due to
differences between estimated and actual utilization and
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">severity of claims principally on our Florida
Medicaid businesses. Medical benefits payable at
December&nbsp;31, 2001 developed favorably by $1.5&nbsp;million
due primarily to lower utilization of medical services than
anticipated.
</FONT>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEBT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s outstanding debt at
December&nbsp;31, 2003 and 2002 consists of the following:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Related Party</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Line of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Note payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term margin payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,806</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,654</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;<I>Line of Credit</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company obtained a $15,000 senior credit
facility with an unaffiliated bank in March 2003. The facility
has a floating interest rate based on the one month Eurodollar
rate and requires payment of any borrowings on the facility at
its maturity date in March 2005. During the year ended
December&nbsp;31, 2003, no draws on the line of credit occurred.
Additionally, the line of credit has certain financial and
non-financial covenants which the Company was in compliance with
at December&nbsp;31, 2003.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;<I>Note Payable</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2003, a Subsidiary of the Company also
issued senior discount notes with a principal amount at maturity
of $21,615. These notes bear interest at 8% and mature in March
2009. The Company received approximately $15,000 from the
issuance (prior to the transaction expenses). The notes require
semi-annual payments of interest. Principal payments are due in
two equal installments in March 2008 and 2009. The discount on
the note was approximately $6,600 and is being amortized over
the term of the notes. During 2003, approximately $903 was
amortized and is included as a component of interest expense in
the accompanying Consolidated Statements of Income.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;<I>Note Payable to Related
Party</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In conjunction with the business combination
described in Note 2, the Company issued the Seller Note payable
to the former stockholders of the Florida Companies. The Seller
Note is secured by a portion of WHP&#146;s common stock, had an
initial principal amount of $53,000, bears interest at the rate
of 5.25% per annum and is payable from September&nbsp;15, 2003
through September&nbsp;15, 2006. The principal amount of the
Seller Note was subject to adjustment for various contingencies
as described in Note 2. As a result of the first Seller Note
adjustment and principal payments, the net balance of the Seller
Note was increased $13,138 in 2003. The principal balance of the
Seller Note at December&nbsp;31, 2003 and 2002 was $119,738 and
$106,600, respectively. The Company entered into a settlement
agreement on February&nbsp;12, 2004 that fixed the amount of the
Seller Note and finalized the settlement of all purchase price
adjustments to the amount recorded by the Company at
December&nbsp;31, 2003. The seller continues to be obligated to
provide the Company with indemnification for potential
pre-acquisition claims.
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;<I>Short-Term Margin
Payable</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The short-term margin payable consisted of
agreements with unaffiliated financial institutions whereby the
Company borrowed $50,000 under two separate margin agreements.
One of the $25,000 agreements bore interest at the financial
institutions base rate plus an applicable margin and the other
agreement had fixed rates within the range of 1.5% to 2.82%.
Both of these margin payable agreements were closed in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Scheduled maturities of the Company&#146;s debt,
including the accreted amount of the senior discount notes,
during fiscal years subsequent to December&nbsp;31, 2003 are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008 and thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COMMITMENTS
AND CONTINGENCIES</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In early 1999, an action was filed against one of
our HMO subsidiaries by a sales agency that had contracted to
market our Predecessor&#146;s commercial health plan. The
plaintiff alleges that its contract requires WC to allow the
plaintiff to serve as a sales agent for its Medicare health
plans and seeks an unspecified amount of damages, including lost
profits, based on our refusal to do so. A trial is scheduled to
commence in February 2004. The Company intends to defend this
matter vigorously.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is involved in legal actions in the
normal course of business, some of which seek monetary damages,
including claims for punitive damages, which are not covered by
insurance or indemnifications from the sellers. These actions,
including the action described in the preceding paragraph, when
finally concluded and determined, will not, in the opinion of
management, have a material adverse effect on our financial
position, results of operations or cash flows.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating
Leases</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has operating leases for office
space, electronic data processing equipment, automobiles,
software and terminal lines. Rental expense totaled $2,273,
$773, $993 and $1,701 for the year ended December 31, 2003, the
five-month period ended December&nbsp;31, 2002, the predecessor
seven-month period ended July&nbsp;31, 2002 and the predecessor
year ended December&nbsp;31, 2001, respectively. Future minimum
lease payments under noncancelable operating leases with initial
or remaining lease terms in excess of one year at
December&nbsp;31, 2003 were:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-20
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MEMBERS&#146;
EQUITY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Company&#146;s Second Amended and
Restated Limited Liability Company Agreement (the &#147;LLC
Agreement&#148;), membership interests in the Company are
represented by issued and outstanding Units. Units may be
divided into one or more types, classes or series, with each
type, class or series having the rights and privileges as may be
set forth in the LLC Agreement. The Company is currently
authorized to issue Preferred Units, Class&nbsp;A Common Units,
Class&nbsp;B Common Units, Class&nbsp;C Common Units and other
Common Units under the LLC&nbsp;Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the execution of the LLC Agreement as of
September&nbsp;5, 2002, the Company effected a unit split,
pursuant to which each common unit then issued and outstanding
was automatically converted into 333&nbsp;1/3 of the same class
of common unit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each Class&nbsp;A Common Unit issued accrues, on
a quarterly basis, an amount, referred to as the
&#147;Class&nbsp;A Common Yield,&#148; equal to 8% per annum on
the sum of (i)&nbsp;the Class&nbsp;A Common Capital Value of
$3.00 per Class&nbsp;A Common Unit, less any portion of such
amount previously distributed to the holder thereof pursuant to
the terms of the LLC Agreement, and (ii)&nbsp;the accrued but
unpaid portion of the Class&nbsp;A Common Yield for all prior
quarterly periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Class&nbsp;A Common Units and Class&nbsp;C Common
Units are voting units, and entitle the holders thereof to one
vote for each such Common Unit on all matters voted upon by
members of the Company. Class&nbsp;B Common Units and any
Preferred Units are non-voting units.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the terms of the LLC Agreement, any
distribution of cash or assets of the Company is to be made in
the following order and priority:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">First, to the holders of Class&nbsp;A Common
Units, in proportion to and to the extent of the accrued but
unpaid Class&nbsp;A Common Yield on all outstanding Class&nbsp;A
Common Units at the time of the distribution, until the entire
amount of the accrued but unpaid Class&nbsp;A Common Yield on
all outstanding Class&nbsp;A Common Units has been paid in full;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Second, to the holders of Class&nbsp;A Common
Units, in proportion to and to the extent of the Class&nbsp;A
Common Capital Value of $3.00 per Class&nbsp;A Common Unit not
distributed to the holders prior to the time of the
distribution, until the entire amount of the Class&nbsp;A Common
Capital Value on all outstanding Class&nbsp;A Common Units has
been paid in full;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Third, to the holders of Class&nbsp;B Common
Units, in proportion to and to the extent of the Class&nbsp;B
Common Capital Value per Class&nbsp;B Common Unit not
distributed to the holders prior to the time of the
distribution, until the entire amount of the Class&nbsp;B Common
Capital Value on all outstanding Class&nbsp;B Common Units has
been paid in full; and
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fourth, pro rata, based on the total number of
common units of all classes outstanding, to the holders of all
common units of all classes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company did not make any distributions during
the periods ended December&nbsp;31, 2003 and 2002, respectively.
The aggregate amount of cumulative distribution preference,
Class&nbsp;A Common Yield, in arrears at December&nbsp;31, 2003
and 2002 is $5,997 and $2,356, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has entered into agreements with
certain members of management and others providing for the sale
and issuance of Class&nbsp;A Common Units and Class&nbsp;C
Common Units. The Class&nbsp;C Common Units issued or to be
issued to management are subject to certain vesting
restrictions, as set forth in the applicable agreements. A
receivable has been recorded as a reduction of units outstanding
and paid in capital for the amount of units issued to one of the
Company&#146;s board members.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 2002, the Company adopted two equity
plans, the 2002 Senior Executive Equity Plan (the
&#147;Executive Plan&#148;) and the 2002 Employee Option Plan
(the &#147;Employee Plan&#148;). Both plans permit senior
executives and other key employees selected to participate to
acquire ownership interests in the Company. The Board of
Directors reserved an aggregate of 4,432,693 Common Units (which
may consist of any combination of Class&nbsp;A Common Units and
Class&nbsp;C Common Units) for issuance under the Executive Plan
and the Employee Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Executive Plan, participants are given
the opportunity to purchase a specified number of Class&nbsp;A
Common Units. As a result of such purchase, participants are
granted a specified number of Class&nbsp;C Common Units, which
may be subject to vesting over time or based upon the
fulfillment of specified conditions. During 2003 and the
five-month period ending December&nbsp;31, 2002, the Company
sold 174,505 and 23,351,667 Class&nbsp;A Common Units,
respectively, under the plan, for net proceeds of $545 and
$70,055, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Employee Plan, participants are granted
options to purchase Class&nbsp;A Common Units, at an exercise
price to be specified in each individual option grant agreement.
No options were exercised during 2003 or 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All Class&nbsp;A Common Units sold and
Class&nbsp;C Common Units granted under the Executive Plan, and
all Class&nbsp;A Common Units issued upon exercise of options
granted under the Employee Plan, are subject to the
Company&#146;s right of repurchase upon the termination of the
participant&#146;s employment with the Company or any of its
subsidiaries. During the year ended December&nbsp;31, 2003,
3,333 Class&nbsp;A Common Units and 161,127 Class&nbsp;C Common
Units were repurchased at the then fair market value at date of
repurchase.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors or any committee
designated by the Board has the authority to select executives
and other employees to participate in the Executive Plan and the
Employee Plan, to determine the number of Class&nbsp;A Common
Units to be sold and the number of Class&nbsp;C Common Units to
be granted to participants in the Executive Plan, to determine
the number of Class&nbsp;A Common Units subject to options
granted under the Employee Plan, to determine the vesting
schedule, if any, applicable to Class&nbsp;C Common Units issued
under the Executive Plan and options granted under the Employee
Plan, to determine the exercise price of option grants under the
Employee Plan, and to otherwise administer the plans.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;31, 2002, in conjunction with the
purchase transaction, the Company issued to the sellers warrants
to purchase 2,287,037 Class&nbsp;B Common Units at an exercise
price of $3.00 per Class&nbsp;B Common Unit. On the same date,
in connection with WHP&#146;s acquisition of the Florida
Companies, WHP transferred the warrants to certain of the former
stockholders of the Florida Companies as part of the purchase
price paid by WHP for the Florida Companies. The warrants have a
10-year term and are nontransferable during a restricted period
from the date of issuance until the closing of a public offering
registered with the Securities and Exchange Commission under the
Securities Act of 1933. Management believes the warrants were
issued at the then fair market value. The warrants were
exercised in December 2003 by the former stockholders. The
former stockholders issued a non-recourse note for the aggregate
purchase price of $6,861 for the units; accordingly, the note
has been shown as an offset to the number of units issued and
outstanding and paid in capital.
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unit Option
Activity</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize information with
respect to unit option activity:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted units issued in 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,093,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted units issued in 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,910,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unit-based compensation for five-months ended
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unit-based compensation for year ended
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted units subject to repurchase at
    December&nbsp;31, 2003:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,532,368</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted units forfeited in 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Units</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,099,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forfeited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,099,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Outstanding options under the various unit
agreements vest over a one to four year period. As of
December&nbsp;31, 2003, 75,417&nbsp;options were exercisable at
exercise prices ranging from $3.00 to $5.26. Remaining
non-exercisable options as of December&nbsp;31, 2003 become
exercisable as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">325,646
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">271,125
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">254,458
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">172,854
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">1,024,083
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information
regarding options outstanding and exercisable as of
December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Options Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options Exercisable</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Range of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Prices</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$3.00&nbsp;&#151; $5.26
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,099,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-23
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average risk free interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.98%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Term
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Volatility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average fair value for options granted
    in 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The minimum fair value of each option grant is
estimated on the date of grant using the Black-Scholes Option
Pricing Model with the following assumptions used for grants
during the periods: dividend yield of 0%; expected option term
of 6.75&nbsp;years; risk-free interest rates ranging from
3.37%&nbsp;&#150; 4.52% for options granted during the year
ended December&nbsp;31, 2003. The weighted average fair value of
options granted for the year ended December&nbsp;31, 2003 was
$3.40.
</FONT>

<P align="left">
<B><FONT size="2">9.&nbsp;&nbsp;STATUTORY CAPITAL AND DIVIDEND
RESTRICTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State insurance laws and regulations prescribe
accounting practices for determining statutory net income and
surplus for HMOs and require, among other matters, the filing of
financial statements prepared in accordance with statutory
accounting practices prescribed or permitted for HMOs. State
insurance regulations also require the maintenance of a minimum
compulsory surplus based on various factors. At
December&nbsp;31, 2003, the Company&#146;s HMO subsidiaries were
in compliance with these minimum compulsory surplus
requirements. The combined statutory capital and surplus of the
Company&#146;s HMO subsidiaries was $59,592 and $37,629 at
December&nbsp;31, 2003 and 2002, respectively, compared to the
required surplus of $33,028 and $23,881 at December&nbsp;31,
2003 and 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends paid by the Company&#146;s HMO
subsidiaries are limited by state insurance regulations. The
insurance regulator in each state of domicile may disapprove any
dividend that, together with other dividends paid by a
subsidiary in the prior twelve months, exceeds the regulatory
maximum as computed for the HMO based on its statutory surplus
and net income.
</FONT>

<P align="left">
<B><FONT size="2">10.&nbsp;&nbsp;INCOME TAXES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is considered a partnership for
federal income tax purposes and is not part of the consolidated
filing with its subsidiaries. The Companies&#146; subsidiaries
file a consolidated federal income tax return. The Company and
the subsidiaries file separate state franchise, income and
premium tax returns as applicable.
</FONT>

<P align="center"><FONT size="2">F-24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides components of income
tax expense for the following periods:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,465</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,820</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(740</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,720</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of income tax at the effective
rate to income tax at the statutory federal rate is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax expense at statutory rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase (reduction) resulting from:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State income tax net of federal benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,088</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The significant components of the Company&#146;s
deferred tax assets and liabilities at December&nbsp;31, 2003
and 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical and other benefits discounting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premium discounting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill and other intangibles
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,068</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;RELATED-PARTY
TRANSACTIONS</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transaction
Expenses</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company reimbursed expenses and paid
transaction fees of $83 and $3,668, for the year ended
December&nbsp;31, 2003 and the five-month period ended
December&nbsp;31, 2002, respectively, to the majority
stockholder of the Company.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seller
Note</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Seller Note described in Notes&nbsp;2 and 6
related to the acquisition of the Subsidiaries is due to a
former stockholder of the Florida Companies, who also serves as
a director for WC and&nbsp;HE.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consulting
Fees</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2003 and the
five-month period ended December&nbsp;31, 2002, the Company
incurred consulting fees of $35 and $190, respectively, to
former stockholders of the Acquired Subsidiaries.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Empire
Solutions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until June 2003, the Company retained Empire
Solutions to provide services such as claims data entry and
information technology-related services, pursuant to an
agreement between Empire Solutions and CHMI. The Company&#146;s
former majority stockholder, who also serves as a director of WC
and HE, is the Chief Executive Officer and sole owner of Empire
Solutions. From the date of the Company&#146;s acquisition of
the Acquired Subsidiaries through the date of the Company&#146;s
termination of the agreement, the Company purchased $584 in the
aggregate from Empire Solutions.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IntelliClaim</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2003, the Company entered into an
agreement with IntelliClaim, Inc. pursuant to which the Company
licenses software and purchases maintenance, support and related
services, from IntelliClaim. A member of the Company&#146;s
board of directors is the Chairman and Chief Executive Officer
of IntelliClaim. In 2003, the Company purchased $263 of services
in the aggregate from IntelliClaim.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bay Area
Primary Care and Bay Area Multi Specialty Group</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company conducts business with Bay Area
Primary Care and Bay Multi Specialty Group, which provide
medical and professional services to a portion of the
Company&#146;s membership base. These entities are owned and
controlled by a former stockholder of the Florida Companies, who
also serves as a director for WC and HE. In 2003 and 2002, the
Company purchased $1,131 and $2,280, respectively, in the
aggregate from Bay Area Primary Care and Bay Multi Specialty
Group.
</FONT>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;EMPLOYEE BENEFIT PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company, through its subsidiary, CHMI, began
offering a defined contribution&nbsp;401(k) in December 2002.
The amount of matching contribution expense incurred in the year
ended December&nbsp;31, 2003 and the five-month period ended
December&nbsp;31, 2002 was $241 and $14, respectively. The
Predecessor had a separate defined contribution 401(k) plan and
made matching contributions of $127 and $200 for the Predecessor
seven-month period ended July&nbsp;31, 2002 and the Predecessor
year ended December&nbsp;31, 2001.
</FONT>

<P align="center"><FONT size="2">F-26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">13.&nbsp;&nbsp;SEGMENT REPORTING:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has two reportable
segments:&nbsp;Medicaid and Medicare. The segments were
determined based upon the type of governmental administration
and funding of the health plans. Segment performance is
evaluated based upon earnings from operations without corporate
allocations. Accounting policies of the segments are the same as
those described in Note&nbsp;1.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Medicaid segment includes operations to
provide healthcare services to recipients that are eligible for
state supported programs including Medicaid and children&#146;s
health programs. The Medicare segment includes operations to
provide healthcare services to recipients who are eligible for
the federally supported Medicare program. The corporate and
other segment includes revenue and claims associated with
commercial members, investment and other income and selling,
general and administrative expenses not allocated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assets and equity details by segment have not
been disclosed, as they are not reported internally by the
Company.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Seven-Month</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">July 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenue:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">741,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">269,197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">330,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">455,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">236,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,045,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">520,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Medical benefits expense:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">609,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">145,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">861,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">341,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">434,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Selling, general and administrative
    expense:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">EBITDA</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicaid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medicare
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,267</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,386</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,534</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(257</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-27
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">WELLCARE HOLDINGS, LLC</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">14.&nbsp;&nbsp;QUARTERLY FINANCIAL INFORMATION
(unaudited)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selected unaudited quarterly financial data in
2003 and 2002 are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">For the Three Month Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">254,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,914</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,448</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,478</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,511</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,560</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income per unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income per unit&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Period end membership
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">482,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">497,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">555,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Combined</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Successor</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">For the Three Month Period Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">226,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class A common unit yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(936</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,420</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income attributable to common units
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income per unit&nbsp;&#151; basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income per unit&nbsp;&#151; diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Period end membership
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">412,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">436,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The sum of the quarterly earnings per unit
amounts do not equal the amount reported since per unit amounts
are computed independently for each quarter and for the full
year based on respective weighted-average units outstanding and
other dilutive potential units.
</FONT>

<P align="left">
<B><FONT size="2">15.&nbsp;&nbsp;SUBSEQUENT EVENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subsequent to December&nbsp;31, 2003, our Board
of Directors authorized a plan to reorganize the Company as a
corporation by means of a merger of the Company with and into
WCG, a wholly-owned subsidiary of the Company, in connection
with a planned initial public offering of the reorganized
company&#146;s common stock.
</FONT>

<P align="center"><FONT size="2">F-28
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">INDEPENDENT AUDITORS&#146; REPORT</FONT></B>

<P align="left">
<FONT size="2">To the Board of Directors and Stockholders of
WellCare Group, Inc.
</FONT>

<DIV align="left">
<FONT size="2">Tampa, Florida
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying balance sheet of
WellCare Group, Inc. (the Company) as of February&nbsp;9, 2004.
This financial statement is the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on this financial statement based on our audit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a
reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, such balance sheet presents
fairly, in all material respects, the financial position of the
Company as of February&nbsp;9, 2004 in conformity with
accounting principles generally accepted in the United States of
America.
</FONT>

<P align="left">
<FONT size="2">/s/ DELOITTE &#38; TOUCHE LLP
</FONT>

<DIV align="left">
<FONT size="2">Tampa, Florida
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">February&nbsp;12, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-29
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- link1 "WELLCARE GROUP, INC. BALANCE SHEET February 9, 2004" -->

<P align="center">
<B><FONT size="2">WELLCARE GROUP, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">BALANCE SHEET</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">February&nbsp;9, 2004</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Shareholder&#146;s Equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shareholder&#146;s Equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock (100&nbsp;shares authorized, issued
    and outstanding, $0.01 par value)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paid-In Capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Shareholders&#146; Equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">See notes to financial statements.</FONT></I>

<P align="center"><FONT size="2">F-30
</FONT>
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<!-- link1 "WELLCARE GROUP, INC. NOTES TO FINANCIAL STATEMENTS February 9, 2004" -->

<P align="center">
<B><FONT size="2">WELLCARE GROUP, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">NOTES TO FINANCIAL STATEMENTS</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">February&nbsp;9, 2004</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">ORGANIZATION, BASIS OF PRESENTATION, AND
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">WellCare Group, Inc. (the &#147;Company&#148;) is
a Delaware corporation incorporated on February&nbsp;5, 2004
(date of inception) for the purpose of merging with WellCare
Holdings, LLC (&#147;Holdings&#148;) and its subsidiaries.
Holdings, through its subsidiaries, provides managed care
programs and related benefits to individuals under Medicaid,
Medicare, and other state-sponsored children and family health
insurance programs. Holdings operates in the states of Florida,
New York and Connecticut.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company did not have any operating activity
during the period February 5, 2004 (date of inception) to
February&nbsp;9, 2004.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis of
Presentation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company holds cash in a demand deposit
account.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">INITIAL PUBLIC OFFERING AND RELATED SUBSEQUENT
    EVENTS</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, the Board of Directors of
Holdings authorized a plan to reorganize Holdings as a
corporation, by means of a merger of Holdings with and into the
Company, in anticipation of a planned initial public offering of
the reorganized company&#146;s common stock.
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>

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<P align="center">
<B><FONT size="2">[INSIDE BACK COVER: COVER ART]</FONT></B>

<P align="left">
<FONT size="2">[A close-up picture of an elderly couple occupies
approximately three-fifths of the page from the top.
</FONT>

<P align="left">
<FONT size="2">The logo for WellCare Health Plans, Inc. is
immediately below followed by the narrative:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">&#147;Our team of over 1,100&nbsp;associates and
    over 17,000&nbsp;physician partners serve over half a million
    members in the states of Florida, New York and Connecticut.
    Headquartered in Tampa, Florida, the WellCare Group of Companies
    operates plans under several local brands&nbsp;&#151; WellCare,
    Staywell, HealthEase and PreferredOne.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">To the left of the narrative is a vertical
listing of &#147;WellCare,&#148; PreferredOne,&#148;
&#147;HealthEase&#148; and &#147;StayWell.&#148; The tagline
&#147;The Common Sense Approach to Healthcare&#148; runs across
the bottom of the page.]
</FONT>

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<DIV align="left">

</DIV>

<P align="center">
<IMG src="w93446w9344646.gif" alt="(WellCare Logo)">

<DIV>&nbsp;</DIV>

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<P align="center">
<B><FONT size="2">PART II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<P align="left">
<B><FONT size="2">Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other
Expenses of Issuance and Distribution</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expenses (other than underwriting discounts
and commissions and the underwriters&#146; non-accountable
expense allowance) payable in connection with the sale of the
common stock offered in this Registration Statement are as
follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities and Exchange Commission registration
    fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NASD filing fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NYSE filing fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Printing and engraving expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounting fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Blue Sky fees and expenses (including legal fees)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer agent and rights agent and registrar
    fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All expenses are estimated except for the SEC fee
and the NASD fee.
</FONT>

<P align="left">
<B><FONT size="2">Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indemnification
of Directors and Officers</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;145 of the Delaware General
Corporation Law (the &#147;DGCL&#148;) provides, in effect, that
any person made a party to any action by reason of the fact that
he is or was a director, officer, associate or agent of WellCare
may and, in certain cases, must be indemnified by WellCare
against, in the case of a non-derivative action, judgments,
fines, amounts paid in settlement and reasonable expenses
(including attorneys&#146; fees) incurred by him as a result of
such action, and in the case of a derivative action, against
expenses (including attorneys&#146; fees), if in either type of
action he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
WellCare. This indemnification does not apply, in a derivative
action, to matters as to which it is adjudged that the director,
officer, associate or agent is liable to WellCare, unless upon
court order it is determined that, despite such adjudication of
liability, but in view of all the circumstances of the case, he
is fairly and reasonably entitled to indemnity for expenses,
and, in a non-derivative action, to any criminal proceeding in
which such person had reasonable cause to believe his conduct
was unlawful.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Article&nbsp;6 of WellCare&#146;s certificate of
incorporation provides that no director of WellCare shall be
liable to WellCare or its stockholders for monetary damages for
breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Article&nbsp;7 of WellCare&#146;s certificate of
incorporation also provides that WellCare shall indemnify to the
fullest extent permitted by Delaware law any and all of its
directors and officers, or former directors and officers, or any
person who may have served at WellCare&#146;s request as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reference is made to Section&nbsp;9 of the
underwriting agreement to be filed as Exhibit&nbsp;1.1 hereto,
pursuant to which the underwriters have agreed to indemnify
officers and directors of WellCare against certain liabilities
under the Securities Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">WellCare has entered into indemnification
agreements with each director and certain officers of WellCare,
a form of which is to be filed as Exhibit&nbsp;10.24 to this
registration statement. Pursuant to such agreements, WellCare
will be obligated, to the extent permitted by applicable law, to
indemnify such directors
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>

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<DIV align="left">
<FONT size="2">and officers against all expenses, judgments,
fines and penalties incurred in connection with the defense or
settlement of any actions brought against them by reason of the
fact that they were directors or officers of WellCare or assumed
certain responsibilities at the direction of WellCare. WellCare
also intends to purchase directors and officers liability
insurance in order to limit its exposure to liability for
indemnification of directors and officers.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Certain Sales of Securities.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as set forth below, in the three years
preceding the filing of this registration statement, the
registrant has not issued any securities that were not
registered under the Securities Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, upon the incorporation of the
registrant, the registrant issued 100 shares of common stock to
WellCare Holdings, LLC (&#147;Holdings&#148;) in exchange for
$1,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, the Board of Directors of
Holdings authorized a plan to reorganize Holdings as a
corporation, by means of a merger of Holdings with and into the
registrant. Upon the consummation of the reorganization, which
will take place immediately prior to the closing of the offering
contemplated by this registration statement:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">assuming an initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the registrant will issue an aggregate
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in exchange
    for &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;A
    Common
    Units, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;B
    Common Units
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;C
    Common Units of Holdings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all outstanding options issued by Holdings will
    automatically be converted into options to acquire shares of
    common stock of the registrant.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing sales of securities were made, or
will be made, in reliance upon the exemption from the
registration provisions of the Securities Act provided for by
Section&nbsp;4(2) thereof for transactions not involving a
public offering. All of the foregoing securities are deemed
restricted securities for the purposes of the Securities Act.
</FONT>

<P align="left">
<B><FONT size="2">Item&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exhibits
and Financial Statement Schedules</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Exhibits</I>
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Agreement and Plan of Merger, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, between WellCare Holdings, LLC and WellCare Group, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Certificate of Incorporation.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation (to be filed with the Delaware Secretary of State
    immediately prior to the closing of the offering covered by this
    Registration Statement).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Bylaws.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws (to be
    adopted immediately prior to the closing of the offering covered
    by this Registration Statement).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen common stock certificate.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Greenberg Traurig, LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of AHCA 2002-2004 Medicaid Health
    Maintenance Organization Contract, dated July 2002.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Nos. 1 through 7 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for Well Care HMO, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Nos. 1 through 9 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for HealthEase of Florida, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contract, dated September&nbsp;26, 2003, between
    the Centers for Medicare &#38; Medicaid Services and Well Care
    HMO, Inc.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase Agreement, dated as of May&nbsp;17,
    2002, by and among WellCare Holdings, LLC, WellCare Acquisition
    Company, the stockholders listed on the signature page thereto,
    Well Care HMO, Inc., HealthEase of Florida, Inc., Comprehensive
    Health Management of Florida, Inc. and Comprehensive Health
    Management, L.C.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Senior Subordinated
    Non-Negotiable Promissory Note, dated February&nbsp;12, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment and Settlement Agreement, dated
    February&nbsp;12, 2004, among WellCare Holdings, LLC. WellCare
    Health Plans, Inc., Kiran C. Patel, Pallavi Patel Pradip C.
    Patel, Swati Patel, Rupesh Shah and Nita Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Equity and Warrant Agreement, dated as of
    July&nbsp;31, 2002, among WellCare Holdings, LLC, Kiran C.
    Patel, M.D., Pradip C. Patel and Rupesh Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Investor Rights Agreement, dated as of
    July&nbsp;31, 2002, by and among WellCare Holdings, LLC, Kiran
    C. Patel, M.D., Pradip C. Patel and Rupesh Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pledge Agreement, dated as of July&nbsp;31, 2002,
    by and between WellCare Holdings, LLC and Kiran C. Patel, as
    Stockholder Representative.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Merger Agreement, dated as of May&nbsp;17, 2002,
    by and among WellCare Acquisition Company, WellCare Merger Sub,
    Inc. and The WellCare Management Group, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contribution Agreement, dated as of July&nbsp;31,
    2002, by and between WellCare Holdings, LLC and Soros Private
    Equity Investors LP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement, dated as of
    September&nbsp;6, 2002, by and among WellCare Holdings, LLC and
    certain equityholders.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">WellCare Holdings, LLC 2002 Senior Executive
    Equity Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Subscription Agreement under 2002 Senior
    Executive Equity Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">WellCare Holdings, LLC 2002 Employee Option Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Time Vesting Option Agreement under 2002
    Employee Option Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.18*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Equity Incentive Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.19*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employee Stock Purchase Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.20*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of July&nbsp;31,
    2002, among WellCare Acquisition Company, Comprehensive Health
    Management, Inc. and Todd S. Farha.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.21*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    October&nbsp;10, 2002, among WellCare Acquisition Company,
    Comprehensive Health Management, Inc. and Heath Schiesser.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.22*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    November&nbsp;18, 2002, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Thaddeus Bereday.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.23*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    September&nbsp;15, 2003, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Paul Behrens.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.24*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Indemnification Agreement.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Management Subscription Agreement, dated as of
    September&nbsp;6, 2002, between WellCare Holdings, LLC and Todd
    S. Farha.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Agreement, dated March&nbsp;25, 2003, between
    Comprehensive Health Management, Inc. and IntelliClaim, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated November 2003,
    between Comprehensive Health Management, Inc. and Ruben
    King-Shaw, Jr.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">16.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter regarding change in certifying accountant.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of subsidiaries.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consents of Deloitte &#38; Touche, LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Greenberg Traurig, LLP (included in
    Exhibit&nbsp;5.1).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney (contained in the signature
    page to this Registration Statement).
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Financial Statement Schedules</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following financial statement schedule is
filed as part of this Registration Statement:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="91%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule II&nbsp;&#151; Valuation and Qualifying
    Accounts and Reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">S-1
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-3
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Item&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Undertakings</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;To file, during any period in which
    offers or sales are being made, a post-effective amendment to
    this registration statement:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;To include any prospectus required by
    Section&nbsp;10(a)(3) of the Securities Act of 1933;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;To reflect in the prospectus any facts
    or events arising after the effective date of the registration
    statement (or the most recent post-effective amendment thereof)
    which, individually or in the aggregate, represent a fundamental
    change in the information set forth in the registration
    statement. Notwithstanding the foregoing, any increase or
    decrease in volume of securities offered (if the total dollar
    value of securities offered would not exceed that which was
    registered) and any deviation from the low or high end of the
    estimated maximum offering range may be reflected in the form of
    prospectus filed with the Commission pursuant to
    Rule&nbsp;424(b) if, in the aggregate, the changes in volume and
    price represent no more than 20&nbsp;percent change in the
    maximum aggregate offering price set forth in the
    &#147;Calculation of Registration Fee&#148; table in the
    effective registration statement; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;To include any material information
    with respect to the plan of distribution not previously
    disclosed in the registration statement or any material change
    to such information in the registration statement.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;That, for the purpose of determining any
    liability under the Securities Act of 1933, each such
    post-effective amendment shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(3)&nbsp;To remove from registration by means of
    a post-effective amendment any of the securities being
    registered which remain unsold at the termination of the
    offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to provisions
described in Item&nbsp;14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes
(1)&nbsp;to provide to the underwriter at the closing specified
in the standby underwriting agreement, certificates in such
denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser;
(2)&nbsp;that for purposes of determining any liability under
the Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule&nbsp;430A and contained in a form of prospectus filed by
the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or
497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective;
and (3)&nbsp;that for the purpose of determining any liability
under the Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
</FONT>

<P align="center"><FONT size="2">II-4
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes to
supplement the prospectus, after the expiration of the
subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities
to be purchased by the underwriters, and the terms of any
subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
</FONT>

<P align="center"><FONT size="2">II-5
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Tampa, Florida, on
February&nbsp;13, 2004.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">WELLCARE GROUP, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ TODD S. FARHA
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="right">
    <HR size="1" align="right" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Todd S. Farha
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Know All Persons By These Presents, that each
person whose signature appears below constitutes and appoints
Todd S. Farha and Thaddeus Bereday or either of them acting
alone, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and revocation, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign (i)&nbsp;any and all amendments (including
post-effective amendments) to this registration statement and to
file the same with all exhibits thereto, and other documents in
connection therewith and (ii)&nbsp;any registration statement
and any and all amendments thereto, relating to the offer
covered hereby filed pursuant to Rule&nbsp;462(b) under the
Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done as fully to all intents
and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ TODD S. FARHA<BR>
    <HR size="1" noshade>Todd S. Farha
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">President, Chief Executive Officer and Director
    (Principal Executive&nbsp;Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ PAUL BEHRENS<BR>
    <HR size="1" noshade>Paul Behrens
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Financial Officer (Principal Financial and
    Accounting Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ REGINA HERZLINGER<BR>
    <HR size="1" noshade>Regina Herzlinger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ KEVIN HICKEY<BR>
    <HR size="1" noshade>Kevin Hickey
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ALIF HOURANI<BR>
    <HR size="1" noshade>Alif Hourani
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ GLEN R. JOHNSON<BR>
    <HR size="1" noshade>Glen R. Johnson
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ RUBEN JOSE KING-SHAW, JR.<BR>
    <HR size="1" noshade>Ruben Jose King-Shaw, Jr.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ CHRISTIAN MICHALIK<BR>
    <HR size="1" noshade>Christian Michalik
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ NEAL MOSZKOWSKI<BR>
    <HR size="1" noshade>Neal Moszkowski
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;13, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-7
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">Schedule&nbsp;II&nbsp;&#151; Valuation and
Qualifying Accounts and Reserves</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance at</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beginning of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Charged to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Balance at</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Costs and Expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deductions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">End of Period</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year Ended December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deducted from assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for uncollectible accounts; Medicare
    Advances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Year Ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deducted from assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for uncollectible accounts; Medical
    Advances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">S-1
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Agreement and Plan of Merger, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, between WellCare Holdings, LLC and WellCare Group, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Certificate of Incorporation.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation (to be filed with the Delaware Secretary of State
    immediately prior to the closing of the offering covered by this
    Registration Statement).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Bylaws.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws (to be
    adopted immediately prior to the closing of the offering covered
    by this Registration Statement).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen common stock certificate.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Greenberg Traurig, LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of AHCA 2002-2004 Medicaid Health
    Maintenance Organization Contract, dated July 2002.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Nos. 1 through 7 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for Well Care HMO, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Nos. 1 through 9 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for HealthEase of Florida, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contract, dated September&nbsp;26, 2003, between
    the Centers for Medicare &#38; Medicaid Services and Well Care
    HMO, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Purchase Agreement, dated as of May&nbsp;17,
    2002, by and among WellCare Holdings, LLC, WellCare Acquisition
    Company, the stockholders listed on the signature page thereto,
    Well Care HMO, Inc., HealthEase of Florida, Inc., Comprehensive
    Health Management of Florida, Inc. and Comprehensive Health
    Management, L.C.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Senior Subordinated
    Non-Negotiable Promissory Note, dated February&nbsp;12, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment and Settlement Agreement, dated
    February&nbsp;12, 2004, among WellCare Holdings, LLC, WellCare
    Health Plans, Inc., Kiran C. Patel, Pallavi Patel, Pradip C.
    Patel, Swati Patel, Rupesh Shah and Nita Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Equity and Warrant Agreement, dated as of
    July&nbsp;31, 2002, among WellCare Holdings, LLC, Kiran C.
    Patel, M.D., Pradip C. Patel and Rupesh Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Investor Rights Agreement, dated as of
    July&nbsp;31, 2002, by and among WellCare Holdings, LLC, Kiran
    C. Patel, M.D., Pradip C. Patel and Rupesh Shah.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pledge Agreement, dated as of July&nbsp;31, 2002,
    by and between WellCare Holdings, LLC and Kiran C. Patel, as
    Stockholder Representative.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Merger Agreement, dated as of May&nbsp;17, 2002,
    by and among WellCare Acquisition Company, WellCare Merger Sub,
    Inc. and The WellCare Management Group, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Contribution Agreement, dated as of July&nbsp;31,
    2002, by and between WellCare Holdings, LLC and Soros Private
    Equity Investors LP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Registration Rights Agreement, dated as of
    September&nbsp;6, 2002, by and among WellCare Holdings, LLC and
    certain equityholders.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">WellCare Holdings, LLC 2002 Senior Executive
    Equity Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Subscription Agreement under 2002 Senior
    Executive Equity Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">WellCare Holdings, LLC 2002 Employee Option Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Time Vesting Option Agreement under 2002
    Employee Option Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.18*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Equity Incentive Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.19*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employee Stock Purchase Plan.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.20*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of July&nbsp;31,
    2002, among WellCare Acquisition Company, Comprehensive Health
    Management, Inc. and Todd S. Farha.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.21*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    October&nbsp;10, 2002, among WellCare Acquisition Company,
    Comprehensive Health Management, Inc. and Heath Schiesser.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.22*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    November&nbsp;18, 2002, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Thaddeus Bereday.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.23*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    September&nbsp;15, 2003, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Paul Behrens.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.24*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Indemnification Agreement.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Management Subscription Agreement, dated as of
    September&nbsp;6, 2002, between WellCare Holdings, LLC and Todd
    S. Farha.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Agreement, dated March&nbsp;25, 2003, between
    Comprehensive Health Management, Inc. and IntelliClaim, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated November 2003,
    between Comprehensive Health Management, Inc. and Ruben
    King-Shaw, Jr.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">16.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter regarding change in certifying accountant.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of subsidiaries.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consents of Deloitte &#38; Touche, LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Greenberg Traurig, LLP (included in
    Exhibit&nbsp;5.1).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney (contained in the signature
    page to this Registration Statement).
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "w93446sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1428468}]
{"company-data": {"conformed-name": "WELLCARE GROUP INC", "cik": "0001279363", "irs-number": "470937650", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-112829", "film-number": "04599733"}, "business-address": {"street1": "68000 NORTH DALE MABRY HWY", "street2": "SUITE 268", "city": "TAMPA", "state": "FL", "zip": "33614", "phone": "8132906200"}, "mail-address": {"street1": "68000 NORTH DALE MABRY HWY", "street2": "SUITE 268", "city": "TAMPA", "state": "FL", "zip": "33614"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange
Commission on February      ,
2004
Registration Statement No.
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WellCare Group, Inc.
(Exact Name of Registrant as Specified in its
Charter)
Delaware
6324
47-0937650
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
6800 North Dale Mabry Highway,
Suite 268
Tampa, Florida 33614
(813) 290-6200
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant's Principal
Executive Offices)
Mr. Todd S. Farha
President and Chief Executive
Officer
WellCare Group, Inc.
6800 North Dale Mabry Highway,
Suite 268
Tampa, Florida 33614
(813) 290-6200
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of Agent for
Service)
Copies to:
Stephen A. Riddick, Esq.
Jason T. Simon, Esq.
Greenberg Traurig, LLP
800 Connecticut Avenue, N.W., Suite 500
Washington, D.C. 20006
(202) 331-3100
Dennis M. Myers, P.C.
Kirkland & Ellis LLP
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
Leslie N. Silverman, Esq.
Cleary, Gottlieb, Steen
& Hamilton
One Liberty Plaza
New York, New York 10006
(212) 225-2000
Approximate date of commencement of proposed
sale to the public:
As soon as
practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, check the
following box.
o
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.
o
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.
o
If delivery of the Prospectus is expected to be
made pursuant to Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of
Aggregate Offering
Amount of
Securities to be Registered
Price(1)
Registration Fee
Common Stock, par value $.01 per share
$100,000,000
$12,670
(1)
Includes shares that the underwriters have the
    option to purchase from the Registrant and the selling
    stockholders to cover over-allotments, if any. Estimated solely
    for purposes of calculating the registration fee in accordance
    with Rule 457(o) under the Securities Act of 1933, as
    amended.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or
until this Registration Statement shall become effective on such
date as the Commission, acting pursuant to such
Section 8(a), may determine.
Table of Contents
The information in this
prospectus is not complete and may be changed. We may not sell
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell securities and we are not soliciting
offers to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS
(Subject to
Completion)
Dated                           ,
2004
Shares
COMMON STOCK
WellCare Group, Inc. is
offering                      shares
of its common stock and the selling stockholder is
selling                      shares
of common stock. We will not receive any proceeds from the sale
of shares of common stock by the selling stockholder. This is
our initial public offering and no public market currently
exists for our shares. We anticipate that the initial public
offering price will be between
$          and
$           per
share.
We have applied to list our common stock on
the New York Stock Exchange under the symbol
"WCG."
Investing in our common stock involves risks. See
"Risk Factors" beginning on page 6.
PRICE
$
A
SHARE
Underwriting
Proceeds to
Discounts and
Proceeds to
Selling
Price to Public
Commissions
WellCare
Stockholder
Per Share
$
$
$
$
Total
$
$
$
$
We have granted the underwriters the right to
purchase up to an
additional           shares
to cover over-allotments.
The Securities and Exchange Commission and state
securities regulators have not approved or disapproved these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Morgan Stanley & Co. Incorporated expects to
deliver the shares to purchasers
on                     ,
2004.
MORGAN
STANLEY
CREDIT SUISSE FIRST
    BOSTON
SG COWEN
RAYMOND JAMES
,
2004.
Table of Contents
[INSIDE COVER: COVER ART]
[A close-up picture of a young child occupies
approximately three-fifths of the page from the top.
The logo for WellCare Health Plans, Inc. is
immediately below followed by the narrative:
"WellCare is committed to making quality and
    affordable healthcare services easily accessible to consumers.
    We specialize in providing care to those who receive their
    health benefits through government programs such as Medicaid,
    Medicare and other programs."
To the left of the narrative is a vertical
listing of "WellCare," PreferredOne,"
"HealthEase" and "StayWell." The tagline
"The Common Sense Approach to Healthcare" runs across
the bottom of the page.]
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
6
Forward-Looking
    Statements
20
Use of Proceeds
21
Dividend Policy
21
Reorganization as a
    Corporation
22
Capitalization
23
Dilution
24
Selected Consolidated and
    Combined Financial Data
25
Management's Discussion
    and Analysis of Financial Condition and Results of Operations
27
Our Business
41
Management
64
Certain Transactions
77
Principal Stockholders
81
Selling Stockholder
83
Description of Capital
    Stock
84
Shares Eligible For Future
    Sale
87
Certain United States Tax
    Consequences to Non-United States Holders
89
Underwriters
92
Validity
94
Experts
94
Additional Information
94
Index to Consolidated
    Financial Statements
F-1
CERTIFICATE OF INCORPORATION
BYLAWS
FORM OF MEDICAID HEALTH MAINTENANCE CONTRACT
AMENDMENT NOS.1 THROUGH 7 TO CONTRACT
AMENDMENT NOS. 1 THROUGH 9 TO CONTRACT
CONTRACT
PURCHASE AGREEMENT
EQUITY AND WARRANT AGREEMENT
INVESTOR RIGHTS AGREEMENT
PLEDGE AGREEMENT
MERGER AGREEMENT
CONTRIBUTION AGREEMENT
REGISTRATION RIGHTS AGREEMENT
2002 SENIOR EXECUTIVE EQUITY PLAN
FORM OF SUBSCRIPTION AGREEMENT
2002 EMPLOYEE OPTION PLAN
FORM OF TIME VESTING OPTION AGREEMENT
MANAGEMENT SUBSCRIPTION AGREEMENT
AGREEMENT
CONSULTING AGREEMENT
LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
CONSENTS OF DELOITTE & TOUCHE, LLP
You should rely only on the information contained
in this prospectus. We and the selling stockholder have not
authorized anyone to provide you with information that is
different from that contained in this prospectus. We and the
selling stockholder are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of when this prospectus is delivered or when any sale
of our common stock occurs.
Until                     ,
2004, all dealers that buy, sell or trade shares, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
i
Table of Contents
PROSPECTUS SUMMARY
You should read the following summary together
with the more detailed information regarding our company, the
common stock being sold in this offering and our consolidated
and combined financial statements, including the notes to those
statements, appearing elsewhere in this prospectus.
Our Business
We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. We have centralized core
functions, such as claims processing and medical management,
combined with targeted marketing and provider services tailored
to the local markets where we operate. We believe that this
approach allows us to provide high-quality, affordable
healthcare services to our members and offer cost saving
opportunities to the states we serve, while maintaining mutually
beneficial relationships with our providers and our regulators.
We also believe that our approach to the delivery of managed
care services will allow us to effectively grow our business,
both through organic growth and acquisitions.
We operate health plans in Florida, New York and
Connecticut. In Florida, we serve more than
475,000 members, and operate the two largest Medicaid
managed care plans. In New York and Connecticut, we serve
approximately 56,000 and 24,000 members, respectively.
Our Markets and Opportunities
The market for government-sponsored healthcare
programs in the United States is large and growing. In 2002,
Medicaid covered 40.1 million enrollees and Medicare
covered 40.5 million enrollees, according to the federal
government's Centers for Medicare & Medicaid
Services, or CMS. Enrollment in Medicaid managed care programs
has grown rapidly in recent years, from 13.3 million, or
40% of enrollees, in 1996 to 23.1 million, or 58% of
enrollees, in 2002, according to CMS. We plan to leverage our
approach to the delivery of managed care programs by expanding
our Medicaid, Medicare and other products in our current markets
and in additional counties and states.
We are the largest Medicaid managed care provider
in the State of Florida, where we also operate a large Medicare
plan. In 2003, we added approximately 30,000 members to our
State Children's Health Insurance Program, or SCHIP, known
in Florida as Healthy Kids. Florida has approximately
2.0 million Medicaid enrollees, which includes
beneficiaries under the Supplemental Security Income, or SSI,
and the Temporary Assistance to Needy Families, or TANF,
programs. Florida also has 2.9 million Medicare enrollees,
the second largest population of any state. Based on our history
of providing quality managed care services in Florida, we
believe we are well positioned to continue increasing our
membership in the state.
Our health plans in New York and Connecticut have
experienced significant membership growth under our management.
During 2003, our membership in New York grew approximately 23%
to nearly 56,000 members, and our membership in Connecticut
grew approximately 39% to nearly 24,000 members. We believe
that both of these states are attractive markets for growth. We
believe that the New York market opportunity is substantial,
with approximately 3.1 million Medicaid and
2.7 million Medicare enrollees.
Our Competitive Advantages
We operate health plans focused on
government-sponsored healthcare programs. We believe the
following are among our key competitive advantages:
Leading Market Presence.
We are the leading Medicaid provider
in Florida, with a market share of approximately 50% and over
475,000 Medicaid managed care enrollees. We believe that this
strong market position provides us with numerous strategic
advantages, including enhanced economies of scale, extensive
provider networks in our core markets, strong relationships with
state and local agencies and the ability to provide a broad
range of government-sponsored healthcare programs.
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Table of Contents
Diversified Government Healthcare
Programs.
We offer managed care
services for a diversified range of government programs,
including the SCHIP, SSI and TANF Medicaid programs and
Medicare. This approach helps reduce the impact of rate
reductions or other adverse changes affecting any one of these
programs. We believe that our experience in serving a broad
range of enrollees in Medicaid, Medicare and related programs
positions us to capitalize on growth opportunities within the
market for government-sponsored healthcare programs.
Centralized and Scalable
Operations.
We have centralized our
medical management programs, claims processing, member services,
information technology and pharmacy benefits programs.
Centralizing these functions and operating on a single platform
permit management to better assess and control medical costs.
Our administrative and information services have been designed
to be scalable to accommodate growth, while allowing targeted
marketing and provider services tailored to local markets.
Strong Relationships with Government
Agencies.
We work closely with the
government agencies that regulate us to develop the products and
services that we offer. Our relationships with these government
agencies enable us to deliver high-quality, affordable
healthcare services to our members and create cost saving
opportunities for the states in which we operate, many of which
currently are facing budgetary pressures. By demonstrating our
ability to provide quality, cost-effective services, we believe
government agencies will remain committed to the growth of
managed care as a means to control rising healthcare
expenditures.
Partnerships with Providers.
We seek to enter mutually beneficial
arrangements with our providers, which help them to develop and
grow their practices. We provide quality service and strive to
be a low hassle partner in developing and maintaining strong
relationships with our providers. As a result of this approach,
we have established a broad provider network that includes over
17,000 physicians and specialists and 300 hospitals.
Integrated Medical
Management.
We employ a multi-tiered,
integrated approach to medical management in order to provide
appropriate care to our members, contain costs and ensure an
efficient delivery network. Our focus is to ensure that members
receive the appropriate care in a timely manner and in the
appropriate healthcare delivery setting. Key elements of our
medical management strategy include a focus on preventative
care, careful management of outpatient, inpatient and other
services and case and disease management. We believe that this
approach allows us to improve medical outcomes for our members,
resulting in cost savings for the states in which we operate.
Our Growth Strategy
Our objective is to be the leading provider of
managed care services for government-sponsored healthcare
programs. To achieve this objective, we intend to:
•
expand our Medicaid business within existing
    markets;
•
leverage our established Medicaid businesses to
    develop Medicare plans; and
•
enter new markets through internal growth and
    acquisitions.
Our Company
We were formed in May 2002 to acquire the
WellCare group of companies. In July 2002, we completed the
acquisition of our current businesses through two concurrent
transactions. In the first, we acquired our Florida operations,
including our Well Care HMO and HealthEase subsidiaries, in a
stock purchase from several individuals. In the second
transaction, we acquired The WellCare Management Group, Inc., a
publicly-traded holding company and the parent company of our
New York and Connecticut operations, through a merger of that
company into a wholly-owned subsidiary of ours. See
"Management's Discussion and Analysis of Financial
Condition and Operations— Corporate History and WellCare
Acquisitions."
Since our inception, we have operated through a
holding company that is a limited liability company. As
described in "Reorganization as a Corporation," our
holding company will become a Delaware corporation
2
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immediately prior to the closing of this
offering. At that time, our name will be changed to WellCare
Health Plans, Inc.
Our principal executive offices are located at
6800 North Dale Mabry Highway, Suite 268, Tampa,
Florida 33614, and our telephone number is
(813) 290-6200. Our website is www.wellcare.com.
Information contained on our website or links to our website do
not constitute a part of this prospectus.
References in this prospectus to
"WellCare," "we," "our" and
"us," for periods prior to the closing of this
offering, refer to WellCare Holdings, LLC, a Delaware limited
liability company, and as of the closing and thereafter, to
WellCare Group, Inc., a Delaware corporation, together in each
case with our subsidiaries and any predecessor entities unless
the context suggests otherwise.
The WellCare trademark and design appearing on
the front cover of this prospectus are registered trademarks of
The WellCare Management Group, Inc., one of our wholly-owned
subsidiaries.
The Offering
Common stock offered by us
shares
Common stock offered by the selling stockholder
shares
Total
shares
Common stock to be outstanding after this offering
shares
Use of proceeds
We intend to use the net proceeds of this
    offering for the repayment of indebtedness, working capital and
    other general corporate purposes, which may include select
    acquisitions. We will not receive any proceeds from the sale of
    shares by the selling stockholder. See "Use of
    Proceeds."
Proposed New York Stock Exchange symbol
WCG
Except as otherwise noted, the number of
shares to be outstanding after this offering excludes:
•
shares
    of common stock available for issuance pursuant to our incentive
    equity plans, of
    which                      shares
    are subject to outstanding options as
    of                     ,
    2004; and
•
shares
    of common stock reserved for future issuances under our employee
    stock purchase plan.
Except as otherwise noted, all information in
this prospectus is based on the following assumptions:
•
the underwriters do not exercise their
    over-allotment option; and
•
the conversion of WellCare Holdings, LLC into
    a corporation immediately prior to the closing of this
    offering.
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Table of Contents
SUMMARY CONSOLIDATED AND COMBINED FINANCIAL
DATA
The following table sets forth our summary
financial data. This information should be read in conjunction
with our financial statements and the related notes and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in
this prospectus. The as adjusted balance sheet data gives effect
to the sale
of                      shares
of common stock at an assumed initial public offering price of
$           per
share, less the estimated underwriting discounts, commissions
and estimated offering expenses payable by us. WellCare, as it
existed prior to the July 31, 2002 acquisition of the
WellCare group of companies, is referred to as
"Predecessor." WellCare, as it existed on and after
July 31, 2002, is referred to as "Successor."
Predecessor
Successor
Seven-Month
Five-Month
Year Ended December 31,
Period Ended
Period Ended
Year Ended
July 31,
December 31,
December 31,
1999
2000
2001
2002
2002
2003
(in thousands, except per unit/share data)
Consolidated and Combined Statements of Income
    (Loss):
Revenues:
Premium:
Medicaid
$
152,543
$
272,497
$
451,210
$
329,164
$
267,911
$
740,078
Medicare
27,212
72,992
233,626
170,073
120,814
288,330
Other
(1)
84,299
80,430
55,027
17,976
9,928
14,444
Total premium
264,054
425,919
739,863
517,213
398,653
1,042,852
Investment income
10,592
4,141
8,949
2,460
3,038
2,561
Other
—
1,407
1,472
359
114
569
Total revenues
274,646
431,467
750,284
520,032
401,805
1,045,982
Expenses:
Medical benefits:
Medicaid
115,046
202,876
364,293
274,672
222,007
609,233
Medicare
25,727
78,542
219,505
145,768
107,384
238,933
Other
(2)
90,138
86,818
53,708
14,484
12,372
12,887
Total medical benefits
230,911
368,236
637,506
434,924
341,763
861,053
Selling, general and administrative
35,201
70,050
86,279
54,492
45,384
126,106
Depreciation and amortization
2,171
1,913
2,234
1,239
3,734
8,159
Interest
6,126
1,785
2,860
1,446
1,462
10,172
Total expenses
274,409
441,984
728,879
492,101
392,343
1,005,490
Income (loss) before income
    taxes
237
(10,517
)
21,405
27,931
9,462
40,492
Income tax expense
(3)
—
—
—
—
4,805
16,955
Net income (loss)
$
237
$
(10,517
)
$
21,405
$
27,931
$
4,657
$
23,537
Net income attributable per common
    unit:
Net income attributable per
    unit — basic
$
0.09
$
0.66
Net income attributable per
    unit — diluted
$
0.08
$
0.60
Pro forma net income per common
    share:
Basic
Diluted
Average common units outstanding:
Basic
Diluted
Pro forma common shares outstanding:
Basic
Diluted
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As of December 31,
1999
2000
2001
2002
2003
Operating Statistics:
Medical benefits ratio—
    consolidated
(4)
87.4%
86.5%
86.2%
84.8%
82.6%
Medical benefits ratio—
    Medicaid
(4)
75.4%
74.5%
80.7%
83.2%
82.3%
Medical benefits ratio—
    Medicare
(4)
94.5%
107.6%
94.0%
87.0%
82.9%
Medical benefit ratio— other
(4)
106.9%
107.9%
97.6%
96.2%
89.2%
Selling, general and administrative expense
    ratio
(5)
12.8%
16.2%
11.5%
10.8%
12.1%
Members— consolidated
157,000
317,000
374,000
470,000
555,000
Members— Medicaid
106,000
256,000
323,000
420,000
512,000
Members— Medicare
5,000
20,000
35,000
42,000
42,000
Members— commercial
46,000
41,000
16,000
8,000
1,000
1999
2000
2001
2002
2003
As
Actual
Adjusted
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
35,658
$
107,730
$
129,791
$
146,784
$
237,321
Total assets
75,765
173,007
221,456
409,504
497,107
Long-term debt (including current maturities)
6,370
1,174
154
156,295
135,755
Total liabilities
82,449
158,589
193,533
334,587
397,530
Total stockholders' equity
    (deficit)
(6)
(6,684
)
14,418
27,923
74,917
99,577
(1)
Other premium revenue relates to our commercial
    business, which is no longer marketed.
(2)
Other medical benefits relates to our commercial
    business, which is no longer marketed.
(3)
Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code, the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses. Pro forma tax
    expense for each of the years 1999, 2000, 2001, and the seven
    months ended July 31, 2002 at an estimated tax rate of 42%
    (our effective tax rate as the Successor) is $100, $0, $8,990,
    and $11,731, respectively.
(4)
Medical benefits ratio represents medical
    benefits expense as a percentage of premium revenue.
(5)
Selling, general and administrative expense ratio
    represents selling, general and administrative expense as a
    percentage of total revenue and excludes depreciation and
    amortization expense for purposes of determining the ratio.
(6)
Total stockholders' equity reflects
    stockholders' equity for Predecessor and on an as adjusted
    basis for 2003 and reflects limited liability company membership
    interests during 2002 and on an actual basis for 2003.
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Table of Contents
RISK FACTORS
This offering and an investment in our common
stock involve a high degree of risk. You should carefully
consider the following risks and all other information contained
in this prospectus before purchasing our common stock. If any of
the following risks actually occur, our business, financial
condition and results of operations could be materially and
adversely affected, the value of our stock could decline, and
you may lose all or part of your investment. The risks and
uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impair our business
operations.
Risks Related to Our Business
If our government contracts are not renewed or
are terminated, our business could be substantially
impaired.
We provide our Medicaid, Medicare, SCHIP and
other services through a limited number of contracts with state,
federal or local government agencies. These contracts generally
have terms of one or two years and are subject to nonrenewal by
the applicable agency. All of our government contracts are
terminable for cause if we breach a material provision of the
contract or violate relevant laws or regulations. In addition,
our right to add new members may be suspended by a government
agency if it finds deficiencies in our provider network or
operations.
Our contracts with the states are subject to
cancellation or a potential freeze on enrollment by the state in
the event of the unavailability of state or federal funding.
This has recently occurred with the Florida Healthy Kids SCHIP
program, which includes our Healthy Kids contract. In some
jurisdictions, such a cancellation or enrollment freeze may be
immediate and in other jurisdictions a notice period is
required. Some of our contracts are also subject to termination
or are eligible for renewal through annual competitive bids. We
may face increased competition as other plans attempt to enter
our markets through the contracting process. If we are unable to
renew, or successfully rebid or compete for any of our
government contracts, or if any of our contracts are terminated,
our business will suffer.
If we are unable to manage medical benefits
expense effectively, our profitability will likely be reduced or
we could cease to be profitable.
Our profitability depends, to a significant
degree, on our ability to predict and effectively manage our
costs related to the provision of healthcare services.
Relatively small changes in the ratio of our expenses related to
healthcare services to the premiums we receive, or medical
benefits ratio, can create significant changes in our financial
results. Factors that may cause medical benefits expense to
exceed our estimates include:
•
an increase in the cost of healthcare services
    and supplies, including pharmaceuticals, whether as a result of
    inflation or otherwise;
•
higher than expected utilization of healthcare
    services;
•
periodic renegotiation of hospital, physician and
    other provider contracts;
•
the occurrence of catastrophes, major epidemics,
    terrorism or bio-terrorism;
•
changes in the demographics of our members and
    medical trends affecting them; and
•
new mandated benefits or other changes in
    healthcare laws, regulations and/or practices.
Because of the relatively high average age of the
Medicare population, medical benefits expense for our Medicare
plans may be particularly difficult to control. According to
CMS, from 1967 to 2001, Medicare healthcare expenses nationwide
increased on average by 10% annually.
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Table of Contents
Although we have been able to manage our medical
benefits expense through a variety of techniques, including
various payment methods to primary care physicians and other
providers, advance approval for hospital services and referral
requirements, medical management and quality management
programs, upgraded information systems, and reinsurance
arrangements, we may not be able to continue to manage these
expenses effectively in the future. If our medical benefits
expense increases, our profits could be reduced or we may not
remain profitable.
We maintain reinsurance to protect us against
severe or catastrophic medical claims, but we cannot assure you
that such reinsurance coverage currently is or will be adequate
or available to us in the future or that the cost of such
reinsurance will not limit our ability to obtain it.
Because our premiums, which generate most of
our revenues, are fixed by contract, we are unable to increase
our premiums during the contract term if our corresponding
medical benefits expense exceeds our estimates.
Most of our revenues are generated by premiums
consisting of fixed monthly payments per member. These payments
are fixed by contract, and we are obligated during the contract
period to provide or arrange for the provision of healthcare
services as established by state and federal governments. We
have less control over costs related to the provision of
healthcare services than we do over our selling, general and
administrative expense. Historically, our medical benefits
expense as a percentage of premium revenue has fluctuated. For
example, our medical benefits expense was 84.8% of our combined
premium revenue in 2002 and 82.6% of our combined premium
revenue in 2003. If our medical benefits expense exceeds our
estimates, we will be unable to adjust the premiums we receive
under our current contracts, and our profits may decline.
Reductions in funding for government
healthcare programs could substantially reduce our
profitability.
All of the healthcare services we offer are
through government-sponsored programs, such as Medicaid and
Medicare. As a result, our profitability is dependent, in large
part, on continued funding for government healthcare programs at
or above current levels. For example, the premium rates paid by
each state to health plans like ours differ depending on a
combination of factors such as upper payment limits established
by the state and federal governments, a member's health
status, age, gender, county or region, benefit mix and member
eligibility categories. Future Medicaid premium rate levels may
be affected by continued government efforts to contain medical
costs or state and federal budgetary constraints. According to
the National Association of State Budget Officers, Medicaid
spending consumed 15% of the average state's budget in
1999, representing the second largest expenditure. According to
the Congressional Budget Office, total state spending on
Medicaid is expected to reach $127 billion in 2004,
representing a 9% annual increase since 2001. Some states may
find it difficult to continue paying the current rates to
Medicaid health plans. Changes in Medicaid funding, for example,
may lead to reductions in the number of persons enrolled in or
eligible for Medicaid, reductions in the amount of reimbursement
or elimination of coverage for certain benefits such as
pharmacy, behavioral health or other benefits. In some cases,
changes in funding could be made retroactive. All of the states
in which we operate are presently considering legislation that
would reduce reimbursement rates, payment levels, benefits
covered or the number of persons eligible for Medicaid.
Reductions in Medicaid payments could reduce our profitability
if we are unable to reduce our expenses. Similarly, reductions
in payments under Medicare or the other programs under which we
offer health plans could likewise reduce our profitability.
Federal budgetary constraints also may limit
premiums payable under our Medicare plans. For example, as a
result of the Balanced Budget Act of 1997, annual increases on
premiums paid to many Medicare+Choice plans were subject to a 2%
cap, even though overall Medicare healthcare expenses were
increasing at a higher rate.
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We are subject to extensive government
regulation, and any violation of the laws and regulations
applicable to us could adversely affect our operating
results.
Our business is extensively regulated by the
federal government and the states in which we operate. The laws
and regulations governing our operations are generally intended
to benefit and protect health plan members and providers rather
than stockholders. The government agencies administering these
laws and regulations have broad latitude to enforce them. These
laws and regulations, along with the terms of our government
contracts, regulate how we do business, what services we offer,
and how we interact with our members, providers and the public.
We are subject, on an ongoing basis, to various governmental
reviews, audits and investigations to verify our compliance with
our contracts and applicable laws and regulations. Any adverse
review, audit or investigation could result in:
•
forfeiture of amounts we have been paid pursuant
    to our government contracts;
•
imposition of civil or criminal penalties, fines
    or other sanctions on us;
•
loss of our right to participate in
    government-sponsored programs, including Medicaid and Medicare;
•
damage to our reputation in various markets;
•
increased difficulty in marketing our products
    and services; and
•
loss of one or more of our licenses to act as an
    insurer or health maintenance organization or to otherwise
    provide a service.
Any of these events could adversely affect our
results of operations.
We derive a substantial portion of our
revenues from operations in Florida, and our operating results
would be materially affected by a decrease in revenues or
profitability of our Florida operations.
In 2003, our Florida health plans accounted for
86.0% of our total premium revenues. If we are unable to
continue to operate in Florida, or if our current operations in
any portion of Florida are significantly curtailed, our revenues
will decrease materially. Our reliance on our operations in
Florida could cause our revenues and profitability to change
suddenly and unexpectedly, depending on legislative actions,
economic conditions and similar factors. In addition, our
significant market share in Florida may make it more difficult
for us to expand our membership in Florida. For example, Florida
has recently frozen enrollment for its Healthy Kids SCHIP
program. Our inability to continue to operate in Florida, or a
decrease in the revenues of our Florida operations, would harm
our business.
Difficulties in executing acquisitions could
adversely affect our business.
Although we cannot predict with certainty our
rate of growth as a result of acquisitions, we believe that
acquisitions of contract rights and other health plans will be
important to our growth strategy. Many of the other potential
purchasers of these assets have greater financial resources than
we have. Moreover, some sellers may insist on selling assets
that we do not want, such as commercial lines of business, or
transferring their liabilities to us as part of the sale of
their companies or assets. Even if we identify suitable
acquisition targets, we may be unable to complete acquisitions
or obtain the necessary financing for these acquisitions on
terms favorable to us, or at all. Further, to the extent we
complete acquisitions, we may be unable to realize the
anticipated benefits from acquisitions because of operational
factors or difficulties in integrating the acquisitions with our
existing businesses. This may include the integration of:
•
additional employees, whom we refer to as
    associates, who are not familiar with our operations;
•
new provider networks, which may operate on terms
    different from our existing networks;
•
additional members, who may decide to transfer to
    other healthcare providers or health plans;
•
disparate information, claims processing and
    record keeping systems; and
8
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•
accounting policies, including those which
    require a high degree of judgment or complex estimation
    processes, such as estimates of medical claims incurred but not
    reported, accounting for goodwill, intangible assets,
    stock-based compensation and income tax matters.
In addition, we are generally required to obtain
regulatory approval from one or more state agencies when making
acquisitions, which may require a public hearing. This is the
case regardless of whether we already operate a plan in the
state in which the business to be acquired is located. We may be
unable to comply with these regulatory requirements for an
acquisition in a timely manner, or at all. For all of the above
reasons, we may not be able to successfully implement our
acquisition strategy.
We may be unable to expand into some
geographic areas without incurring significant additional
costs.
We are likely to incur additional costs if we
enter states or counties where we do not currently operate. Our
rate of expansion into other geographic areas may also be
inhibited by:
•
the time and costs associated with obtaining a
    health maintenance organization license to operate in the new
    area or the expansion of our licensed service area, if necessary;
•
our inability to develop a network of physicians,
    hospitals and other healthcare providers that meets our
    requirements and those of government regulators;
•
competition, which increases the costs of
    recruiting members;
•
the cost of providing healthcare services in
    those areas; and
•
demographics and population density.
Accordingly, we may be unsuccessful in entering
other metropolitan areas, counties or states.
Our limited operating history as a stand-alone
entity makes evaluating our business and future prospects
difficult.
We were formed in May 2002 to acquire the
WellCare group of companies. Until the closing of that
acquisition in July 2002, the companies that comprise our
Florida operations had operated as a closely-held business, and
our New York and Connecticut businesses had operated as
subsidiaries of a public company, the majority stockholders of
which were the owners of the Florida operations. Although the
majority of our associates were employed by our predecessor
companies, almost all of the senior members of our current
management have joined us recently, including Todd S. Farha, our
President and Chief Executive Officer. Our limited operating
history under current management may not be adequate to enable
you to fully assess our future prospects.
A failure to estimate incurred but not
reported medical benefits expense accurately will affect our
profitability.
Our medical benefits expense includes estimates
of medical claims incurred but not reported, or IBNR. We,
together with our internal and consulting actuaries, estimate
our medical cost liabilities using actuarial methods based on
historical data adjusted for payment patterns, cost trends,
product mix, seasonality, utilization of healthcare services and
other relevant factors. Actual conditions, however, could differ
from those assumed in the estimation process. Due to the
uncertainties associated with the factors used in these
assumptions, materially different amounts could be reported in
our financial statements for a particular period under different
conditions or using different assumptions. Adjustments, if
necessary, are made to medical benefits expense when the
criteria used to determine IBNR change and when actual claim
costs are ultimately determined. Although our estimates of IBNR
have been adequate since our acquisition of the WellCare
businesses, they may be inadequate in the future, which would
adversely affect our results of operations. Further, our
inability to estimate IBNR accurately may also affect our
ability to take timely corrective actions, further exacerbating
the extent of any adverse effect on our results.
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The new Medicare legislation makes changes to
the Medicare program that could reduce our profitability and
creates uncertainties that could adversely affect our
business.
On December 8, 2003, President Bush signed
the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, or MMA. MMA makes significant changes to the
Medicare program. We believe that many of these changes will
benefit the managed care sector. However, the new rate
methodologies, expanded benefits and shifts in certain coverage
responsibilities pursuant to MMA create uncertainties, including
the following:
•
MMA increases reimbursement for Medicare+Choice
    plans, which will be renamed "Medicare Advantage" in
    2006 under MMA. Higher reimbursement rates may increase the
    number of plans that participate in the program, creating new
    competition that could adversely affect our profitability.
•
Beginning in 2006, a new regional Medicare
    Preferred Provider Organization, or Medicare PPO, program will
    be implemented pursuant to MMA. Medicare PPOs would allow their
    members more flexibility to select physicians than the current
    plans, which are HMOs that require members to coordinate with a
    primary care physician. MMA requires the Secretary of the
    Department of Health and Human Services, or HHS, to create
    between 10 and 50 regions for the Medicare PPO program,
    with each region covering at least one state and some possibly
    crossing state lines. The regional Medicare PPO program will
    compete with local Medicare Advantage HMO programs and may
    affect our Medicare Advantage HMO business. We do not know
    whether the regions will be constructed in a way that will
    create obstacles or opportunities for us to participate in the
    program. We also do not know how the creation of the regional
    Medicare PPO program, which is intended to provide further
    choice to beneficiaries, will affect our Medicare Advantage HMO
    business.
•
In order to participate in the regional Medicare
    Advantage PPO program under MMA, a plan must meet certain
    requirements, including having an adequate provider network
    throughout the region. MMA provides some incentives for certain
    hospitals to join the network. However, we do not know whether
    we will be able to contract with a sufficient number of
    providers throughout our regions to satisfy the network adequacy
    requirements under MMA that would enable us to participate in
    the regional product.
•
Beginning in 2006, the payments for the local
    Medicare Advantage HMO and regional Medicare Advantage PPO
    programs will be based on a competitive bidding process that may
    decrease the amount of premiums paid to us or cause us to
    increase the benefits we offer.
•
Under MMA, beginning in 2006, organizations that
    offer Medicare Advantage plans of the type we currently offer
    will be required to offer prescription drug benefits. It is not
    known at this time whether the governmental payments will be
    adequate to cover the costs for this benefit. In addition,
    Medicare Advantage enrollees will be required to obtain their
    drug benefit from their Medicare Advantage plan. Enrollees may
    prefer a stand- alone drug plan and may disenroll from the
    Medicare Advantage plan altogether in order to participate in
    another drug plan. Accordingly, the new prescription drug
    benefit could reduce our profitability and membership enrollment
    following its implementation in 2006.
•
Some enrollees may have chosen our
    Medicare+Choice plan in the past rather than a Medicare
    fee-for-service program because of the added drug benefit that
    we offer with our Medicare+Choice plan. Following the
    implementation of the new prescription drug benefit, Medicare
    beneficiaries will have the opportunity to obtain a drug benefit
    without joining a managed care plan. As a result, our membership
    enrollment may decline.
•
Beginning in 2006, individuals eligible for both
    Medicare and Medicaid, or dual-eligibles, will generally receive
    their drug coverage from Medicare rather than from Medicaid.
    Because Medicaid will no longer be directly responsible for most
    drug coverage for dual-eligibles, Medicaid payments to plans
    will be reduced. We cannot predict whether this change in
    Medicaid payments will have an adverse effect on our operating
    results.
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Changes, other than MMA, in federal funding
mechanisms also could reduce our profitability.
In addition to changes pursuant to MMA, other
changes in federal funding mechanisms could reduce our
profitability. As part of the current administration's 2004
budget submission to Congress, HHS announced principles for
Medicaid reform. HHS's proposal would establish two capped
allotments for states combining both Medicaid and SCHIP funds,
one for acute care and one for long-term care. Under this
proposal, all mandatory populations and benefits would continue
to be covered as required under current law. States, however,
would be given flexibility for optional populations and
benefits. The proposal would be revenue-neutral over a 10-year
period, although states would receive an additional
$12.7 billion over the first seven years, with
corresponding funding reductions in years eight through 10.
The proposal was meant to provide increased
flexibility to the states in managing their Medicaid and SCHIP
programs, in particular in the design of benefit packages for
optional populations. Governors working in concert with HHS were
unable to reach agreement on these principles and the proposal
was set aside for the time being. It is uncertain whether this
proposal, or a variation thereof, will eventually be enacted.
Congress instead passed a $20.0 billion fiscal relief program
for the states, which included a $10.0 billion increase in
the share of medical assistance expenditures provided to each
state's Medicaid program, known as the Federal Medical
Assistance Percentage, or FMAP.
If HHS's proposal is ultimately adopted and
the number of persons enrolled in Medicaid or SCHIP decreases in
the states in which we operate or the scope of benefits provided
is reduced, or expanded without a corresponding increase in
payments made to us, our growth, operations and financial
performance could be adversely affected.
We are required to comply with laws governing
the transmission, security and privacy of health information,
and we have not yet determined what our total compliance costs
will be.
The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, requires us to comply with
standards for the exchange of health information within our
company and with third parties, such as healthcare providers,
business associates, and our members. These include standards
for common healthcare transactions, such as claims information,
plan eligibility, payment information and the use of electronic
signatures, unique identifiers for providers, employers, health
plans and individuals, security, privacy and enforcement.
HHS finalized the transaction standards on
August 17, 2000. While we initially were required to comply
with them by October 16, 2002, Congress passed legislation
in December 2001 that delayed the compliance date until
October 16, 2003, but only for entities that submitted a
compliance plan to HHS by the original implementation deadline,
which we did. On February 20, 2003, HHS published certain
modifications to the final transaction standards, but these
changes did not affect the October 16, 2003 compliance
deadline. HHS issued the privacy standards on December 28,
2000, and after certain delays, they became effective on
April 14, 2001, with a compliance date of April 14,
2003. Sanctions for failing to comply with the HIPAA health
information practices provisions include criminal penalties and
civil sanctions. The security standards became effective
April 21, 2003, with a compliance date of April 21,
2005 for most covered entities.
HIPAA also provides that to the extent that state
laws impose stricter privacy standards than HIPAA privacy
regulations or to the extent that a state seeks and receives an
exception from HHS regarding certain state laws, such state
standards and laws will not be preempted. The states'
ability to promulgate stricter rules, and uncertainty regarding
many aspects of the regulations, make compliance with the
relatively new regulatory landscape difficult and more expensive.
We believe we have achieved substantial
compliance with HIPAA by the applicable deadlines. However,
given its complexity, the recent adoption of several final
regulations, the possibility that the regulations may change and
may be subject to changing and perhaps conflicting
interpretation, our ability to comply with all of the HIPAA
requirements is uncertain. Moreover, due to the evolving nature
of the HIPAA requirements we have not yet determined what our
total compliance costs will be.
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Future changes in healthcare law may reduce
our profitability.
Healthcare laws and regulations, and their
interpretations, are subject to frequent change. Changes in
existing laws or regulations, or their interpretations, or the
enactment of new laws or regulations could reduce our
profitability by:
•
imposing additional capital requirements;
•
increasing our administrative and other costs;
•
increasing mandated benefits;
•
forcing us to restructure our relationships with
    providers; or
•
requiring us to implement additional or different
    programs and systems.
Changes in state law also may adversely affect
our profitability. Laws relating to managed care consumer
protection standards, including increased plan information
disclosure, limits to premium increases, expedited appeals and
grievance procedures, third party review of certain medical
decisions, health plan liability, access to specialists, clean
claim payment timing, physician collective bargaining rights and
confidentiality of medical records either have been enacted or
continue to be under discussion. New healthcare reform
legislation may require us to change the way we operate our
business, which may be costly. Further, although we have
exercised care in structuring our operations to attempt to
comply in all material respects with the laws and regulations
applicable to us, government officials charged with
responsibility for enforcing such laws may assert that we or
certain transactions in which we are involved are in violation
of these laws, or courts may ultimately interpret such laws in a
manner inconsistent with our interpretation. Therefore, it is
possible that future legislation and regulation and the
interpretation of laws and regulations could have a material
adverse effect on our ability to operate under the Medicaid,
Medicare and SCHIP programs and to continue to serve our members
and attract new members.
The statutory framework for our regulated
subsidiaries' statutory net worth requirements may change
over time. For instance, New York is considering a 150% increase
in reserve requirements and the states in which we operate may
elect to adopt risk-based capital requirements, or RBC
requirements, based on guidelines adopted by the National
Association of Insurance Commissioners, or NAIC. Our
subsidiaries are also subject to their state regulators'
general oversight powers. Regardless of whether they adopt the
RBC requirements of the NAIC, these state regulators can require
our subsidiaries to maintain minimum levels of statutory net
worth in excess of amounts required under the applicable state
laws if they determine that maintaining such additional
statutory net worth is in the best interests of our members. If
our subsidiaries are required to maintain higher levels of
statutory net worth due to the adoption of the RBC requirements
by the states in which we operate, or because state regulators
otherwise deem this to be in the best interests of our members,
this could have an adverse effect on our business.
Restrictions on our ability to market would
adversely affect our revenue.
Although we enroll some of our new members
through auto enrollment programs and voluntary member
enrollment, we rely on our marketing and sales efforts for a
significant portion of our membership growth. All of the states
in which we currently operate permit marketing but impose strict
requirements and limitations as to the types of marketing
activities that are permitted. In Florida and New York, other
plans have been prohibited from engaging in marketing activities
for a period of time after being found to have violated the
state's requirements. While no such action is currently
pending or threatened by the State of Florida against us, from
time to time we have been cited, and in some cases fined, for
alleged marketing violations. Until recently, our New York
Medicare business was prohibited from marketing as a result of
past audits and regulatory deficiencies. If our marketing
efforts were to be prohibited or curtailed, our ability to
increase or sustain membership would be significantly harmed,
which would adversely affect our revenue.
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Past operational deficiencies related to our
New York business may adversely affect our growth in
New York.
We inherited a number of operational deficiencies
when we acquired our New York business, which resulted in a
prohibition on marketing our Medicare program in New York.
Although we have made investments in our New York business to
address these deficiencies and are once again permitted to
market our Medicare health plan in New York, we continue to
experience problems related to our past deficiencies, including
gaps in our provider network. Moreover, members and providers
and potential members and providers may have a negative
perception of our New York health plans as a result of these
prior operational deficiencies. These issues may adversely
affect the growth of our business in New York.
If we are unable to maintain satisfactory
relationships with our providers, our profitability could
decline and our ability to operate in some markets will be
adversely affected.
Our profitability depends, in large part, upon
our ability to enter into cost-effective contracts with
hospitals, physicians and other healthcare providers in
appropriate numbers in our geographic markets and at convenient
locations for our members. In any particular market, however,
providers could refuse to contract, demand higher payments or
take other actions that could result in higher medical benefits
expense. In some markets, certain providers, particularly
hospitals, physician/hospital organizations or multi-specialty
physician groups, may have significant market positions or near
monopolies. If such a provider or any of our other providers
refuse to contract with us, use their market position to
negotiate contracts that might not be cost-effective or
otherwise place us at a competitive disadvantage, those
activities could adversely affect our operating results in that
market area. In the long term, our ability to contract
successfully with a sufficiently large number of providers in a
particular geographic market will affect the relative
attractiveness of our managed care products in that market and
could preclude us from renewing our Medicaid or Medicare
contracts in those markets or from entering into new markets.
Our provider contracts with network primary care
physicians and specialists generally have terms of one year,
with automatic renewal for successive one-year terms. We may
terminate these contracts for cause, based on provider conduct
or other appropriate reasons, subject to laws giving providers
due process rights. The contracts generally may be cancelled by
either party without cause upon 60 or 90 days prior written
notice. Our contracts with hospitals generally have terms of one
to two years, with automatic renewal for successive one-year
terms. We may terminate these contracts for cause, based on
provider misconduct or other appropriate reasons. Our hospital
contracts generally may be cancelled by either party without
cause upon 120 days prior written notice. We may be unable
to continue to renew such contracts or enter into new contracts
enabling us to serve our members profitably. We will be required
to establish acceptable provider networks prior to entering new
markets. Although we have established long-term relationships
with many of our network providers, we may be unable to maintain
those relationships or enter into agreements with providers in
new markets on a timely basis or under favorable terms. If we
are unable to retain our current provider contracts or enter
into new provider contracts timely or on favorable terms, our
profitability could decline.
If a state fails to renew its federal waiver
application for mandated Medicaid enrollment into managed care
or such application is denied, our membership in that state will
likely decrease.
A significant percentage of our Medicaid plan
enrollment results from mandatory Medicaid enrollment in managed
care plans. States may only mandate Medicaid enrollment into
managed care under federal waivers or demonstrations. Waivers
and programs under demonstrations are generally approved for
two-year periods and can be renewed on an ongoing basis if the
state applies and the waiver request is approved or renewed by
CMS. We have no control over this renewal process. If a state in
which we operate does not renew its mandated program or the
federal government denies the state's application for
renewal, our business would suffer as a result of a likely
decrease in membership.
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We rely on the accuracy of eligibility lists
provided by the government. Inaccuracies in those lists would
adversely affect our results of operations.
Premium payments to us are based upon eligibility
lists produced by the government. From time to time, states
require us to reimburse them for premiums paid to us based on an
eligibility list that a state later discovers contains
individuals who are not in fact eligible for any
government-sponsored program or are eligible for a different
premium category or a different program. Alternatively, a state
could fail to pay us for members for whom we are entitled to
payment. Our results of operations would be adversely affected
as a result of such reimbursement to the state if we had made
related payments to providers and were unable to recoup such
payments from the providers.
Our business depends on our information
systems, and our inability to effectively integrate, manage and
keep secure our information systems could disrupt our
operations.
Our business is dependent on effective and secure
information systems that assist us in, among other things,
monitoring utilization and other cost factors, supporting our
healthcare management techniques, processing provider claims and
providing data to our regulators. Our providers also depend upon
our information systems for membership verifications, claims
status and other information. If we experience a reduction in
the performance, reliability or availability of our information
systems, our operations and ability to produce timely and
accurate reports could be adversely affected. In addition, many
of our key software applications are licensed from third
parties. If the owner of the software becomes insolvent or is
otherwise unable to support the software, our operations could
be adversely affected. Our operations could also be adversely
affected if the software owner is unwilling to continue to
support the software or charges materially increased fees for
such support.
We will not have a fully implemented disaster
recovery and business continuity program until the end of 2004.
Events outside our control, including acts of nature, such as
earthquakes, fires or hurricanes, or terrorism, could
significantly impair our information systems and applications.
Our information systems and applications require
continual maintenance, upgrading and enhancement to meet our
operational needs. If we are unable to maintain or expand our
systems, we could suffer from, among other things, operational
disruptions, such as the inability to pay claims or to make
claims payments on a timely basis, loss of members, difficulty
in attracting new members, regulatory problems and increases in
administrative expenses.
Our business requires the secure transmission of
confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of
cryptography or other events or developments could result in
compromises or breaches of our security systems and client data
stored in our information systems. Anyone who circumvents our
security measures could misappropriate our confidential
information or cause interruptions in services or operations.
The Internet is a public network, and data is sent over this
network from many sources. In the past, computer viruses or
software programs that disable or impair computers have been
distributed and have rapidly spread over the Internet. Computer
viruses could be introduced into our systems, or those of our
providers or regulators, which could disrupt our operations, or
make our systems inaccessible to our providers or regulators. We
may be required to expend significant capital and other
resources to protect against the threat of security breaches or
to alleviate problems caused by breaches. Because of the
confidential health information we store and transmit, security
breaches could expose us to a risk of regulatory action,
litigation, possible liability and loss. Our security measures
may be inadequate to prevent security breaches, and our business
operations would be adversely affected by cancellation of
contracts and loss of members if they are not prevented.
We may not have adequate intellectual property
rights in our brand names for our health plans, and we may be
unable to adequately enforce such rights.
Our success depends, in part, upon our ability to
market our health plans under our brand names, including
"WellCare," "HealthEase" and
"Staywell." While we hold federal trademark
registrations for the "WellCare" trademark, we have
not taken enforcement action to prevent infringement of our
federal
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trademark and have not secured registrations of
our other marks. Other businesses may have prior rights in the
brand names that we market under or in similar names, which
could limit or prevent our ability to use these marks, or to
prevent others from using similar marks. If we are unable to
prevent others from using our brand names, or if others prohibit
us from using them, our revenues could be adversely affected.
Even if we are able to protect our intellectual property rights
in such brands, we could incur significant costs in
doing so.
Ineffective management of our growth may
adversely affect our results of operations, financial condition
and business.
Depending on acquisition and other opportunities,
we expect to continue to increase our membership and to expand
into other markets. In 1999, we had total revenue of
approximately $275 million. In 2003, we had total revenue
of more than $1.0 billion. Continued rapid growth could
place a significant strain on our management and on other
resources. Our ability to manage our growth may depend on our
ability to strengthen our management team and attract, train and
retain skilled associates, and our ability to implement and
improve operational, financial and management information
systems on a timely basis. If we are unable to manage our growth
effectively, our financial condition and results of operations
could be materially and adversely affected. In addition, due to
the initial substantial costs related to potential acquisitions,
rapid growth could adversely affect our short-term profitability
and liquidity.
We are subject to competition that may
adversely affect our ability to increase or maintain membership
in the markets we serve.
We operate in a highly competitive environment
and in an industry that is currently subject to significant
changes due to business consolidations, new strategic alliances
and aggressive marketing practices by other managed care
organizations. We compete for members principally on the basis
of size, location and quality of provider network, benefits
provided, quality of service and reputation. A number of these
competitive elements are partially dependent upon and can be
positively affected by financial resources available to a health
plan. Many other organizations with which we compete have
substantially greater financial and other resources than we do.
In addition, changes resulting from MMA may bring additional
competitors into our market area. As a result, we may be unable
to increase or maintain our membership.
Restrictions and covenants in our credit
facility and instruments governing our additional indebtedness
may limit our ability to make certain acquisitions and declare
dividends.
We have a $15 million credit facility that
we plan to use for general corporate purposes and acquisitions.
We also have other indebtedness, including $119.7 million
in debt to the selling stockholders of our Florida operations.
Our credit facility documents and other debt instruments contain
various restrictions and covenants, including prescribed debt
coverage ratios, medical loss ratios, which we refer to as
medical benefits ratios, net worth requirements and acquisition
limitations, that restrict our financial and operating
flexibility, including our ability to make certain acquisitions
above specified values and declare dividends without lender
approval.
Our failure to comply with covenants in our
debt instruments could result in our indebtedness being
immediately due and payable and the loss of our
assets.
As of December 31, 2003, we had total
consolidated long-term debt of approximately
$135.8 million, including $119.7 million owed to the
selling stockholders of our Florida operations. Our indebtedness
to these shareholders is secured by a pledge of a portion of the
outstanding capital stock of our subsidiary, WellCare Health
Plans, Inc., which is the parent corporation of all of our
operating subsidiaries. The percentage of the total outstanding
capital stock of this subsidiary subject to this pledge is to
decrease as the indebtedness is paid off, but will not be
reduced below 51% until the debt is paid in full. Our credit
facility is similarly secured by a pledge of stock of our
operating subsidiaries. If we fail to pay any of our
indebtedness when due, or if we breach any of the other
covenants in the instruments governing our indebtedness, one or
more events of default, including cross-defaults among multiple
portions of our indebtedness, could result. These events of
default could permit our creditors to declare all amounts owing
to be immediately due and payable. If we were
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unable to repay indebtedness owed to our secured
creditors, they could proceed against the collateral securing
that indebtedness.
We are dependent on our executive officers and
other key associates.
Our operations are highly dependent on the
efforts of our President and Chief Executive Officer and our
other senior executives. Although some of our executives have
entered into employment agreements with us, these agreements may
not provide sufficient incentives for those executives to
continue their employment with us. While we believe that we
could find replacements, the loss of their leadership, knowledge
and experience could adversely affect our operations. Replacing
many of our executive officers might be difficult or take an
extended period of time because a limited number of individuals
in the managed care industry have the breadth and depth of
skills and experience necessary to operate and expand
successfully a business such as ours. Our success is also
dependent on our ability to hire and retain qualified
management, technical and medical personnel. We may be
unsuccessful in recruiting and retaining such personnel, which
could adversely affect our operations.
Claims relating to medical malpractice and
other litigation could cause us to incur significant
expenses.
Our providers involved in medical care decisions
may be exposed to the risk of medical malpractice claims. A
small percentage of these providers do not have malpractice
insurance. Although our network providers are independent
contractors, claimants sometimes allege that a managed care
organization such as us should be held responsible for alleged
provider malpractice, and some courts have permitted that theory
of liability; however, the Florida legislature recently enacted
legislation that has partially limited liability of managed care
organizations for provider malpractice. In addition, managed
care organizations may be sued directly for alleged negligence,
such as in connection with the credentialing of network
providers or for improper denials or delay of care. In addition,
Congress and several states are considering legislation that
would expressly permit managed care organizations to be held
liable for negligent treatment decisions or benefits coverage
determinations.
We maintain errors and omissions insurance and
other insurance coverage that we believe is adequate based on
industry standards. However, potential liabilities may not be
covered by insurance, our insurers may dispute coverage, or may
be unable to meet their obligations, or the amount of our
insurance coverage may be inadequate. We cannot assure you that
we will be able to obtain insurance coverage in the future, or
that insurance will continue to be available on a cost-effective
basis, if at all. Moreover, even if claims brought against us
are unsuccessful or without merit, we would have to defend
ourselves against such claims. The defense of any such actions
may be time-consuming and costly, and may distract our
management's attention. As a result, we may incur
significant expenses and may be unable to effectively operate
our business.
Our results of operations could be adversely
affected by downturns in general economic conditions.
The number of persons eligible to receive
Medicaid benefits has historically increased more rapidly during
periods of rising unemployment, corresponding to less favorable
general economic conditions. However, during such economic
downturns, state and federal budgets often decrease, causing
states or the federal government to attempt to cut healthcare
programs, benefits and rates. As a result of state budget
shortfalls, all of the states in which we currently operate are
considering future changes in Medicaid reimbursement rates or
payments. If federal or state funding is decreased, our results
of operations could be adversely affected.
Growth in the number of Medicaid eligibles may
be counter-cyclical, which could adversely affect our operating
results when general economic conditions are
improving.
The number of persons eligible to receive
Medicaid benefits may grow more slowly or even decline if
economic conditions improve. Therefore, improvements in general
economic conditions may cause our membership levels to decrease,
thereby causing our operating results to suffer, which could
lead to decreases in our stock price during periods in which
stock prices in general are increasing.
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Negative publicity regarding the managed care
industry may harm our business and operating results.
In the past, the managed care industry has
received negative publicity. This publicity has led to increased
legislation, regulation, review of industry practices and
private litigation in the commercial sector. These factors may
adversely affect our ability to market our services, require us
to change our services and increase the regulatory burdens under
which we operate, further increasing the costs of doing business
and adversely affecting our operating results.
If state regulators do not approve payments of
dividends and distributions by our affiliates to us, it may
adversely affect our business strategy.
We operate principally through our health plan
subsidiaries. These subsidiaries are subject to laws and
regulations that limit either the amount of dividends and
distributions that they can pay to us or the amount of fees that
may be paid to affiliates of our health plan subsidiaries
without prior approval of, or notification to, state regulators.
In addition, our New York and Connecticut subsidiaries may not
pay any dividends until September 2004 without regulatory
approval. The discretion of the state regulators, if any, in
approving or disapproving a dividend is not clearly defined.
Health plans that declare non-extraordinary dividends must
usually provide notice to the regulators in advance of the
intended distribution date of a non-extraordinary dividend. The
aggregate amounts our health plan subsidiaries could have paid
us at December 31, 2001, 2002 and 2003 without approval of
the regulatory authorities were $0, $500,000 and $500,000,
respectively, assuming no dividends had been paid during the
respective calendar years. If the regulators were to deny or
significantly restrict our subsidiaries' requests to pay
dividends to us or to pay fees to the affiliates of our health
plan subsidiaries, the funds available to our company as a whole
would be limited, which could harm our ability to implement our
business strategy. For example, we could be hindered in our
ability to make debt service payments on amounts drawn from our
credit facility.
Recently enacted changes in securities laws
and regulations are likely to increase our costs.
The Sarbanes-Oxley Act of 2002 that became law in
July 2002, as well as new rules subsequently implemented by the
Securities and Exchange Commission, have required changes in
some of our corporate governance practices. In addition, the New
York Stock Exchange has recently adopted revisions to its
requirements for listed companies. We expect these new rules,
and interpretations of these rules, and regulations to increase
our legal and financial compliance costs, and to make some
activities more difficult, time consuming and/or costly. We also
expect these new rules and regulations to make it more difficult
and expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage. These new
rules and regulations could also make it more difficult for us
to attract and retain qualified members of our board of
directors, particularly to serve on our audit committee, and
executive officers.
Risks Related to this Offering
There has been no public market, and it is
possible that no trading market will develop or be maintained,
for our common stock and you may not be able to resell shares of
our common stock for an amount equal to or more than your
purchase price.
Prior to this offering there has not been a
public market for our common stock. We cannot predict the extent
to which a trading market will develop, how liquid that market
might become or whether it will be maintained. The initial
public offering price will be determined by negotiation between
the representatives of the underwriters and us and may not be
indicative of prices that will prevail in the trading market. If
an active trading market fails to develop or be maintained, you
may be unable to sell the shares of common stock purchased in
this offering at an acceptable price or at all.
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Volatility of our stock price could adversely
affect stockholders.
The market price of our common stock could
fluctuate significantly as a result of:
•
state and federal budget decreases;
•
adverse publicity regarding health maintenance
    organizations and other managed care organizations;
•
government action regarding eligibility;
•
changes in government payment levels;
•
changes in state mandatory programs;
•
changes in expectations of our future financial
    performance or changes in financial estimates, if any, of public
    market analysts;
•
announcements relating to our business or the
    business of our competitors;
•
conditions generally affecting the managed care
    industry or our provider networks;
•
the success of our operating or acquisition
    strategy;
•
the operating and stock price performance of
    other comparable companies;
•
the termination of any of our contracts;
•
regulatory or legislative changes; and
•
general economic conditions, including inflation
    and unemployment rates.
Investors may not be able to resell their shares
of our common stock following periods of volatility because of
the market's adverse reaction to that volatility. Our stock
may not trade at the same levels as the stock of other
healthcare companies, and the market in general may not sustain
its current prices.
You will experience immediate and significant
dilution in the book value per share and will experience further
dilution with the future exercise of stock options.
If you purchase common stock in this offering,
you will incur immediate dilution, which means that:
•
you will pay a price per share that exceeds by
    $          the
    per share net tangible book value of our assets immediately
    following the offering; and
•
the investors in the offering will have
    contributed           percent
    of the total amount to fund us (before deducting the estimated
    underwriting discounts and commissions and offering expenses)
    but will own
    only                     percent
    of our outstanding shares of our common stock.
As
of                     ,
2004, we had outstanding options to
purchase                     shares
of our common stock, of
which                     were
vested, at a weighted average price of
$           per
share. From time to time, we may issue additional options to
associates, non-employee directors and consultants pursuant to
our equity incentive plans. These options generally vest
commencing one year from the date of grant and continue vesting
over a three-year period. As these options vest, you will
experience further dilution as these stock options are exercised
by their holders.
Future sales, or the availability for sale, of
our common stock may cause our stock price to decline.
In connection with this offering, we, along with
our officers, directors, stockholders and option holders, will
have agreed prior to the commencement of this offering, subject
to limited exceptions, not to sell or transfer any shares of
common stock for 180 days after the date of this prospectus
without the underwriters' consent. However, the
underwriters may release these shares from these restrictions at
any time. In evaluating whether to grant such a request, the
underwriters may consider a number of factors with a view toward
maintaining an orderly market for, and minimizing volatility in
the market price of, our common stock. These factors include,
among others, the number of shares involved, recent trading
volume and prices of the stock,
18
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the length of time before the lock-up expires and
the reasons for, and the timing of, the request. We cannot
predict what effect, if any, market sales of shares held by any
stockholder or the availability of these shares for future sale
will have on the market price of our common stock.
Based on shares outstanding as
of                     ,
2004, a total
of                     shares
of common stock may be sold in the public market by existing
stockholders 181 days after the date of this prospectus,
subject to applicable volume and other limitations imposed under
federal securities laws. Sales of substantial amounts of our
common stock in the public market after the completion of this
offering, or the perception that such sales could occur, could
adversely affect the market price of our common stock and could
materially impair our future ability to raise capital through
offerings of our common stock. See "Shares Eligible for
Future Sale" below for a more detailed description of the
restrictions on selling shares of our common stock after this
offering.
We have broad discretion to spend the net
proceeds of this offering and may spend the proceeds in ways
with which you may not agree.
Our business plan is general in nature and is
subject to change based upon changing conditions and
opportunities. Our management will retain broad discretion to
expend a significant portion of the net proceeds of this
offering. Because of the number and variability of factors that
will determine the use of these proceeds, our actual allocation
of the proceeds may vary substantially from our current
intentions. If management fails to use the proceeds effectively,
our operating results could suffer. See "Use of
Proceeds" for a more detailed description of how management
intends to apply the proceeds from this offering.
The concentration of our capital stock
ownership upon the completion of this offering will likely limit
your ability to influence corporate matters.
Soros Private Equity Investors LP, or SPEI,
owned           %
of our outstanding capital stock as
of                     ,
2004. Upon the completion of this offering, SPEI will
beneficially
own           %
of outstanding capital stock,
or           %
if the underwriters exercise their over-allotment option in
full. In addition, we anticipate that our executive officers and
directors will together beneficially own
approximately           %
of our capital stock. One of the members of our board of
directors is associated with SPEI. As a result, this particular
director may have the ability to influence our management and
affairs and determine the outcome of matters submitted to
stockholders for approval, including the election and removal of
directors, amendments to our charter, approval of any
equity-based employee compensation plan and any merger,
consolidation or sale of all or substantially all of our assets.
It may be difficult for a third party to
acquire us, which could inhibit stockholders from realizing a
premium on their stock price.
After completion of this offering, SPEI will
beneficially
own                      shares
of our common stock,
representing           %
of the voting power of our common stock. For as long as SPEI
owns a majority of our common stock, a takeover of our company
will require SPEI's approval.
In addition, provisions of our certificate of
incorporation, bylaws and provisions of applicable Delaware law
may discourage, delay or prevent a merger or other change in
control that a stockholder may consider favorable.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking
statements that address, among other things, market acceptance
of our products and services, expansion into new targeted
markets, product development, sales and marketing strategies,
development and maintenance of strategic alliances,
technological advancement, use of proceeds, projected capital
expenditures, liquidity and availability of additional funding
sources. These statements may be found in the sections of this
prospectus entitled "Prospectus Summary," "Risk
Factors," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Our
Business" and in this prospectus generally. In some cases,
you can identify forward-looking statements by terminology such
as "may," "will," "should,"
"expects," "plans," "anticipates,"
"believes," "estimates,"
"predicts," "potential,"
"continues" or the negative of such terms or other
comparable terminology. Investors are cautioned that matters
subject to forward-looking statements involve risks and
uncertainties, including economic, regulatory, competitive and
other factors that may affect our business. We undertake no
obligation beyond that required by law to update publicly any
forward-looking statements for any reason, even if new
information becomes available or other events occur in the
future.
Actual results may differ from projections or
estimates due to a variety of important factors. The expiration,
cancellation or suspension of our HMO contracts by the federal
or state governments could significantly impair our results of
operations. In addition, our results of operations and
projections of future earnings depend in large part on
accurately predicting and effectively managing health benefits
and other operating expenses. A variety of factors, including
competition, changes in healthcare practices, changes in federal
or state laws and regulations or their interpretations,
inflation, provider contract changes, changes in or terminations
of our contracts with government agencies, new technologies,
government-imposed surcharges, taxes or assessments, reduction
in provider payments by governmental payors, major epidemics,
disasters and numerous other factors affecting the delivery and
cost of healthcare, such as major healthcare providers'
inability to maintain their operations, may in the future affect
our ability to control our medical costs and other operating
expenses. Governmental action or business conditions could
result in premium revenues not increasing to offset any increase
in medical costs and other operating expenses. Once set,
premiums are generally fixed for one-year periods and,
accordingly, unanticipated costs during such periods cannot be
recovered through higher premiums. Furthermore, if we are unable
to accurately estimate incurred but not reported medical costs,
our profitability may be affected.
Due to these factors and risks, no assurance can
be given with respect to our future premium levels or our
ability to control our future medical costs.
From time to time, legislative and regulatory
proposals have been made at the federal and state government
levels related to the healthcare system, including but not
limited to limitations on managed care organizations (including
benefit mandates) and reform of the Medicaid and Medicare
programs. Such legislative and regulatory action could have the
effect of reducing the premiums paid to us by governmental
programs or increasing our medical costs. We are unable to
predict the specific content of any future legislation, action
or regulation that may be enacted or when any such future
legislation or regulation will be adopted. Therefore, we cannot
predict accurately the effect of such future legislation, action
or regulation on our business.
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USE OF PROCEEDS
We expect to receive approximately
$          million
in net proceeds from the sale
of                      shares
of common stock in this offering, assuming that the initial
public offering price is
$           per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. We
expect to receive approximately
$          million
if the underwriters' over-allotment option is exercised in
full. We will not receive any of the proceeds from the sale of
shares by the selling stockholder.
We intend to use the net proceeds of this
offering for the repayment of indebtedness, working capital and
other general purposes, which may include acquisitions.
We intend to repay a portion of our outstanding
indebtedness with proceeds from this offering. This indebtedness:
•
matures in September 2006;
•
bears interest at the rate of 5 1/4% per
    annum; and
•
was used to finance a portion of the purchase
    price of our Florida operations.
The amounts that we actually expend for working
capital purposes will vary significantly depending on a number
of factors, including revenue growth, if any, and the amount of
cash we generate from operations. As a result, we will retain
broad discretion in the allocation of the net proceeds of this
offering. Pending the uses described above, we will invest the
net proceeds in short-term, interest-bearing, investment-grade
securities.
DIVIDEND POLICY
We have never paid cash dividends on our common
stock. We currently intend to retain any future earnings to fund
the development and growth of our business, and we do not
anticipate paying any cash dividends in the future.
Our ability to pay dividends is dependent on our
receipt of cash dividends from our subsidiaries. Laws of the
states in which we operate or may operate, as well as
requirements of the government-sponsored health programs in
which we participate, limit the ability of our subsidiaries to
pay dividends to us. In addition, the terms of our credit
facility and other indebtedness limit our ability to pay
dividends. Any future determination to pay dividends will be at
the discretion of our board of directors and will depend upon,
among other factors, our results of operations, financial
condition, capital requirements and contractual restrictions.
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REORGANIZATION AS A CORPORATION
WellCare Group, Inc., a Delaware corporation, the
shares of which are being sold to the public in this offering,
will be the successor to WellCare Holdings, LLC, our current
holding company, following a reorganization that will take place
immediately prior to the closing of this offering. In
conjunction with the reorganization, our name will be changed to
WellCare Health Plans, Inc. The reorganization will not affect
our operations, which we will continue to conduct through our
operating subsidiaries.
The reorganization will be effected through the
merger of WellCare Holdings, LLC with and into WellCare Group,
Inc., a wholly-owned subsidiary of WellCare Holdings, LLC. Each
outstanding limited liability company unit of WellCare Holdings,
LLC will be converted into shares of common stock according to
the relative rights and preferences of such units and the
initial public offering price of the common stock offered hereby.
Prior to the reorganization, WellCare Holdings,
LLC had three outstanding classes of common units, designated as
Class A Common Units, Class B Common Units and
Class C Common Units. These outstanding classes of common
units generally differ as to their relative priority with
respect to distributions and as to voting rights. Assuming an
initial public offering price of
$           per
share, holders of common units will receive an aggregate
of                     shares
of common stock in connection with the merger.
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CAPITALIZATION
The following table sets forth our capitalization
as of December 31, 2003. We present capitalization:
•
On an actual basis;
•
On a pro forma basis, to reflect our
    reorganization as a corporation and the resultant conversion of
    all outstanding limited liability company units into shares of
    common stock, immediately prior to the closing of this offering;
    and
•
On a pro forma, as adjusted basis to give effect
    to our receipt of the estimated net proceeds from the sale
    of                      shares
    of common stock offered in the offering at an assumed initial
    public offering price of
    $           per
    share, after deducting underwriting discounts and commissions
    and estimated offering expenses and the application of the net
    proceeds as described under "Use of Proceeds."
December 31, 2003
Pro Forma,
Actual
Pro Forma
As Adjusted
(in thousands,
except per unit/share data)
Cash and cash equivalents
$
237,321
$
$
Capitalization:
Debt
$
135,755
$
$
Members'/Stockholders' equity:
Class A Common Units, 23,507,839 units
    issued and outstanding, actual; no units issued and outstanding,
    pro forma or pro forma, as adjusted
—
—
—
Class B Common Units, no units issued and
    outstanding, actual; no units issued and outstanding, pro forma
    or pro forma, as adjusted
—
Class C Common Units, 4,842,508 units issued
    and outstanding, actual; no units issued and outstanding, pro
    forma or pro forma, as adjusted
—
Common stock, $0.01 par value, no shares
    authorized, issued and outstanding,
    actual;            shares
    authorized, pro forma and pro forma, as
    adjusted;            shares
    issued and outstanding, pro
    forma;            shares
    issued and outstanding, pro forma, as adjusted
—
Preferred stock, $0.01 par value, no shares
    authorized, issued and outstanding,
    actual;            shares
    authorized, pro forma and pro forma, as adjusted; no shares
    issued and outstanding, pro forma or pro forma, as adjusted
—
Additional paid-in capital
71,382
Retained earnings
28,194
Accumulated other comprehensive income
1
Total members'/stockholders' equity
99,577
Total capitalization
$
235,332
$
$
Our capitalization information represented above
excludes:
•
shares of common stock available for issuance
    pursuant to our incentive equity plans, of
    which                      shares
    are subject to outstanding options as
    of                     ,
    2004; and
•
shares of common stock reserved for future
    issuances under our employee stock purchase plan.
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DILUTION
If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
public offering price per share of our common stock and the as
adjusted net tangible book value per share of common stock after
giving effect to this offering.
As of December 31, 2003 and after giving
effect to our reorganization as a corporation and the resultant
conversion of all outstanding limited liability company units
for shares of common stock immediately prior to the closing of
this offering, our pro forma net tangible book value was
approximately
$           million
or
$           per
share of common stock. "Net tangible book value" per
share represents the amount of our total tangible assets reduced
by the amount of our total liabilities, divided by the number of
shares of common stock outstanding. As of December 31,
2003, our pro forma net tangible book value, as adjusted for the
sale
of                      shares
of our common stock, based on an assumed initial public offering
price of
$           per
share and after deducting the underwriting discounts and
commissions and other estimated offering expenses, would have
been approximately
$           per
share. This represents an immediate increase of
$           per
share to existing stockholders and an immediate dilution of
$           per
share to new investors. The following table illustrates this per
share dilution:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share at
    December 31, 2003
$
Increase per share attributable to new investors
$
Pro forma net tangible book value per share after
    the offering
$
Dilution per share to new investors
$
The following summarizes, on a pro forma, as
adjusted basis, as of December 31, 2003, the differences
between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors
with respect to the number of shares of common stock purchased
from us based on an assumed initial public offering price of
$           per
share.
Shares Purchased
Pro Forma
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
New investors
Total
The preceding table excludes:
•
shares of common stock available for issuance
    pursuant to our incentive equity plans, of
    which                      shares
    are subject to outstanding options as
    of                     ,
    2004; and
•
shares of common stock reserved for future
    issuances under our employee stock purchase plan.
To the extent all of these options had been
exercised as of December 31, 2003, net tangible book value
per share after this offering would be
$          and
total dilution per share to new investors would be
$          .
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Table of Contents
SELECTED CONSOLIDATED AND COMBINED FINANCIAL
DATA
You
should read the following selected financial data in conjunction
with our financial statements and related notes and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in
this prospectus. We derived the combined statements of
operations data for the years ended December 31, 1999 and
2000 and the balance sheet data as of December 31, 1999 and
2000 from the unaudited financial statements of our Predecessor.
We derived the combined statements of operations for the year
ended December 31, 2001, and the seven-month period ended
July 31, 2002, and the balance sheet data as of
December 31, 2001 from the audited financial statements of
our Predecessor. We derived the consolidated statements of
operations data for the five-month period ended
December 31, 2002 and the year ended December 31,
2003, and the balance sheet data as of December 31, 2002
and 2003, from our audited consolidated financial statements.
Our
acquisition of the WellCare group of companies as of
July 31, 2002 was accounted for using the purchase method
of accounting, as described in Note 2 to our consolidated and
combined financial statements included elsewhere in this
prospectus. Accordingly, the combined results of operations and
financial condition at dates prior to July 31, 2002 are not
comparable to the consolidated results of operations and
financial condition after that date.
Predecessor
Successor
Seven-Month
Five-Month
Year Ended December 31,
Period Ended
Period Ended
Year Ended
July 31,
December 31,
December 31,
1999
2000
2001
2002
2002
2003
(in thousands, except per unit/share data)
Consolidated and Combined Statements of Income
    (Loss):
Revenues:
Premium:
Medicaid
$
152,543
$
272,497
$
451,210
$
329,164
$
267,911
$
740,078
Medicare
27,212
72,992
233,626
170,073
120,814
288,330
Other
(1)
84,299
80,430
55,027
17,976
9,928
14,444
Total premium
264,054
425,919
739,863
517,213
398,653
1,042,852
Investment income
10,592
4,141
8,949
2,460
3,038
2,561
Other
—
1,407
1,472
359
114
569
Total revenues
274,646
431,467
750,284
520,032
401,805
1,045,982
Expenses:
Medical benefits
Medicaid
115,046
202,876
364,293
274,672
222,007
609,233
Medicare
25,727
78,542
219,505
145,768
107,384
238,933
Other
(2)
90,138
86,818
53,708
14,484
12,372
12,887
Total medical benefits
230,911
368,236
637,506
434,924
341,763
861,053
Selling, general and administrative
35,201
70,050
86,279
54,492
45,384
126,106
Depreciation and amortization
2,171
1,913
2,234
1,239
3,734
8,159
Interest
6,126
1,785
2,860
1,446
1,462
10,172
Total expenses
274,409
441,984
728,879
492,101
392,343
1,005,490
Income (loss) before income
    taxes
237
(10,517
)
21,405
27,931
9,462
40,492
Income tax expense
(3)
—
—
—
—
4,805
16,955
Net income (loss)
$
237
$
(10,517
)
$
21,405
$
27,931
$
4,657
$
23,537
Net income attributable per common
    unit:
Net income attributable per unit — basic
$
0.09
$
0.66
Net income attributable per unit —
    diluted
$
0.08
$
0.60
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Predecessor
Successor
Seven-Month
Five-Month
Year Ended December 31,
Period Ended
Period Ended
Year Ended
July 31,
December 31,
December 31,
1999
2000
2001
2002
2002
2003
(in thousands, except per unit/share data)
Pro forma net income per common
    share:
Basic
Diluted
Average common units outstanding:
Basic
Diluted
Pro forma common shares outstanding:
Basic
Diluted
As of December 31,
1999
2000
2001
2002
2003
Operating Statistics:
Medical benefits ratio—
    consolidated
(4)
87.4%
86.5%
86.2%
84.8%
82.6%
Medical benefits ratio—
    Medicaid
(4)
75.4%
74.5%
80.7%
83.2%
82.3%
Medical benefits ratio—
    Medicare
(4)
94.5%
107.6%
94.0%
87.0%
82.9%
Medical benefit ratio— other
(4)
106.9%
107.9%
97.6%
96.2%
89.2%
Selling, general and administrative expense
    ratio
(5)
12.8%
16.2%
11.5%
10.8%
12.1%
Members— consolidated
157,000
317,000
374,000
470,000
555,000
Members— Medicaid
106,000
256,000
323,000
420,000
512,000
Members— Medicare
5,000
20,000
35,000
42,000
42,000
Members— commercial
46,000
41,000
16,000
8,000
1,000
As of December 31,
1999
2000
2001
2002
2003
As
Actual
Adjusted
(6)
(in thousands)
Balance Sheet Data:
Cash and cash equivalents
$
35,658
$
107,730
$
129,791
$
146,784
$
237,321
Total assets
75,765
173,007
221,456
409,504
497,107
Long-term debt (including current maturities)
6,370
1,174
154
156,295
135,755
Total liabilities
82,449
158,589
193,533
334,587
397,530
Total stockholders' equity
    (deficit)
(7)
(6,684
)
14,418
27,923
74,917
99,577
(1)
Other premium revenue relates to our commercial
    business that is no longer marketed.
(2)
Other medical benefits relates to our commercial
    business that is no longer marketed.
(3)
Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses. Pro forma tax
    expense for each of the years 1999, 2000, 2001, and the seven
    months ended July 31, 2002 at an estimated tax rate of 42%
    (our effective tax rate as the Successor) is $100, $0, $8,990,
    and $11,731, respectively.
(4)
Medical benefits ratio represents medical
    benefits expense as a percentage of premium revenue.
(5)
Selling, general and administrative expense ratio
    represents selling, general and administrative expense as a
    percentage of total revenue and excludes depreciation and
    amortization expense for purposes of determining the ratio.
(6)
The as adjusted balance sheet data gives effect
    to the sale
    of              shares
    of common stock at an assumed initial public offering price of
    $         per
    share, less the estimated underwriting discounts, commissions
    and estimated offering expenses payable by us.
(7)
Total stockholders' equity reflects
    stockholders' equity for Predecessor and on an as adjusted
    basis for 2003 and reflects limited liability company membership
    interests during 2002 and on an actual basis for 2003.
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of the
financial condition and results of operations of WellCare should
be read in conjunction with "Selected Consolidated and
Combined Financial Data" and WellCare's combined and
consolidated financial statements and related notes appearing
elsewhere in this prospectus. The following discussion contains
forward-looking statements that involve risks, uncertainties and
assumptions that could cause our actual results to differ
materially from management's expectations. Factors that
could cause such differences include those set forth under
"Risk Factors," "Forward-Looking
Statements," "Business" and elsewhere in this
prospectus.
Overview
We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. Our business currently
operates health plans in Florida, New York and Connecticut,
serving approximately 555,000 members as of December 31,
2003. The following tables summarize our membership by state and
our membership by program as of December 31, 2003:
State
Total Members
Florida
475,000
New York
56,000
Connecticut
24,000
Program
Total Members
Medicaid
512,000
Medicare
42,000
Other
1,000
We were formed in May 2002 to acquire the
WellCare group of companies. Until the closing of that
acquisition in July 2002, the companies that comprise our
Florida operations had operated as closely-held businesses, and
our New York and Connecticut businesses had operated as
subsidiaries of a public company. Results of operations
beginning July 31, 2002 reflect our operations under
current management.
We enter into contracts generally on an annual
basis with government agencies that administer health benefits
programs. We receive premiums from state and federal agencies
for the members that are assigned to or have selected us to
provide healthcare services under each benefit program. The
amount of premiums we receive for each member is fixed, although
it varies according to each government program, based on the
healthcare needs of each program's recipients, the cost of
healthcare in their geographic location and other requirements
of the program.
Our largest expense is the cost of medical
benefits that we provide, which is based primarily on our
arrangements with healthcare providers. Our profitability
depends on our ability to predict and effectively manage medical
benefits expense relative to the fixed premiums we receive. Our
arrangements with providers fall into two broad categories:
capitation arrangements, where we pay the providers a fixed fee
per member, and fee-for-service and risk-sharing arrangements,
where we assume all or part of the risk of the cost of the
healthcare provided. Generally, capitation payments represent
less than 12% of our total medical benefits expense. Other
components of medical benefits expense are variable and require
estimation and ongoing cost management.
Estimation of medical benefits expense is our
most significant critical accounting estimate. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations— Critical Accounting
Policies."
We use a variety of techniques to manage our
medical benefits expense, including payment methods to
providers, referral requirements, quality and disease management
programs, reinsurance and member co-payments and premiums for
some of our Medicare plans. National healthcare costs have been
increasing at a
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higher rate than the general inflation rate,
however, and relatively small changes in our medical benefits
expense relative to premiums that we receive can create
significant changes in our financial results. Changes in
healthcare laws, regulations and practices, levels of use of
healthcare services, competitive pressures, hospital costs,
major epidemics, terrorism or bio-terrorism, new medical
technologies and other external factors could reduce our ability
to manage our medical benefits expense effectively.
One of our primary tools for measuring
profitability is our medical benefits ratio, the ratio of our
medical benefits expense to the premiums we receive. Changes in
the medical benefits ratio from period to period result from
changes in Medicaid and Medicare funding, our ability to manage
medical costs and changes in accounting estimates related to
incurred but not reported claims. We use medical benefits ratios
both to monitor our management of medical benefits expense and
to make various business decisions, including what healthcare
plans to offer, what geographic areas to enter or exit and the
selection of healthcare providers. Although medical benefits
ratios play an important role in our business strategy, we may
be willing to enter into provider arrangements that might
produce a less favorable medical benefits ratio if those
arrangements, such as capitation or risk-sharing, would likely
lower our exposure to risk or if we believe that such a strategy
would result in increased member enrollment.
Corporate History and WellCare
Acquisitions
Our Well Care HMO subsidiary was established in
1985 by a group of physicians located in Tampa, Florida, and
began offering Medicaid managed care services in 1994 and
Medicare services in 2000. Our HealthEase subsidiary was formed
in May 2000 to acquire the business of Tampa General Health
Plan, Inc., including its HMO license and approximately 5,900
Medicaid members. HealthEase subsequently acquired almost
100,000 Medicaid members from Humana, Inc. in June 2000.
In July 2002, our current management acquired the
WellCare group of companies in two concurrent transactions. In
the first transaction, we acquired our Florida operations,
including our Well Care HMO and HealthEase subsidiaries, in a
stock purchase. The purchase price for this transaction
consisted of:
•
$50 million in cash;
•
the issuance of a senior subordinated promissory
    note in the original principal amount of $53 million,
    subject to adjustments for earnouts and other purchase price
    adjustments; and
•
warrants to purchase 2,287,037 Class B
    Common Units of WellCare Holdings, LLC.
The purchase price was subject to adjustment,
based upon a number of earnout and other calculations. In
February 2004, the remaining principal amount of the note was
fixed at $119.7 million pursuant to the terms of a
settlement agreement with the selling stockholders. See
"Certain Transactions — Other Agreements with
Selling Stockholders — Amendment and Settlement
Agreement."
In the second transaction, we acquired The
WellCare Management Group, Inc., a publicly-traded holding
company and the parent company of our New York and Connecticut
operations, through a merger of that company into a wholly-owned
subsidiary of ours. The purchase price for this transaction
consisted of approximately $7.72 million in cash.
We are currently evaluating potential
acquisitions that would increase our membership and broaden our
geographic presence. These potential acquisitions are at various
stages of consideration and discussion, and we may enter into
letters of intent or other arrangements relating to these
transactions at any time. However, we cannot predict when or
whether we will actually acquire these businesses.
Basis of Presentation
WellCare, as it existed prior to the
July 31, 2002 acquisition of the WellCare group of
companies, is referred to as "Predecessor." WellCare,
as it existed on and after July 31, 2002, is referred to as
the "Successor," "we" or "us."
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The consolidated results of operations include
the accounts of the Successor and all of its subsidiaries.
Significant intercompany accounts and transactions have been
eliminated.
The combined results of operations include all of
the accounts of the Predecessor's entities under common
control prior to the July 31, 2002 acquisition of the
WellCare group of companies. Significant intercompany accounts
and transactions have been eliminated.
The combined results of operations of the
Predecessor also do not reflect the effects of our change in
corporate structure and management. The Predecessor's
combined financial results do not reflect the effects of:
•
additional debt incurred by Successor management,
    which results in increased interest expense;
•
a C corporation tax structure, which results in
    taxes being incurred by us where previously, because the
    Predecessor had an S corporation tax structure, taxes were
    incurred by the stockholders; and
•
accounting for amortization of the acquired
    intangible assets, which resulted from the purchase of the
    businesses.
In addition, due to prior management's
preparation of the Predecessor for sale, certain costs and
expenses were temporarily eliminated and opportunities to
increase membership were not pursued during the relevant time
periods.
Segments
We have two reportable business segments:
Medicaid and Medicare. Medicaid, a state administered program,
was enacted in 1965 to make federal matching funds available to
all states for the delivery of healthcare benefits to eligible
individuals, principally those with incomes below specified
levels who meet other state specified requirements. Medicaid is
structured to allow each state to establish its own eligibility
standards, benefits package, payment rates and program
administration under broad federal guidelines. Most states
determine threshold Medicaid eligibility by reference to other
federal financial assistance programs including TANF and SSI.
TANF provides assistance to low-income families
with children and was adopted to replace the Aid to Families
with Dependent Children program. SSI is a federal program that
provides assistance to low-income aged, blind or disabled
individuals. However, states can broaden eligibility criteria.
SCHIP, developed in 1997, is a federal/state
matching program that provides healthcare coverage to children
not otherwise covered by Medicaid or other insurance programs.
SCHIP enables a segment of the large uninsured population in the
United States to receive healthcare benefits. States have the
option of administering SCHIP through their Medicaid programs.
Medicare is a federal program that provides
persons age 65 and over and some disabled persons a variety of
hospital and medical insurance benefits. Most individuals
eligible for Medicare are entitled to receive inpatient hospital
care without the payment of any premium, but are required to pay
a premium to the federal government, which is adjusted annually,
to be eligible for physician care and other services.
Under the Medicare+Choice program, managed care
plans can contract with CMS to provide health insurance coverage
in exchange for a fixed monthly payment per member that varies
based on the geographic areas in which the members reside. The
fixed monthly payment per member is subject to periodic
adjustments determined by CMS based upon a number of factors,
including retroactive changes in members' status such as
Medicaid eligibility, and risk measures based on demographic
factors such as age, gender, county of residence and health
status. The weighting of the risk measures in the determination
of the amount of the periodic adjustments to the fixed monthly
payments is being phased in over time. These measures will have
their full impact on the calculation of those adjustments by
2007. Individuals who elect to participate in the
Medicare+Choice program are relieved of the obligation to pay
some or all of the deductible or coinsurance amounts required
under the traditional Medicare program, but are generally
required to use the service
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provided by the HMO exclusively and may be
required to pay a premium to the federal Medicare program unless
the HMO chooses to pay the premium as part of its benefit
package.
Critical Accounting Policies
In the ordinary course of business, we make a
number of estimates and assumptions relating to the reporting of
our results of operations and financial condition in conformity
with accounting principles generally accepted in the United
States. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under
the circumstances. Actual results could differ significantly
from those estimates under different assumptions and conditions.
We believe that the accounting policies discussed below are
those that are most important to the portrayal of our financial
condition and results and require management's most
difficult, subjective and complex judgments, often as a result
of the need to make estimates about the effect of matters that
are inherently uncertain.
Revenue recognition.
We generate revenues primarily from premiums we receive from
agencies of the federal government and the states in which we
operate to provide healthcare benefits to our members. We
receive a fixed premium per member per month to provide
healthcare benefits to our members pursuant to our contracts in
each of our markets. We generally receive premiums in advance of
providing services, and recognize premium revenue during the
period in which we are obligated to provide services to our
members. Premiums collected in advance are deferred and reported
as unearned premiums. Any amounts that have not been received
remain on the balance sheet classified as premiums receivable.
We also generate revenues from investments.
We experience adjustments to our revenues based
on member retroactivity. These retroactivity adjustments reflect
changes in the number and eligibility status of enrollees
subsequent to when revenue is billed. We estimate the amount of
outstanding retroactivity each period and adjust premium revenue
accordingly. The estimates of retroactivity adjustments are
based on historical trends, premiums billed, the volume of
member and contract renewal activity and other information. We
refine our estimates and methodologies based upon actual
retroactivity experienced. Retroactivity adjustments have not
been significant.
Estimating medical benefits expense and
medical benefits payable.
The cost of
medical benefits is recognized in the period in which services
are provided and includes an estimate of the cost of medical
benefits that have been incurred but not yet reported. We
contract with various healthcare providers for the provision of
certain medical care services to our members and generally
compensate those providers on a fee-for-service or capitated
basis or pursuant to certain risk-sharing arrangements.
Capitation represents fixed payments on a per member per month
basis to participating physicians and other medical specialists
as compensation for providing comprehensive healthcare services.
Participating physician capitation payments for our year ended
December 31, 2003 and five-month period ended
December 31, 2002, and the Predecessor seven-month period
ended July 31, 2002 and year ended December 31, 2001
were 11.8%, 11.6%, 10.2% and 10.3%, respectively, of total
medical benefits expense.
Medical benefits expense has two main components:
direct medical expenses and medically-related administrative
costs. Direct medical expenses include amounts paid to
hospitals, physicians and providers of ancillary services, such
as laboratory and pharmacy. Medically-related administrative
costs include items such as case and disease management,
utilization review services, quality assurance and on-call
nurses.
Medical benefits payable consists primarily of
benefit reserves established for reported and unreported claims,
which are unpaid as of the balance sheet date, and contractual
liabilities under risk-sharing arrangements, determined through
an estimation process utilizing company-specific, industry-wide,
and general economic information and data. Our year-end medical
benefits payable is substantially satisfied through claim
payments in the subsequent year.
We have used the same methodology for estimating
our medical benefits expense and medical benefits payable since
our acquisition of the WellCare group of companies. The
estimation process also involves continuous monitoring and
evaluation of the submission, adjudication and payment cycles of
claims. Monthly, we estimate ultimate benefits payable based
upon historical experience and other available information as
well
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as assumptions about emerging trends, which vary
by business segment. Significant assumptions used in the
estimation process include trends in benefit costs, seasonality
and changes in member demographics, utilization, provider
contract terms and reimbursement strategies, frequency and
severity of claims incurred, known and adjudicated claims,
changes in the timing of the reporting, adjudication and payment
of losses, and expected costs to settle unpaid claims. We also
estimate and accrue for the costs necessary to process unpaid
claims.
Our policy is to record management's best
estimate of medical benefits payable. Our review considers
amounts necessary to cover uncertainties related to our
underlying assumptions. Deviations, whether positive or
negative, between actual experience and estimates used to
establish the liability are recorded in the period known. As a
result, any adjustments to prior-period estimates are reflected
in the current period on a consistent basis. We also assess how
our prior year's estimates developed and, to the extent
appropriate, incorporate those findings in our current
projections. Since the average life of a claim is only a few
months, current medical cost trends and utilization patterns are
very important in establishing this liability.
We record reserves for estimated referral claims
related to healthcare providers under contract with us who are
financially troubled or insolvent and who may not be able to
honor their obligations for the costs of medical services
provided by other providers. In these instances, we may be
required to honor these obligations for legal or business
reasons. Based on our current assessment of providers under
contract with us, such losses have not been and are not expected
to be significant.
Medical benefits paid can also be significantly
impacted by court decisions, interpretations by regulatory
authorities and legislative changes involving healthcare
matters. As a result, amounts ultimately paid may differ from
initial estimates that did not consider such outcomes.
Actual conditions could differ from those assumed
in the estimation process. Due to the uncertainties associated
with the factors used in these assumptions, materially different
amounts could be reported in our financial statements for a
particular period under different conditions or using different
assumptions. As is common in the health insurance industry, we
believe that actual results may vary within a reasonable range
of possible outcomes.
The following table provides a reconciliation of
the beginning and ending balance of medical benefits payable for
the following periods:
Predecessor
Successor
Seven-Month
Five-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31,
July 31,
December 31,
December 31,
2001
2002
2002
2003
(in thousands)
Balances as of beginning of period
$
86,714
$
98,314
$
109,054
$
113,670
Medical benefits incurred related to:
Current period
634,726
436,444
348,079
884,703
Prior periods
2,780
(1,520
)
(6,316
)
(23,650
)
Total
637,506
434,924
341,763
861,053
Medical benefits paid related to:
Current period
(538,505
)
(335,938
)
(249,076
)
(751,826
)
Prior periods
(87,401
)
(88,246
)
(88,071
)
(74,600
)
Total
(625,906
)
(424,184
)
(337,147
)
(826,426
)
Balances as of end of period
$
98,314
$
109,054
$
113,670
$
148,297
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Medical benefits payable at December 31,
2002 developed favorably by $23.7 million in the year ended
December 31, 2003. This favorable development was primarily
due to estimated medical costs per member exceeding actual
medical costs per member both due to lower than expected
utilization of services, principally in our Florida Medicaid
businesses, and due to lower than expected cost per service.
Medical benefits payable at July 31, 2002
developed favorably in the five-month period ended
December 31, 2002 by $6.3 million primarily due to
differences between estimated and actual utilization and
severity of claims on certain of our Florida Medicaid
businesses. Medical benefits payable at December 31, 2001
developed favorably in the seven-month period ended
July 31, 2002 by $1.5 million due primarily to lower
utilization of medical services than anticipated. Medical
benefits payable at December 31, 2000 developed unfavorably
in the year ended December 31, 2001 by $2.8 million,
due primarily to higher than expected utilization of services
and cost per service.
We believe that the amount of medical benefits
payable as of December 31, 2003 is adequate to cover our
ultimate liability for unpaid claims recorded as of that date;
however, actual claim payments and other items may differ from
established estimates. Assuming a hypothetical 1% difference
between our December 31, 2003 medical benefits ratio due to
changes between estimated medical benefits payable and actual
medical benefits payable, income before income taxes for the
year ended December 31, 2003 would have increased or
decreased by $10.4 million and diluted earnings per share
would have increased or decreased by approximately
$           per
share, after giving effect to our reorganization into a
corporation.
Goodwill and intangible
assets.
We obtained goodwill and
intangible assets as a result of the acquisitions of our
subsidiaries. Goodwill represents the excess of the cost over
the fair market value of net assets acquired. Intangible assets
include provider networks, membership contracts, trademark,
noncompete agreements, government contracts, licenses and
permits. Our intangible assets are amortized over their
estimated useful lives ranging from one to 15 years.
We evaluate whether events or circumstances have
occurred that may affect the estimated useful life or the
recoverability of the remaining balance of goodwill and other
identifiable intangible assets. We must make assumptions and
estimates, such as the discount factor, in determining the
estimated fair values. While we believe these assumptions and
estimates are appropriate, other assumptions and estimates could
be applied and might produce significantly different results.
We review goodwill and intangible assets for
impairment at least annually, or more frequently if events or
changes in circumstances occur that may affect the estimated
useful life or the recoverability of the remaining balance of
goodwill or intangible assets. Events or changes in
circumstances would include significant changes in membership,
state funding, medical contracts and provider networks. At
December 31, 2003, we do not believe that any impairment of
goodwill or intangible assets has occurred.
The purchase of our subsidiaries was partially
financed through a contingent note payable to the former
shareholders of our subsidiaries. The principal amount of this
note was subject to adjustment for various contingencies
including based on the adequacy of the statutory capital of
certain subsidiaries, the actual medical benefits payable of
certain subsidiaries, the earnings (or losses) of certain
products and potential indemnifications under the purchase
agreement. Adjustments to the note resulted in a change in the
purchase price and the amount of goodwill acquired of
$41.6 million.
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Results of Operations
The following table sets forth the consolidated
and combined statements of income data, expressed as a
percentage of revenues for each period indicated. The pro forma
combined year ended December 31, 2002 amounts consist of
combined financial data from the Predecessor for the seven-month
period ended July 31, 2002 and from the Successor for the
five-month period ended December 31, 2002. The historical
results are not necessarily indicative of results to be expected
for any future period.
Percentage of Revenues
Predecessor
Predecessor/Successor
Successor
Combined
Pro Forma Combined
Consolidated
Year Ended
December 31,
2001
2002 (combined)
2003
Statement of Operations Data:
Revenues:
Premium
98.6
%
99.4
%
99.7
%
Investment income
1.2
%
0.6
%
0.2
%
Other
0.2
%
—
0.1
Total revenues
100.0
%
100.0
%
100.0
%
Expenses:
Medical benefits
85.0
%
84.3
%
82.3
%
Selling, general and administrative
11.5
%
10.8
%
12.1
%
Depreciation and amortization
0.3
%
0.5
%
0.8
%
Interest
0.4
%
0.3
%
1.0
%
Total expenses
97.2
%
95.9
%
96.2
%
Income before income taxes
2.8
%
4.1
%
3.8
%
Income tax expense
—
(1)
0.5
%
(1)
1.6
%
Net income
2.8
%
3.6
%
2.2
%
(1)
Income tax expense was not recorded by the
    Predecessor because its tax structure included entities that had
    elected subchapter S status under the Internal Revenue Code, the
    income of which was taxed at the stockholder level, as well as
    entities that were subject to tax, but did not generate tax
    liabilities or benefits due to operating losses.
Comparison of Consolidated Year Ended
December 31, 2003 to Combined Year Ended December 31,
2002
Premium revenue.
Premium revenue for the year ended
December 31, 2003 increased $127.0 million, or 14%, to
$1.04 billion from $915.9 million for the combined
year ended December 31, 2002. The increase was principally
due to internal growth in overall membership and to a lesser
extent increased premium rates per member. Premium rate
increases were partially offset by a lower average premium per
member primarily as a result of changes in the mix of Medicaid
members by product. During 2003, membership increased by 85,000
members, or 18%, from 470,000 members at December 31, 2002
to 555,000 members at December 31, 2003.
Our Medicaid segment includes Medicaid programs
and other state-sponsored healthcare programs. The Medicaid
segment premium revenue for the year ended December 31,
2003 increased $143.0 million, or 24%, to
$740.1 million from $597.1 million for the combined
year ended December 31, 2002. The increase was principally
due to internal growth in overall membership within the Medicaid
segment and to a lesser extent increased premium rates per
member. During 2003, membership within the Medicaid segment
increased 92,000 members, or 22%, from 420,000 members
at December 31, 2002 to 512,000 members at
December 31, 2003.
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Medicare segment premium revenue for the year
ended December 31, 2003 decreased $2.6 million, or 1.0%, to
$288.3 million from $290.9 million for the combined
year ended December 31, 2002. We continually review the
medical loss ratio of our business and make strategic decisions
based on those analyses. During 2003, our medical benefits
expense in certain areas of Florida was at a higher level than
expected. We addressed this concern by withdrawing from areas
where financial performance was unfavorable. Overall membership
levels remained flat at approximately 42,000.
Investment income.
Investment income for the year ended
December 31, 2003 decreased $2.9 million, or 53%, to
$2.6 million from $5.5 million for the combined year
ended December 31, 2002. The decrease in investment income
was primarily due to the continued decline in market interest
rates and maintaining investments with shorter maturities, which
was partially offset by an increase in overall cash levels. Cash
levels increased primarily due to increased profitability and
differences in the timing of our receipt of premiums as compared
to the timing of our payment of the related medical benefits
expense.
Medical benefits expense.
Medical benefits expenses for the year
ended December 31, 2003 increased $84.4 million, or
11%, to $861.1 million from $776.7 million for the
combined year ended December 31, 2002. The increase was
primarily due to the increase in membership. The medical
benefits ratio, as a percentage of premium revenue, for the year
ended December 31, 2003 was 82.6% compared to 84.8% in
2002. The medical benefits ratio decreased in 2003 primarily as
a result of our initiatives to enter into contracts with
providers that offer more economical benefits, to focus on
preventative and disease management programs, and to increase
the effectiveness of medical management to ensure that medical
benefits are utilized efficiently.
The Medicaid segment medical benefits expense for
the year ended December 31, 2003 increased
$112.5 million, or 23%, to $609.2 million from
$496.7 million for the combined year ended
December 31, 2002. The increase was principally due to
internal growth in overall membership within the Medicaid
segment and to a lesser extent increased healthcare costs. The
Medicaid medical benefits ratio, as a percentage of premium
revenue, for the year ended December 31, 2003 was 82.3%
compared to 83.2 % in 2002.
Medicare segment medical benefits expense for the
year ended December 31, 2003 decreased $14.3 million,
or 6%, to $238.9 million from $253.2 million for the
combined year ended December 31, 2002. The decrease was
principally a result of our withdrawal from certain areas of
Florida where financial performance was unfavorable and, to a
lesser extent, as a result of revised contracts with providers
containing improved contract terms. The Medicare medical
benefits ratio, as a percentage of premium revenue, for the year
ended December 31, 2003 was 82.9% compared to 87.0% in 2002.
Selling, general and administrative expense.
Selling, general and administrative
expense for the year ended December 31, 2003 increased
$26.2 million, or 26%, to $126.1 million from
$99.9 million for the combined year ended December 31,
2002. Our selling, general and administrative expense to premium
revenue ratio was 12.1% and 10.8% for the years ended
December 31, 2003 and 2002, respectively. The increase in
the ratio was the result of increased marketing efforts,
servicing our increased membership, amortization of purchased
intangible assets and costs incurred to strengthen our
infrastructure. These costs include additional management staff,
information technology system enhancements, and consulting
services. The ratio increase that resulted from these increased
costs was partially offset by realized economies of scale due to
our fixed costs being spread over a larger membership base.
Additionally, certain expenses to expand the business or make
the operations more efficient were not incurred in 2002 as the
predecessor management was preparing the company for sale.
Interest expense.
Interest expense for the year ended
December 31, 2003 increased $7.3 million, or 252%, to
$10.2 million from $2.9 million for the combined year
ended December 31, 2002. The increase was due to increased
debt as a result of the purchase of the business from the
predecessor owners.
Income tax expense.
Income tax expense for the year ended
December 31, 2003 increased $12.2 million, or 254%, to
$17.0 million from $4.8 million for the combined year ended
December 31, 2002. The increase resulted from being taxed
as a C corporation for 12 months in 2003 compared to being
taxed as a C corporation for only five months in 2002.
Prior to August 1, 2002, our Predecessor was an S
corporation and
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was a disregarded entity for federal and state
income taxes. Our effective tax rate for the year ended
December 31, 2003 was 41.9% and for the five-month period
ended December 31, 2002 was 50.8%.
Net income.
Net
income for the year ended December 31, 2003 was $23.5
million compared to $32.6 million for the combined year
ended December 31, 2002.
Comparison of Combined Year Ended
    December 31, 2002 to Combined Year Ended December 31,
    2001
Premium revenue.
Premium revenue for the pro forma
combined year ended December 31, 2002 increased
$176.0 million, or 24%, to $915.9 million from
$739.9 million for the combined year ended
December 31, 2001. The increase was principally due to
internal growth in overall membership and to a lesser extent
increased premium rates per member. During combined fiscal 2002,
membership increased 96,000 members, or 26%, from 374,000
members at December 31, 2001 to 470,000 members at
December 31, 2002.
Medicaid segment premium revenue for the combined
year ended December 31, 2002 increased $145.9 million,
or 32%, to $597.1 million from $451.2 million for the
combined year ended December 31, 2001. The increase was
principally due to internal growth in overall membership within
the Medicaid segment and to a lesser extent increased premium
rates per member. Premium rate increases were partially offset
by a lower average premium per member primarily as a result of
changes in the mix of Medicaid members by product. During 2002,
membership within the Medicaid segment increased 97,000 members,
or 30%, from 323,000 members at December 31, 2001 to
420,000 members at December 31, 2002.
Medicare segment premium revenue for the combined
year ended December 31, 2002 increased $57.3 million,
or 25%, to $290.9 million from $233.6 million for the
combined year ended December 31, 2001. The increase was
principally due to internal growth in overall membership within
the Medicare segment and to a lesser extent increased premium
rates per member. During 2002, membership within the Medicare
segment increased 7,000 members, or 20%, from 35,000 members at
December 31, 2001 to 42,000 members at December 31,
2002.
Investment income.
Investment income for the combined
year ended December 31, 2002 decreased $3.4 million, or
38%, to $5.5 million from $8.9 million for the
combined year ended December 31, 2001. The decrease in
investment income was primarily due to the decline in market
interest rates partially offset by an increase in overall cash
levels. Cash levels primarily increased due to cash generated
from operations and contributions of capital.
Medical benefits expense.
Medical benefits expenses for the
combined year ended December 31, 2002 increased
$139.2 million, or 22%, to $776.7 million from
$637.5 million for the combined year ended
December 31, 2001. The increase was primarily due to the
increase in membership. The medical benefits ratio, as a
percentage of premium revenue, for the combined year ended
December 31, 2002 was 84.8% compared to 86.2% in 2001.
Medicaid segment medical benefits expense for the
combined year ended December 31, 2002 increased
$132.4 million, or 36%, to $496.7 million from
$364.3 million for the combined year ended
December 31, 2001. The increase was principally due to
internal growth in overall membership within the Medicaid
segment.
Medicare segment medical benefits expense for the
combined year ended December 31, 2002 increased
$33.7 million, or 15%, to $253.2 million from
$219.5 million for the combined year ended
December 31, 2001. The increase was principally due to
internal growth in overall membership within the Medicare
segment.
Selling, general and administrative expense.
Selling, general and administrative
expense for the combined year ended December 31, 2002
increased $13.6 million, or 16%, to $99.9 million from
$86.3 million for the combined year ended December 31,
2001. The increase was primarily due to an increase in staff to
support our increased membership. Our selling, general and
administrative expense to revenue ratio was 10.8% and 11.5% for
the years ended December 31, 2002 and 2001, respectively.
The decrease in the general and administrative expense ratio was
the result of predecessor management preparing the business for
sale and temporarily eliminating certain costs and expenses that
would have been incurred under normal operating conditions.
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Interest expense.
Interest expense was $2.9 million
for the combined years ended December 31, 2002 and 2001 as we
had similar balances of short- and long-term debt during both
periods.
Income tax expense.
Income tax expense for the combined
year ended December 31, 2002 was $4.8 million. Prior
to August 1, 2002, our Predecessor was an S corporation and
was a disregarded entity for federal and state taxes. Our
effective tax rate for the five-month period ended
December 31, 2002 was 50.8%.
Net income.
Net
income for the combined year ended December 31, 2002 was
$32.6 million compared to $21.4 million for the
combined year ended December 31, 2001.
Liquidity and Capital Resources
We have financed our operations principally
through internally generated funds. We generate cash mainly from
premium revenue. Our primary use of cash is the payment of
expenses related to medical benefits. We generally receive
premium revenue in advance of payment of claims for related
healthcare services. From time to time, we may need to raise
capital or draw on our credit facility to fund planned
geographic and product expansion or acquire healthcare
businesses.
Because we receive premiums in advance of
payments of claims for healthcare services, we maintain
estimated balances of cash and cash equivalents pending payment
of claims. At December 31, 2003 and 2002, cash and cash
equivalents were $237.3 million and $146.8 million,
respectively. We also had short-term investments with maturities
of three to 12 months of $33.8 million and
$69.0 million at December 31, 2003 and 2002,
respectively.
Our investment policies are designed primarily to
provide liquidity and preserve capital. The states in which we
operate prescribe the types of instruments in which our
subsidiaries may invest their funds. As of December 31, 2003, a
substantial portion of our cash was invested in a portfolio of
highly liquid money market securities with a weighted average
maturity of 138 days. The average portfolio yield for the
year ended December 31, 2003 was approximately 1.2%.
Cash Flow.
Net cash
provided by operations increased to $121.4 million in 2003
from $65.1 million in 2002 and $36.2 million in 2001.
The growth in cash from operations was primarily due to
increased membership, improved profitability and changes in
outstanding receivables and liabilities based on the timing of
cash receipts and payments. Because we generally receive premium
revenue in advance of payment for the related medical care
costs, our cash available has historically increased during
periods of enrollment growth. At December 31, 2003, we had
negative working capital of $4.4 million as compared to
working capital of $2.6 million and negative working
capital of $38.1 million at December 31, 2002 and
2001, respectively.
We believe that our cash resources and internally
generated funds will be sufficient to support our operations,
regulatory requirements and capital expenditures for at least
12 months following this offering.
Regulatory Capital and Restrictions on
Dividends.
Our operations are
conducted through our HMO subsidiaries. These subsidiaries are
subject to state regulations that, among other things, may
require the maintenance of minimum levels of statutory capital,
as defined by each state. These regulations may restrict the
amount, payment, and timing of the distribution of dividends
that may be paid to our parent company. The states can, in their
sole discretion, require individual subsidiaries to maintain
statutory capital levels higher than state mandated minimums.
Management believes that we are in compliance with all minimum
statutory capital requirements at December 31, 2003, and
will continue to be so for the foreseeable future.
The National Association of Insurance
Commissioners, or NAIC, has adopted rules which, to the extent
they are implemented by the states in which we operate, set
minimum capitalization requirements for subsidiaries and other
risk bearing entities. The requirements take the form of
risk-based capital rules. Florida and New York have not yet
adopted the risk-based capital standard as a net worth
requirement. Connecticut has adopted the NAIC guidance. Our
subsidiaries are required to maintain minimum capital amounts as
prescribed by the various states in which we operate. Our
restricted assets consist of cash and cash equivalents that are
deposited or pledged to state agencies in accordance with state
rules and regulations. At December 31, 2003 and 2002, all
of our restricted assets consisted of cash and cash equivalents.
As of December 31, 2003
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and 2002, all of our subsidiaries were in
compliance with the minimum capital requirements. Barring any
change in regulatory requirements, we believe that we will
continue to be in compliance with these requirements at least
through 2004.
If our regulators were to deny or significantly
further restrict our subsidiaries' ability to pay dividends
to us or to pay management fees to our affiliates, the funds
available to us as a whole would be limited, which could harm
our ability to implement our business strategy. For example, we
could be hindered in our ability to make debt service payments
on amounts drawn from our credit facility.
Debt and Credit
Facilities.
As part of the
consideration for the acquisition of the WellCare group of
companies, we issued a senior subordinated non-negotiable
promissory note in the original principal amount of
$53 million to the stockholder representative on behalf of
the stockholders of the Florida business. In February 2004, we
entered into a settlement agreement with the selling
stockholders that fixed the remaining amount of the seller note
at $119.7 million. Remaining payments of principal under
the note are due on or about the closing of this offering and on
September 15 of each of 2004, 2005 and 2006, and would be
due immediately upon a sale of our business. Interest on the
principal amount of the note accrues at the rate of 5.25% per
year.
In March 2003, one of our subsidiaries issued
senior discount notes with a principal amount at maturity of
$21.6 million. These notes bear interest at 8% and mature
in March 2009. We received approximately $15 million from
the issuance, prior to transaction expenses. The notes require
semi-annual payments of interest. Principal payments are due in
two equal installments in March 2008 and 2009.
We entered into a $15 million senior credit
facility with an unaffiliated bank in March 2003. The facility
has a floating interest rate based on the one month Eurodollar
rate and requires payment of any borrowings on the facility at
its maturity date in March 2005. No amounts have been drawn from
this facility to date.
These notes and credit facility include financial
and operational covenants that limit our ability to incur
additional indebtedness as well as purchase or dispose of
significant assets. Covenants on the notes and credit facility
include maintenance of a medical loss ratio below a set maximum,
a minimum claims coverage ratio and profit margin, and a minimum
statutory surplus in the HMO subsidiaries.
Commitments and Contingencies
The following table sets forth information
regarding our contractual obligations:
Payments due by period
Contractual Obligations at
Less than
1-3
3-5
More than
December 31, 2003
Total
1 Year
Years
Years
5 Years
(in thousands)
Long-term debt
$
141,353
$
48,170
$
71,568
$
—
$
21,615
Operating leases
4,858
1,641
1,303
1,033
881
Other long-term liabilities
1,782
1,782
—
—
—
Total
$
147,993
$
51,593
$
72,871
$
1,033
$
22,496
We are not an obligor under or guarantor of any
indebtedness of any other party; however, we may have to pay
referral claims of healthcare providers under contract with us
who are not able to pay costs of medical services provided by
other providers. We have no off balance sheet financing
arrangements except for the operating leases described above.
Equity Plans
In connection with our reorganization as a
corporation immediately prior to the closing of this offering,
our board of directors plans to adopt and submit to our
stockholders for approval our 2004 Equity Incentive Plan, which
will be effective immediately prior to the closing of our
reorganization. An aggregate
of                      shares
of our common stock will be reserved for issuance under the
Equity Incentive Plan, subject to
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certain adjustments reflecting changes in our
capitalization. The Equity Incentive Plan will be administered
by our board of directors and compensation committee.
Our 2002 Senior Executive Equity Plan and our
2002 Employee Option Plan were both adopted by our board of
directors and became effective in September 2002. After giving
effect to our reorganization as a corporation, a maximum
of                      shares
of common stock in the aggregate was reserved for issuance to
our associates under the plans. Both plans are administered by
our board of directors and compensation committee.
Under the Senior Executive Equity Plan, each
participant was given the opportunity to purchase a specified
number of what were, prior to our reorganization as a
corporation, Class A Common Units. As a result of that
purchase, each participant was granted, for no consideration, a
specified number of our former Class C Common Units. Under
the Employee Option Plan, each participant was granted an option
to purchase a specified number of our former Class A Common
Units. The securities that were granted under both plans are
subject to the terms, including vesting, set forth in each
subscription agreement or option agreement, as applicable. We
may repurchase securities granted pursuant to the plans at fair
market value if the participant ceases to be employed by us.
Upon the closing of our reorganization as a
corporation, the Class C Common Units granted under the
Senior Executive Equity Plan will be converted automatically
into shares of our common stock and the options granted under
the Employee Option Plan will be converted automatically into
equivalent options to purchase our common stock. Each granted
share and option will be subject to the same vesting terms as in
each holder's original subscription or option agreement, as
applicable. The number of shares subject to each option and
their exercise price will be adjusted to reflect any stock split
effected in connection with the restructuring. Following our
reorganization as a
corporation,                 of
our employees will hold a total
of                      shares
under our Senior Executive Equity Plan, of
which                     will
be vested,
and                 of
our employees will hold options under our 2002 Employee Option
Plan exercisable for
approximately                      shares
of our common stock, at a weighted average exercise price
of                     ,
of
which                     will
be vested. We do not intend to issue any additional securities
under either of these plans.
We account for these plans under the recognition
and measurement principles (the intrinsic-value method)
prescribed in Accounting Principles Board or "APB"
Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Compensation cost
for stock options is reflected in net income and is measured as
the excess of the estimated market price of our common stock at
the date of grant over the amount an employee must pay to
acquire the stock.
In addition to complying with APB Opinion
No. 25, we also comply with the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based
Compensation," which, among other things, requires
supplemental disclosure using a fair-value-based method of
accounting for stock-based employee compensation plans. In
December 2002, SFAS No. 148, "Accounting for
Stock-Based Compensation—Transition and Disclosure"
was issued. SFAS No. 148 amends SFAS No. 123 to, among
other things, expand the disclosure provisions of SFAS
No. 123 and APB Opinion No. 28, "Interim
Financial Reporting," to require disclosure in the summary
of significant accounting policies of the effects of an
entity's accounting policy with respect to stock-based
employee compensation on reported net income and earnings per
share in annual and interim financial statements. While SFAS
No. 148 does not require companies to account for employee
stock options using the fair-value method, the disclosure
provisions of SFAS No. 148 are applicable to all companies
with stock-based employee compensation, regardless of whether
they account for that compensation using the fair-value method
of SFAS No. 123 or the intrinsic-value method of APB
Opinion No. 25. We have adopted the disclosure requirements
of SFAS No. 148.
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The following table illustrates the effect on net
income and earnings per share if we had applied the fair value
recognition provisions to stock-based employee compensation.
Successor
Five-Month
Period Ended
Year Ended
December 31,
December 31,
2002
2003
(in thousands,
except per unit data)
Net income, as reported
$
4,657
$
23,537
Reconciling items (net of tax effects):
Add: stock-based employee compensation expense
    determined under the intrinsic-value based method for all awards
4
434
Deduct: stock-based employee compensation expense
    determined under the fair-value based method for all awards
(67
)
(3,152
)
Net adjustment
(63
)
(2,718
)
Net income, as adjusted
4,594
20,819
Class A common unit yield
(2,356
)
(5,997
)
Net income attributable to common units
2,238
14,822
Net income attributable per common unit:
Basic, as reported
$
0.09
$
0.66
Basic, as adjusted
$
0.09
$
0.56
Diluted, as reported
$
0.08
$
0.60
Diluted, as adjusted
$
0.08
$
0.50
Recent Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal
Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 requires recognition of the
liability for costs associated with an exit or disposal activity
when we exit a facility, whereas under EITF Issue No. 94-3,
a liability for an exit cost is recognized at the date a company
commits to an exit plan. In addition, SFAS No. 146
establishes that the liability should initially be measured and
recorded at fair value. Accordingly, SFAS No. 146 may
affect the timing of recognizing future restructuring costs, as
well as the amounts recognized. Application of SFAS No. 146
was required for restructuring activities initiated after
December 31, 2002. Adoption of this standard did not impact our
financial statements.
In November 2002, the FASB issued Interpretation
No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others— an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB
Interpretation No. 34." The interpretation elaborates
on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. In general, the interpretation applies to contracts
or indemnification agreements that contingently require the
guarantor to make payments to the guaranteed party based on
changes in an underlying obligation that is related to an asset,
liability or an equity security of the guaranteed party. The
initial recognition and measurement provisions of the
interpretation apply to guarantees issued or modified after
December 31, 2002. The adoption of this interpretation in
fiscal 2003 did not impact our financial statements.
In January 2003, the FASB issued Interpretation
No. 46, "Consolidation of Variable Interest
Entities." This interpretation of Accounting Research
Bulletin No. 51, "Consolidated Financial
Statements," addresses consolidation by business
enterprises of variable interest entities that either:
(1) do not have sufficient equity investment at risk to
permit the entity to finance its activities without additional
subordinated financial
39
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support, or (2) have equity investors that
lack an essential characteristic of a controlling financial
interest. As of December 31, 2003, we did not have any
entities that require disclosure or new consolidation as a
result of the adoption of FASB Interpretation No. 46.
In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity." SFAS
No. 150 requires that certain financial instruments,
including mandatorily redeemable financial instruments, be
classified as liabilities. For existing financial instruments,
the standard is applicable for the first quarter beginning after
June 15, 2003. The adoption of SFAS No. 150 did not
impact our financial statements.
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
In September 2003, we hired the Ernst & Young
LLP audit partner serving us to become our chief financial
officer. We believe this action impaired Ernst & Young
LLP's independent relationship with us. As a result, we
terminated the engagement of Ernst & Young LLP as our
independent public accountants. The report of Ernst & Young
LLP on our financial statements as of December 31, 2002 and
for the period May 8, 2002, our date of inception, to
December 31, 2002 contained no adverse opinion or
disclaimer of opinion, nor was the report qualified or modified
as to uncertainty, audit scope, or accounting principles. In
connection with the audit of our 2002 financial statements, and
in the subsequent interim period, there were no disagreements
with Ernst & Young LLP on any matters of accounting
principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the
satisfaction of Ernst & Young LLP would have caused Ernst
& Young LLP to make reference to the matter in their report.
We have provided a copy of the above disclosures
to Ernst & Young LLP and requested that Ernst & Young
LLP furnish us with a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the above
statements. A copy of such letter, dated February 12, 2004
is filed as Exhibit 16.1 to the registration statement of which
this prospectus is a part.
Effective December 2003, we retained Deloitte
& Touche LLP as our independent public accountants. Our
decision to engage Deloitte & Touche LLP was ratified by our
audit committee. Deloitte & Touche LLP previously had been
the auditor for certain WellCare subsidiaries in 2001 and
performed consulting services during 2002. Except in relation to
these services, neither we nor anyone acting on our behalf
consulted with Deloitte & Touche LLP regarding the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of the audit opinion
that might be rendered on our financial statements, nor did we
or anyone acting on our behalf consult with Deloitte &
Touche LLP regarding any other matter that was the subject of a
disagreement, as defined in paragraph 304(a)(1)(iv) and the
related instructions to Item 304 of Regulation S-K, or
a reportable event, as described in paragraph 304(a)(1)(v)
of Item 304 of Regulation S-K.
Qualitative and Quantitative Disclosures about
Market Risk
As of December 31, 2003, we had short-term
investments of $33.8 million and investments classified as
long-term of $21.4 million, principally restricted deposits
in accordance with regulatory requirements. The short-term
investments consist of highly liquid securities with maturities
between three and 12 months. Long-term restricted assets
consist of cash and cash equivalents deposited or pledged to
state agencies in accordance with state rules and regulations.
These restricted assets are classified as long-term regardless
of the contractual maturity date due to the nature of the
states' requirements. The investments classified as
long-term are subject to interest rate risk and will decrease in
value if market rates increase. Because of their short-term
nature, however, we would not expect the value of these
investments to decline significantly as a result of a sudden
change in market interest rates. Assuming a hypothetical and
immediate 1% increase in market interest rates at
December 31, 2003, the fair value of our fixed income
investments would decrease by less than $.01 million.
Similarly, a 1% decrease in market interest rates at
December 31, 2003 would result in an increase of the fair
value of our investments of less than $.01 million.
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OUR BUSINESS
Overview
We provide managed care services targeted
exclusively to government-sponsored healthcare programs,
focusing on Medicaid and Medicare. We have centralized core
functions, such as claims processing and medical management,
combined with localized marketing and strong provider
relationships. We believe that this approach will allow us to
effectively grow our business, both through organic growth and
through acquisitions.
We operate health plans in Florida, New York and
Connecticut. In Florida, we serve more than 475,000 members, and
operate the two largest Medicaid managed care plans. In New York
and Connecticut, we serve approximately 56,000 and 24,000
members, respectively.
Unlike many other government-sponsored healthcare
programs, which specialize in individuals eligible for only one
type of benefit, we serve individuals eligible for both Medicaid
and Medicare benefits, which include recipients of TANF, SCHIP
and SSI. We believe that our experience in managing healthcare
for this broad range of beneficiaries better positions us to
capitalize on growth opportunities across all of these programs.
In addition, unlike many other managed care organizations that
attempt to serve the general population through commercial
health plans, we focus exclusively on serving individuals in
government programs. We believe that this focus allows us to
better serve our members and providers and to more efficiently
manage our operations.
Our Markets and Opportunities
The Market for Government-Sponsored
    Healthcare Programs
The market for government-sponsored healthcare
programs is large and growing. Overall healthcare spending in
the United States has increased dramatically over the past four
decades, from $41 billion in 1965 to $1.6 trillion in
2002, according to CMS. CMS estimates that healthcare
expenditures will continue to increase over the next decade at
an average annual rate of 6.4%, growing to a projected
$2.8 trillion by 2011. Approximately 32% of total
healthcare spending in 2002, or $516 billion, was financed
by Medicare and Medicaid, according to CMS. In 2002,
approximately 40.1 million people received Medicaid
benefits, and total Medicaid expenditures were approximately
$216 billion, of which almost $98 billion was the
responsibility of state governments and the balance provided by
the federal government. In the same year, approximately
40.5 million people were enrolled in Medicare, and the
federal government spent approximately $236 billion in
Medicare benefit payments, according to CMS.
We currently operate managed care health plans in
Florida, New York and Connecticut. Florida and New York have two
of the largest Medicaid and Medicare populations in the United
States.
•
Florida.
Florida has
    the fourth largest population of Medicaid enrollees,
    2.0 million, and the second largest population of Medicare
    enrollees, 2.9 million. In 2001, total Medicaid spending in
    Florida was approximately $8.6 billion, of which the state
    government's portion totaled approximately
    $3.7 billion. During the same period, according to CMS,
    total Medicare spending in Florida totaled approximately
    $21.6 billion. According to data from the Henry J. Kaiser
    Family Foundation, in 2002 approximately 63% of
    Medicaid-eligible beneficiaries in Florida participated in
    managed care plans.
•
New York.
New York
    has the second largest population of Medicaid enrollees,
    3.1 million, and the third largest population of Medicare
    enrollees, 2.7 million. In 2001, total Medicaid spending in
    New York was approximately $31.4 billion, of which the
    state and local governments' portion totaled approximately
    $15.7 billion. According to CMS, Medicare spending in New
    York for 2001 was approximately $20.4 billion. According to
    data from the Henry J. Kaiser Family Foundation, in 2002
    approximately 45% of Medicaid-eligible beneficiaries in New York
    participated in managed care plans.
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•
Connecticut.
Connecticut has approximately 376,000 Medicaid enrollees and
    approximately 517,000 Medicare enrollees. In 2001, total
    Medicaid spending in Connecticut was $3.2 billion, of which
    the state government's portion totaled $1.6 billion.
    According to CMS, Medicare spending in Connecticut was
    $3.1 billion in 2001. According to data from the Henry J.
    Kaiser Family Foundation, in 2002 approximately 76% of
    Medicaid-eligible beneficiaries participated in managed care
    plans.
Emergence of Managed Care
Health maintenance organizations, or HMOs, and
other types of managed care plans were created as a response to
dramatic increases in healthcare-related costs. Managed care
plans generally reduce the cost of health insurance by providing
members with access to a quality, efficient and cost-effective
network of providers. The plans also reduce costs by attempting
to increase member access to timely and preventative healthcare
delivered in the most appropriate healthcare delivery setting.
Since the 1970s, enrollment in managed care has increased
dramatically, especially over the past decade. In 2002, in the
commercial market, 27% of employees who were covered by their
employer's health benefit plan were enrolled in HMOs. As
part of efforts to control rising costs within
government-sponsored healthcare programs, the federal government
and many states have encouraged the creation of managed care
plans for government programs.
Medicaid Managed Care.
Medicaid is a joint federal and state
health insurance program for certain low-income individuals. The
amount of total federal outlays for Medicaid has no set limit;
rather, the federal government must match whatever the
particular state provides for its eligible recipients, subject
to limits determined annually by CMS. The percentage matched by
the federal government varies by state. Medicaid is structured
to allow each state to establish, within broad federal
guidelines, its own eligibility standards, benefits package,
payment rates and program administration. In most states, the
threshold requirements for Medicaid eligibility are determined
by the state. In some cases, eligibility criteria are determined
by reference to other federal financial assistance programs,
including Temporary Assistance to Needy Families, or TANF, and
SSI. TANF provides assistance to low-income families with
children. SSI provides assistance to low-income aged, blind or
disabled individuals. States may also broaden eligibility beyond
the requirements for TANF and SSI. Families who exceed the
income thresholds for Medicaid may be able to qualify for the
State Children's Health Insurance Program, or SCHIP.
According to data from CMS, from 1970 through
2000, Medicaid spending grew at a 12.8% compound annual growth
rate. According to the Congressional Budget Office, federal
Medicaid is expected to be $169 billion in fiscal 2004 with
states contributing an additional $127 billion. According
to the Kaiser Commission on Medicaid and the Uninsured, on
average, states spend approximately 15% of their annual budget
on Medicaid, making it the second largest program in most states.
Historically, Medicaid operated on a
fee-for-service model, under which the Medicaid programs made
payments directly to providers after delivery of care. We
believe that the fee-for-service model has resulted in
beneficiaries often receiving care on an episodic basis and in
inappropriate, high-cost settings, such as emergency rooms and
hospitals, as opposed to receiving care in a comprehensive
organized manner. To address these concerns, 42 states have now
implemented mandatory Medicaid managed care programs and six
have implemented voluntary managed care programs. In states with
mandatory Medicaid managed care programs, a percentage of
Medicaid recipients are automatically enrolled by the state into
a managed care program. States generally may only mandate
managed care in areas where more than one managed care plan
operates, and the state allocates members among those plans. The
percentage of recipients who are subject to such mandatory
assignment varies by state and is set by law or regulation
within each state from time to time. If Medicaid managed care is
not mandatory, individuals entitled to Medicaid may choose
either the traditional Medicaid fee-for-service program or a
managed care plan, if available.
There are two types of managed care programs:
capitated managed care plans and primary care case management
plans. Under capitated managed care programs, which we operate,
the state pays the managed care plan a fixed fee per enrollee
and the plan assumes either full or partial risk for the
financing and delivery of state-specified healthcare services.
Under primary care case management plans, a provider is paid a
per patient monthly case management fee for acting as a
gatekeeper to approve all medical services and does not
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assume financial risk for the recipient. The
number of Medicaid beneficiaries enrolled in some form of
managed care program has grown rapidly, from approximately 40%
in 1996 to approximately 58% in 2002, according to CMS. Of the
58% of Medicaid beneficiaries enrolled in managed care in 2002,
17.6% were enrolled in primary care case management programs.
SCHIP is the single largest expansion of health
insurance coverage for children since the enactment of Medicaid,
and some states are expanding the program to include adults.
SCHIP is a federal and state matching program designed to help
states expand health insurance to children whose families earn
too much to qualify for traditional Medicaid yet not enough to
afford private health insurance. States have the option of
administering SCHIP through their existing Medicaid programs,
creating separate programs or combining both approaches.
According to HHS, approximately 4.6 million children who
otherwise would not have access to healthcare were covered under
SCHIP in 2001, representing a 38% increase from 2000. In 2002,
according to CMS, there were 5.3 million children enrolled
in SCHIP programs. Currently, all 50 states, the District of
Columbia and all U.S. territories have approved SCHIP plans, and
many states continue to submit plan amendments to further expand
coverage under SCHIP.
Medicare Managed Care.
Medicare is a federal program that
provides eligible retired persons age 65 and over and some
disabled persons a variety of hospital and medical insurance
benefits. Medicare beneficiaries have the option to enroll in a
Medicare+Choice plan, Medicare's managed care option, in
areas where such a plan is offered. Under this program, managed
care plans can contract with CMS to provide benefits comparable
to those offered under the traditional Medicare program in
exchange for a fixed monthly payment per member that varies
based on the county in which the member resides. Individuals who
elect to participate in the Medicare+Choice program usually
receive greater benefits than traditional Medicare, including
less or no deductible or coinsurance amounts, but are generally
required to use the services and provider network provided by
the HMO exclusively and are required to pay an additional
premium to the federal Medicare program unless the HMO chooses
to pay the premium as a part of its benefit package. These
individuals also may be required to pay a monthly premium to the
health plan.
The recently enacted Medicare reform legislation,
MMA, expands Medicare's health options by, among other
things, adding a prescription drug benefit beginning in 2006,
authorizing transitional prescription drug discount cards
beginning in June 2004, and modifying the methods by which
Medicare will pay Medicare managed care plans. MMA also renames
the Medicare+Choice program "Medicare Advantage"
starting in 2006. As of January 1, 2004, Medicare+Choice
rates have been increased to 100% of the fee-for-service cost,
meaning that managed care plans will receive 100% of the average
costs that CMS anticipates incurring for a Medicare-eligible
individual that is not enrolled in a managed care program. This
may have the effect of raising the fixed monthly payments made
to managed care organizations by CMS for providing services to
Medicare beneficiaries in some counties. Managed care plans must
use the increased payments to improve the healthcare benefits
they offer or to strengthen their provider networks.
Enrollment in Medicare managed care programs has
declined in recent years, from 6.5 million, or 16% of
Medicare beneficiaries, in 2000 to 4.6 million, or 11% of
Medicare beneficiaries, in 2002. During this period, many
managed care programs that had contracted with CMS to provide
Medicare managed care plans reduced benefits or withdrew from
markets, as healthcare costs in many areas exceeded payments
received from CMS for their participation in Medicare's
managed care program. However, as a result of MMA, which
increases reimbursement rates to Medicare managed care plans and
generally will allow Medicare managed care plans to offer more
attractive benefits, we expect enrollment in Medicare's
managed care programs to increase.
Dual-Eligible
Beneficiaries.
Individuals who are
eligible to receive both Medicare and Medicaid benefits are
sometimes termed "dual-eligible." Health plans that
serve dual-eligibles receive a higher premium on account of
those members. According to the Henry J. Kaiser Family
Foundation, in 2002 an estimated 7.2 million individuals,
or 14% of Medicaid beneficiaries, were dual-eligible.
Dual-eligible beneficiaries accounted for 42% of total Medicaid
spending in 2002 according to Kaiser, and we believe that
dual-eligibles are an increasingly important sector of the
market.
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Our Competitive Advantages
We operate health plans focused on
government-sponsored healthcare programs. We believe the
following are our key competitive advantages:
Leading Market Presence.
We are the leading Medicaid provider
in Florida, with an approximately 50% market share of Medicaid
managed care enrollees and over 475,000 total members. We
believe that this strong market position provides us with
numerous strategic advantages, including:
•
enhanced economies of scale;
•
extensive, high-quality provider networks in our
    core markets;
•
strong relationships with our state and local
    government agencies; and
•
the ability to provide a broad range of
    government-sponsored healthcare programs.
We are leveraging these advantages to
aggressively grow our operations in New York and Connecticut.
Diversified Government Healthcare
Programs.
We offer managed care
services for a diversified range of government programs,
including the SCHIP, SSI and TANF Medicaid programs and
Medicare. This approach helps reduce the impact on us resulting
from rate reductions or other adverse changes that impact one
type of program. We believe that this approach also results in
operational efficiencies and stronger relationships with our
providers and regulators and positions us to capitalize on
growth opportunities in Medicaid, Medicare and other government
programs. Our broad range of programs and our low cost of
operations also allow us to effectively compete for specialized
programs designed to meet the specific needs of certain
jurisdictions. For example, in 2003 we were assigned an
additional 30,000 members under our Florida Healthy Kids program
through a competitive bid process. We were able to win this bid,
in part due to the economies of scale we achieve from our broad
range of product offerings. We believe that our experience in
serving a broad range of beneficiaries of Medicaid, Medicare and
other government-sponsored programs and our strong provider
networks, guided by our medical management programs, position us
to optimally serve this population.
Exclusive Focus on Government Healthcare
Programs.
We are focused on designing
and operating our business to serve our government programs
constituents: members, providers and regulators. This allows us
to build our provider networks with a focus on our target
populations, and allows us, in large part, to contract with our
providers using the Medicaid and Medicare fee schedules, which
are generally lower than commercial rates, as a benchmark. Our
approach to contracting has allowed us to build strong provider
networks that have been designed to provide the necessary care
to our members, based on specific benefit designs, in the
appropriate healthcare setting. We also target our sales and
marketing efforts directly to individuals and communities,
rather than employers and other groups targeted by commercial
plans. We have developed internal regulatory affairs expertise
to allow us to work more effectively with the states and other
governments that regulate our programs and services.
Centralized and Scalable Operations.
We have centralized various functions
across all of our health plans, including claims processing,
member services, information technology, regulatory compliance
and medical management and pharmacy benefits management
programs. We have successfully developed a data reporting system
to help assure that consistent sources of claims and member
information are provided across all of our health plans, which
enables our management team to better assess and control medical
costs. Our processing systems operate on a single technology
platform and have been designed to be scalable to accommodate
growth. In a study performed by the manufacturer, our core
transaction system demonstrated scalability to more than
6.5 million members and 2,800 concurrent users. We seek
continuously to improve our administrative and operational
infrastructure to be scalable for rapid and cost-effective
expansion in existing and new markets.
Localized, Disciplined Sales and Marketing
Efforts.
Our sales force is designed
to target the diverse ethnic, cultural and linguistic
composition of the communities we serve with over six different
languages spoken. Through the strong relationships our sales
people have with community leaders and healthcare
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providers, we are able to access
Medicaid-eligible populations and encourage them to join our
plans, resulting in greater market share than relying solely on
mandatory assignments. Our sales efforts are enhanced by
targeted marketing designed to strengthen our local brands. We
focus on specific media such as community events, direct mail,
radio advertisements and other highly targeted programs. We
believe these marketing programs enhance our leading brands,
such as HealthEase and Staywell in Florida, and will allow us to
further penetrate the Medicare market. Our sales and marketing
team also provides us with increased flexibility in assessing
potential new markets. We believe that we have developed the
requisite infrastructure and expertise to succeed in both
mandatory and non-mandatory Medicaid managed care states.
Strong Relationships with Government Agencies.
We work closely with the government
agencies that regulate us to help develop the products and
services that we offer. Through this approach, we are able to
offer health plans that deliver cost savings for the states in
which we operate. For example, under our Medicaid contract with
the State of Florida, the state pays us a discounted percentage
of approximately 92% of the fee-for-service rate the state pays
under the traditional Medicaid program. As a result, in 2003, we
estimate that our Medicaid services saved the State of Florida
approximately $54.4 million compared to what the state
would have been required to pay under the traditional program.
We have demonstrated to government agencies our ability to
provide quality healthcare services in a cost-effective manner.
As a result, we believe that the government agencies that
regulate us remain committed to the growth of managed care as an
element of an overall plan to control rising healthcare
expenditures.
Partnerships with Providers.
We strive to be a low hassle partner
for our providers and to provide them with ongoing health and
related data that allows them to care for our members
effectively and manage their practices efficiently. We
accomplish this by:
•
contracting with providers that we consider
    well-suited, based on proximity, languages spoken in their
    communities, culture and experience, to provide high-quality and
    cost-effective services to our members;
•
consulting with our Medicare providers to design
    benefit packages that the providers believe will deliver
    quality, cost-effective services to our Medicare members;
•
sponsoring marketing events, which helps increase
    our member base and, in turn, helps our providers build their
    practices;
•
supplying our providers with risk management
    data, allowing them to provide services to our members more
    efficiently;
•
providing high-quality service to our providers,
    including paying claims on a timely basis, and promptly
    responding to their operational inquiries;
•
reducing the number of procedures requiring
    pre-approval; and
•
utilizing web-based functions to help reduce the
    administrative burden on our providers.
By aligning our incentives with those of our
providers, providing frequent, data-based feedback on
performance, and providing high-quality service, we seek to
develop networks that aid our efforts to attract and retain
members. Using this approach, we have developed the flexibility
to offer both fee-for-service and capitated provider payment
methods.
Integrated Medical Management.
We employ a multi-tiered approach to
medical management to ensure that our members receive
appropriate, high-quality care, while containing our costs and
ensuring an efficient healthcare delivery network. Key elements
of our medical management strategy include:
•
A focus on preventative
    care.
Our approach to contracting
    allows us to align our interests with those of our providers by
    providing financial incentives for preventative health services,
    such as childhood immunizations, well-child check-ups, diabetes
    monitoring and treatment and mammogram screening. We focus on
    helping our members and providers to identify medical problems
    at an early stage, which results in a higher quality of care for
    members while reducing our medical costs. For example, on a
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monthly basis, we communicate with our primary
    care providers regarding preventative services that may be
    necessary for the individual members they serve.
•
Network structure.
Our providers have been selected based on our specific benefit
    design and their willingness to help us manage medical costs. We
    encourage our providers to work closely with their patients and
    proactively manage their healthcare, which we believe has
    resulted in our members receiving the appropriate level of
    healthcare at the appropriate time, rather than on an episodic
    basis.
•
Careful management of outpatient, inpatient
    and other services.
Our medical
    management associates proactively communicate with our providers
    to ensure that our members are receiving the necessary care in
    the appropriate healthcare delivery setting. We also have
    established pharmacy management programs and policies that allow
    us to manage our pharmaceutical costs more effectively. In
    addition, we utilize on site nurses to coordinate with
    hospital-based physicians to promote effective care management.
•
Case and disease
    management.
We have developed case and
    disease management programs that address the particular
    healthcare needs of our members. Our medical directors and
    medical staff actively manage cases of members with specific
    high-risk conditions, such as congestive heart failure and
    diabetes, to help ensure that these members are receiving the
    appropriate level of healthcare given the particular
    circumstances of each case.
We believe that this multi-tiered approach has
helped us improve medical outcomes for our members, which
results in cost savings.
Experienced Management Team.
Our management has extensive
experience operating managed care plans. Our executive officers
have more than 85 years of combined experience in the
healthcare industry with healthcare plans such as Aetna, Cigna,
Humana and Oxford. Our management team is focused on process and
data analytics, which has enabled us to create a culture that
emphasizes effective execution of our business plans and
analysis of results. Members of our medical management team are
board certified in a variety of healthcare disciplines, allowing
us to manage a broad range of healthcare issues more
effectively. We believe that our management's experience
brings a professional, disciplined approach to the operation of
government-sponsored healthcare plans, resulting in increased
operational efficiencies.
Our Growth Strategy
Our objective is to be the leading provider of
government programs-focused managed care services. To achieve
this objective, we intend to grow our business by:
Expanding our Medicaid Business within
Existing Markets.
We operate in
markets that present significant opportunities for expanding our
Medicaid membership. We believe that there are significant
growth opportunities in Florida. According to data from the
Henry J. Kaiser Family Foundation, while approximately 63% of
Medicaid-eligible beneficiaries in Florida are enrolled in some
form of managed care program, including primary care management
programs, only 34% of Medicaid-eligible beneficiaries
participate in a fully-capitated, risk-bearing managed health
plan. New York is also a significant market for Medicaid managed
care services, with approximately 3.1 million
Medicaid-eligible beneficiaries. According to data from Kaiser,
in New York, only 44% of Medicaid-eligible beneficiaries
participate in a fully-capitated, risk-bearing managed health
plan. Each of the states in which we operate, Florida, New York
and Connecticut, has mandatory assignment of a certain
percentage of Medicaid-eligible individuals to Medicaid managed
care plans. We intend to continue to grow our business in the
markets that we currently serve by:
•
maintaining and expanding our provider networks;
•
deepening relationships with our providers;
•
providing high-quality, affordable healthcare;
•
tailoring our localized marketing efforts to
    reach individuals who are eligible for government healthcare
    programs;
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•
encouraging our government partners to increase
    mandatory assignment;
•
focusing on the healthcare needs of the aged and
    disabled populations; and
•
selectively pursuing acquisitions of Medicaid
    membership within our existing markets.
Leveraging our Established Medicaid Businesses
to Develop Medicare Plans.
We intend
to leverage the core competencies, systems and infrastructure
that we have developed through our established Medicaid
businesses to continue to develop Medicare plans. We believe
that there are compelling synergies between Medicaid and
Medicare health plans that make leveraging our Medicaid
businesses attractive, including:
•
a similar sales process, focused on individual,
    community-based efforts;
•
member demographics similar to the Medicaid
    population, particularly the SSI population, characterized by
    lower income, elderly individuals;
•
a focus on strong provider relationships;
•
significant provider network overlap that results
    from the many providers that meet the healthcare needs of both
    Medicaid and Medicare beneficiaries;
•
a focus on cost-effective networks and operations;
•
the importance of disciplined medical management;
•
an ability to leverage our existing licenses and
    investments in required statutory capital; and
•
an emphasis on mutually beneficial relationships
    with regulatory agencies.
We believe that there is a significant
opportunity to continue leveraging our strong Medicaid
businesses, including our marketing and sales processes and our
provider and regulatory relationships in Florida to increase our
Medicare membership in the state. We currently have
approximately 41,000 Medicare members in Florida out of the
approximately 2.9 million Medicare enrollees. We believe
that we can also expand our Medicare business organically in the
other states where we currently operate, as well as in
additional markets, without incurring significant expenses. In
our organic expansion efforts, we expect that we will incur
marginal direct expenses, such as personnel and facilities
costs, and may need to provide marginal capital reserves where
we are unable to leverage our current capital reserves. In New
York, we have a successful Medicaid plan and are in the process
of re-launching our Medicare plan. We are also entering new
markets. For example, we are in the process of establishing a
Medicare health plan in Louisiana, where we have identified
providers that are well suited to serve the Medicare population
and where we believe the demographics and reimbursement rates
indicate that we can be successful. We also intend to monitor
the effects of MMA and may consider acquisitions of select
Medicare managed care businesses.
Entering New Medicaid Markets Through Internal
Growth and Acquisitions.
We intend to
enter new Medicaid markets, whether or not they have mandatory
assignment, through a combination of internal growth and
acquisitions. Entering new Medicaid markets will provide us with
the opportunity to grow and diversify our revenues, enhance
economies of scale from our centralized administrative
infrastructure, and strengthen our relationships with providers
and government agencies. We expect to grow organically by
expanding our service area and provider network, increasing
awareness of our local brand names and maintaining positive
provider relationships.
We also intend to enter new markets by acquiring
existing Medicaid managed care businesses. We expect to focus
our expansion on markets with significant Medicaid populations,
large provider populations, a fragmented competitive landscape
and favorable regulatory conditions. We believe that the managed
care industry, particularly Medicaid-focused plans, is likely to
experience continued consolidation in the future and that this
will provide us an opportunity to acquire existing plans in
attractive markets.
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Our Health Plans
We provide managed care services targeted to
government-sponsored healthcare programs in Florida, New York
and Connecticut. We offer a diverse array of products, primarily
Medicaid and related state programs, such as SCHIP, and Medicare
programs. The following tables summarize our membership by state
and our membership by program as of December 31, 2003:
State
Total Members
Florida
475,000
New York
56,000
Connecticut
24,000
Program
Total Members
Medicaid
512,000
Medicare
42,000
Other
1,000
We are in the process of resuming Medicare
marketing activities in New York and re-launching our Medicare
plan in the state. We are also establishing a Medicare health
plan in Louisiana. We expect to begin operating in Louisiana in
late 2004, subject to receiving final regulatory approval.
Each of our plans receives premiums from the
federal or state governments in the markets where we operate. We
generally receive a fixed premium per member per month to
provide healthcare benefits to our members pursuant to our
contracts in each of our markets.
Florida
We are the largest operator of Medicaid managed
care plans in Florida. We began providing Medicaid services in
Florida in 1994, and now operate the two largest Medicaid
managed care plans in the state, Staywell Health Plans, or
Staywell, and HealthEase. Our two distinct Medicaid health plans
have separate brand identities, sales forces, provider networks
and geographic coverage, but both utilize our centralized back
office and claims processing systems. This allows us to benefit
from economies of scale while increasing our coverage and
penetration throughout the state.
Our Medicaid managed care plans have broad
geographic coverage throughout Florida. Staywell operates in 15
counties, with a particularly strong presence in South Florida.
HealthEase operates in 32 counties and has a significant
presence in Central and South Florida, as well as in counties in
Northern Florida that tend to be more rural.
We began providing Medicare services in Florida
in 2000 and now operate a rapidly growing Medicare plan under
the name WellCare. Our Medicare plan operates in 11 counties in
Florida, and has particularly large membership in South Florida,
which has a large population of Medicare-eligible individuals
and favorable reimbursement rates.
Our Medicaid contracts with the State of Florida
for our Staywell and HealthEase plans expire on June 30,
2004. Our Medicare contract for our WellCare plan expires on
December 31, 2004. We also have a SCHIP contract with the
Florida Healthy Kids Corporation that expires on
September 30, 2005. We have been able to successfully renew
our contracts since we began operating in Florida.
New York
Our Medicaid managed care programs in New York,
which we provide under the WellCare name, have grown rapidly
under our management. In 2003, our membership grew from
approximately 45,000 members to approximately
56,000 members. During this period, we substantially
increased the size of our provider network, adding eight
hospitals, including six in New York City, and almost 700 new
physicians, including specialists. We currently operate in four
of the boroughs of New York City and in the Hudson Valley region.
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When we acquired the New York operations in 2002,
we inherited a number of operational deficiencies, including a
prohibition on Medicare marketing previously imposed by CMS in
August 1999 due to a lack of compliance with the terms of our
Medicare contract. We have made significant investments in our
New York operations to address these challenges and to compete
more effectively in this market, including by:
•
hiring an experienced, local senior management
    team, including a Vice President with more than 10 years of
    healthcare experience;
•
relocating our New York headquarters from
    Newburgh to Manhattan to access a deeper talent pool of
    associates;
•
improving our regulatory compliance program,
    including through the implementation of a corporate-wide ethics
    and compliance program, called the Trust Program and by hiring
    local compliance personnel; and
•
reorganizing our operations, including the
    consolidation of certain functions in our Tampa corporate
    headquarters.
We believe that we have successfully addressed
most of the regulatory challenges we faced in New York and have
implemented comprehensive corrective action plans that were
approved by both the New York State Department of Health and CMS
in June 2003. As a result, we have commenced the process of
re-launching our Medicare plan in New York, which as of
December 31, 2003 had approximately 600 members. We expect
to re-commence marketing efforts in the second half of 2004. In
connection with the re-launch, we are restructuring our Medicare
provider network, with a focus on building strong relationships
with providers and hospitals, and have made significant
investments in quality improvement.
Our Medicaid contracts in New York expire on
September 30, 2004. Our Medicare contract with CMS expires
on December 31, 2004. We also have a SCHIP contract with
the State of New York that expires on June 30, 2004.
Despite the regulatory challenges we have encountered in New
York, we have been able to successfully renew our contracts
since we began operating in that state.
Connecticut
In Connecticut, we operate a Medicaid managed
care plan under the name PreferredOne. In 2003, our PreferredOne
membership grew from 17,000 members to over 24,000 members. We
also significantly expanded our provider network in the state
during that period, adding more than 150 primary care
physicians and four hospitals.
We began operating in Connecticut in 1995 when we
purchased Yale New Haven Health Plan. We currently offer
services in each of Connecticut's eight counties. Our
Medicaid contracts with the state expire on September 30,
2004. We have been able to successfully renew our contracts
since we began operating in Connecticut.
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Medical Programs and Services
The programs and services we offer to our members
vary by state and county and are designed to address the unique
needs of our members within the various communities we serve.
Through our Medicaid plans, we provide our members access to a
broad spectrum of medical benefits. These benefits range from
all facets of primary care and preventative programs to full
hospitalization and tertiary care. Our Medicaid contracts
determine to a large extent the type and scope of healthcare
services that we arrange for our members; however, we do
customize our benefits in the following ways, which we believe
makes our products more attractive:
Benefit
Florida
New York
Connecticut
Vision
Adults receive unlimited eye exams and unlimited
    eyeglasses with no co- payment.
No difference from standard Medicaid benefits.
No difference from standard Medicaid benefits.
Dental
Adults receive x-rays, semi-annual cleanings,
    extractions and fillings, all with no co-payment.
No difference from standard Medicaid benefits.
No difference from standard Medicaid benefits.
Over-the-counter
Monthly over-the-counter benefit— $10 worth
    of products at no charge delivered directly to the member's
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
No difference from standard Medicaid benefits.
Monthly over-the-counter benefit— $10 worth
    of products at no charge delivered directly to the member's
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
Case management
Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
Professionals work with chronically ill to
    coordinate care and to help ensure that health issues are
    managed appropriately.
Nurse help line
24-hour nurse help line.
24-hour nurse help line.
24-hour nurse help line.
In addition, our approach to contracting has
allowed us to build strong provider networks, which provides our
members with access to physicians to whom they may not otherwise
have access. Members are required to use our network, except in
cases of emergencies, transition of care, or when specialty
providers are unavailable or inadequate to meet a member's
medical needs, and generally must receive a referral from their
primary care physician in order to receive healthcare from a
specialist, such as an orthopedic surgeon or neurologist.
Members do not pay any premiums, deductibles or co-payments.
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Through our Medicare plans, we also cover a wide
spectrum of medical services. We provide an enhanced level of
services relative to standard fee-for-service Medicare coverage,
ranging from reduced out-of-pocket expenses to prescription drug
coverage. While our Medicare benefits offerings vary by county,
the following is an example of the enhanced level of benefits we
offer in a metropolitan county of Florida in comparison to those
benefits generally available under the Medicare program:
Benefit
Standard Medicare Fee-For-Service
Our Medicare Benefits
General
Patient must pay out-of-pocket drug costs (or
    obtain supplemental insurance) and 20% of hospital stay.
Predictable healthcare costs, no co- insurance or
    deductibles.
Vision
One pair of glasses, only after cataract surgery.
    Co-insurance costs associated with diseases and conditions of
    eye. No routine eye exams.
Vision covered, generally a $10 co- payment for
    glasses and exams. Routine eye exams generally at no charge.
Dental
Not covered. 100% out-of-pocket expense or
    patient may obtain supplemental insurance.
Covered— small co-payment for oral exams and
    cleanings. One fluoride treatment per year at no charge. Annual
    x-rays are covered, with small co-payment.
Hearing
Not covered. 100% out-of-pocket expense for
    routine exams and hearing aids.
No co-payment for one pair of hearing aids every
    two years (includes exam with $10 co-payment).
Routine physicals
Not covered.
One annual physical covered with no co-payment.
Preventative care
Generally, patient pays 20% of the cost of the
    service.
100% covered, with no co-payment or co-insurance.
    We proactively contact members and physicians and recommend
    preventative services.
Drug benefit
Under Medicare reform legislation, not fully
    implemented until 2006. Currently, patients pay 100% or obtain
    supplemental insurance.
Small co-payment for generic drugs. In some
    areas, we also offer a brand name drug benefit for a larger co-
    payment.
Over-the-counter
Not covered.
Monthly over-the-counter benefit— $10 worth
    of products at no charge delivered directly to the member's
    home. Includes vitamins, cough and cold remedies, first aid
    supplies and many other products.
Through these enhanced benefits, the
out-of-pocket expenses incurred by our members are reduced,
which allows them to better predict their healthcare costs.
Most of our Medicare plans require members to pay
a co-payment for services provided, and the amount of the
co-payment varies by benefit. None of our plans require a
deductible for services. Members are required to use our network
of providers, except in limited cases such as emergencies,
transition of care, or when specialty providers are unavailable
or inadequate to meet a member's medical needs, and
generally must receive a referral from their primary care
physician in order to receive healthcare from a specialist.
Also, compared to our Medicaid plans, we have more flexibility
in designing benefits packages, and we can charge members a
premium for benefits that the Medicare fee-for-service plan does
not offer.
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As part of our continuing efforts to improve the
services we offer members, in January 2004 we implemented a drug
discount benefit for members of our Florida Medicare plans. We
introduced a new member identification card that includes a drug
discount card, entitling members to discounts of approximately
19% on brand-name prescription drugs and 28% on generic drugs.
We provided this benefit to our members several months in
advance of CMS's implementation of the prescription drug
discount card program authorized by MMA. As a result, our
Medicare members are already able to access benefits comparable
to those benefits offered under the new law.
Provider Networks
We have longstanding, established relationships
with our network of providers in each of the markets we
currently serve. We continuously upgrade and review our networks
to ensure adequacy of coverage and compliance of individual
providers with our network and operational standards, and we
replace and add providers as appropriate. We arrange for the
provision of healthcare services to our members through mutually
non-exclusive contracts with independent primary care
physicians, specialists, ancillary medical agencies and
professionals and hospitals.
Our network of primary care physicians plays an
integral role in managing the healthcare of our members. The
relationship between the primary care physician, or PCP, and a
member is critical for the member to make the most effective use
of managed care. Our PCPs are encouraged to discuss care options
with new members during their first visit, and answer questions
they may have about managed care, as well as to assist them in
understanding the role of the PCP. Primary care physicians
include family and general practitioners, pediatricians,
internal medicine physicians and OB/ GYNs. Specialty care
physicians provide medical care to members generally upon
referral by the primary care physicians. The following table
shows the total approximate number of primary care physicians,
specialists and hospitals participating in our network as of
December 31, 2003, 2002 and 2001:
Florida
New York
Connecticut
Total
Primary care physicians
2003
3,385
1,752
840
4,977
2002
3,415
1,718
684
5,817
2001
3,348
1,886
727
5,961
Specialists
2003
6,680
3,396
2,383
12,459
2002
7,069
3,194
2,347
12,610
2001
6,894
3,812
3,189
13,895
Hospitals
2003
207
79
16
302
2002
216
79
12
307
2001
213
79
16
308
We have also contracted with other ancillary
medical providers and professionals for physical therapy, mental
health and chemical dependency care, home healthcare, vision
care, diagnostic laboratory tests, x-ray examinations, ambulance
services and durable medical equipment. Additionally, we have
contracted with a national pharmacy benefit manager that
provides a local pharmacy network in our markets where pharmacy
is a covered benefit. We also offer, using in-house resources,
comprehensive management of mental health and substance abuse
services.
We value our relationships with our providers.
Our provider relations strategy is focused on being a low hassle
partner. Examples of the steps we have taken to implement this
strategy include:
•
paying claims promptly;
•
providing web-based access to eligibility
    information;
•
delivering useful information to our providers,
    including monthly reports to help providers evaluate their
    performance and increase their efficiency;
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•
reducing restrictions on network physicians in
    ordering of medical tests and procedures; and
•
sponsoring marketing events designed to increase
    awareness of our plans and the advantages of managed care,
    sometimes with the participation of our providers.
We also consult with members of our provider
network to obtain their assistance in designing benefit
packages, and we enter into relationships using a range of
contract types, including capitated and fee-for-service
arrangements. See "Provider Payment Methods." We
believe that our focus on strong provider relationships has
helped us to make our health plans more attractive and increase
our membership.
In order to help ensure the quality of our
providers, we credential and re-credential our providers using
standards that are required in the states in which we operate.
In order to encourage our PCPs to be proactive in the treatment
of our members, we pay a fee-for-service rate in excess of the
capitation rate to our PCPs who provide specified preventative
health services, such as childhood immunizations, lead screening
and well-child check-ups. In New York, PCPs to whom we pay a
capitation also receive an additional payment, or bill-above,
for supplying us with timely encounter data regarding the nature
of members' visits. We use this data to improve the level
of preventative healthcare we provide, such as vaccinations,
immunizations and health screenings for new-born children. In
Florida and Connecticut, we plan to pay our PCPs bill-aboves for
encounter data beginning in early 2004. This data will also help
us to monitor the amount and level of medical treatment and
improve our compliance with regulatory reporting requirements to
ensure high-quality medical care.
Our contracts with hospitals, independent primary
care physicians and specialists are usually for one to two year
periods and automatically renew for successive one-year terms.
The contracts can generally be cancelled by either party upon a
specified prior written notice period, which is typically 60 or
90 days, subject to various conditions. With respect to our
hospital contracts, the hospital is paid for all medically
necessary inpatient and outpatient services, including emergency
services, diagnostic services and therapeutic care provided to
members. With the exception of admissions from the emergency
room, all inpatient hospital services require precertification
from our utilization review staff. All contracted hospitals are
required to participate in our utilization review and quality
improvement programs.
Provider Payment Methods
We utilize three primary methods of payment with
our network providers: capitation, fee-for-service and risk
sharing arrangements, which we utilize in our Medicare business.
We periodically review our payment methods as necessary. Factors
we generally consider in adjusting payment methods include
changes to state Medicaid fee schedules, the competitive
environment, current market conditions, anticipated utilization
patterns and projected medical benefits expense.
Medicaid
Capitation.
We pay
most of our PCPs a fixed fee per member, which is referred to as
capitation. Under this arrangement, the PCP is at risk for all
costs related to the services rendered by such physician, with
the exception of those preventative health services that are
paid in addition to the capitation and subject, in some cases,
to stop-loss arrangements. In some instances, certain specialty
physicians are paid on a capitated basis. For the nine months
ended September 30, 2003, 16% of our Medicaid payments to
providers were on a capitated basis.
Fee-for-Service.
We
pay our other providers, including most specialists, based upon
the service performed, which is referred to as fee-for-service.
For the nine months ended September 30, 2003, 84% of our
Medicaid payments to providers were on a fee-for-service basis.
The primary fee-for-service arrangements are percentage of
Medicaid payment and per diem and case rates. These arrangements
may also be combined. The following is a description of the
principal arrangements we utilize:
•
Percentage of Medicaid fee
    schedule.
We pay providers a specified
    percentage of the amount Medicaid would pay under the
    fee-for-service program.
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•
Per diem and case
    rates.
Hospital facility costs are
    generally reimbursed at negotiated per diem or case rates, which
    vary depending upon the level of care. Lower intensity services
    are generally paid at a lower rate than high intensity services.
    For example, services provided on behalf of a newborn baby who
    in order to gain weight stays in the hospital a few days longer
    than the mother would typically be paid at a lower rate; whereas
    a neo-natal intensive care unit stay for a baby born with severe
    developmental disabilities would be paid at a higher rate.
A significant percentage of our fee-for-service
contracts with providers allow for automatic adjustments in
payments based upon changes in government reimbursement rates.
Medicare
Risk-sharing
Arrangements.
Within our capitation
and fee-for-service arrangements, which account for 27% and 73%,
respectively, of our Medicare payments to providers, a small
number of Medicare providers operate under specialized capitated
risk arrangements in order to more efficiently align our
interests and reduce our risk. Under these arrangements, we
establish a risk fund for each provider based on a percentage of
premium paid, which is evaluated on an individual or group
basis, subject to monitoring and analysis by our actuaries.
Based on this analysis, we estimate the amount, if any, due to
the provider and establish a liability and pay the applicable
provider on a periodic basis, to the extent that the balance
exceeds claim payments.
Out-of-Network Providers
When our members receive services for which we
are responsible from a provider with whom we have not
contracted, such as in the case of emergency room services from
non-contracted hospitals, we generally attempt to negotiate a
rate with that provider. In some cases, we are obligated to pay
the full rate billed by the provider.
Sales and Marketing Programs
Our sales force consists of 363 associates who
focus their efforts on individuals and communities, as opposed
to employer groups. We believe that our targeted sales and
marketing efforts are primarily responsible for our rapid
membership growth in several of our markets.
We employ a disciplined approach to sales and
marketing by measuring the return on investment of our key sales
and marketing activities. This approach allows us to emphasize
those activities that we have determined to be effective and
eliminate others than have not provided us with an acceptable
return on investment.
As of December 31, 2003, our sales force was
deployed in our markets as follows:
Number of
Market
Associates
Florida
216
New York
130
Connecticut
17
In addition, we use third-party brokers and
agents to help us promote our plans in some Medicare markets. In
some cases, these parties receive payment for referrals that our
associates process, while in other cases we pay the brokers and
agents for completing the applications themselves. The
activities of these brokers and agents are regulated by the
states and CMS.
Our marketing efforts involve designing
attractive benefit packages and generating interest in our
programs among individuals. Our sales efforts involve promoting
the product in the communities we serve at events and in
conversations with eligible individuals.
In general, the lead-generation components of our
marketing efforts are more heavily concentrated on our Medicare
products, where the return on investment for such activities has
proven to be higher. Through our
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strong relationships with providers and community
leaders, our Medicaid and Medicare sales teams employ promotions
activities and other techniques to develop interest among
eligible populations.
Our sales and marketing programs have been
developed on a localized basis with a focus on the communities
in which our members reside. We often conduct our sales programs
in churches, community centers and in coordination with
government agencies. We regularly participate in local events
and festivals and organize community health fairs to promote our
products and the benefits of preventative care. We also utilize
traditional marketing methods such as direct mail,
telemarketing, mass media and cooperative advertising with
participating medical groups to generate leads.
Consistent with our community-focused approach,
we employ a culturally diverse sales staff, with more than six
languages represented, including Spanish, Russian and Chinese.
This allows us to target specific demographic markets, including
markets requiring specific language skills and knowledge.
Our marketing and sales activities are heavily
regulated by CMS and the states. For example, our sales and
marketing materials must be approved in advance by the
applicable regulatory authority. In addition, our sales
activities are subject to various restrictions. We are allowed
to engage in various selling activities, such as conveying
information regarding the benefits of preventative care,
describing the operations of managed care plans and providing
information about eligibility requirements. In Florida and New
York, we can assist in the enrollment process. See
"Regulation" for a further description of restrictions
on marketing and sales activities.
Quality Improvement
We continually strive to improve the quality of
care provided to our members. We believe that continuous
improvement in the delivery of quality care and measurement of
the results of quality improvement efforts will be driving
factors in the continued growth of managed care.
Our Quality Improvement Program provides the
basis for our quality and utilization management functions and
outlines specific, ongoing processes designed to improve the
delivery of quality healthcare services to our members, as well
as to ensure compliance with regulatory and accreditation
standards. Our Quality Improvement Committee is chaired by our
President and Chief Executive Officer and includes all senior
executive management and other key company associates as
members. The Quality Improvement Committee also has a number of
subcommittees that are charged with monitoring certain aspects
of care and service, such as healthcare utilization, pharmacy
services and provider credentialing/recredentialing. Several of
our subcommittees include physicians as members.
Our Quality Improvement Program is evaluated
annually and revised as necessary to address recent developments
and areas of improvement. Elements of our Quality Improvement
Program include the following:
•
evaluation of the effects of particular
    preventative measures;
•
member satisfaction surveys;
•
grievance and appeals processes for members and
    providers;
•
orientation visits to, and site audits of, select
    providers;
•
provider credentialing and recredentialing;
•
ongoing member education programs;
•
ongoing provider education programs;
•
regulatory compliance;
•
health plan accreditation; and
•
medical record audits.
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As part of our Quality Improvement Program, we
have implemented changes to our reimbursement methods to reward
those providers who encourage preventative care, such as
well-child check-ups and prenatal care. In addition, we have
specialized systems to support our quality improvement
activities. Information is drawn from our systems to identify
opportunities to improve care and to track the outcomes of the
services provided to achieve those improvements. Some examples
of our intervention programs include:
•
a prenatal case management program to help women
    with high-risk pregnancies deliver full-term, healthy infants;
•
a program to reduce the number of inappropriate
    emergency room visits;
•
a disease management program to decrease the need
    for emergency room visits and hospitalizations for asthma,
    congestive heart failure and diabetes patients; and
•
a wound management program to redirect
    specialized care to the home setting, resulting in improved
    patient outcomes and reduced cost of care.
We believe that these efforts have resulted in
improvements in the quality of care our members receive, while
reducing our medical costs. As a result of our Quality
Improvement Program, we have received accreditation from the
Accreditation Association for Ambulatory Health Care, or AAAHC,
in the State of Florida.
Corporate Compliance
Due to the increasingly complex ethical and legal
questions facing all participants in the healthcare industry, we
have unified our corporate ethics and compliance policies by
implementing a comprehensive corporate ethics and compliance
program, called the Trust Program. The Trust Program covers all
aspects of our company and is designed to assist us with
conducting our business in accordance with applicable federal
and state laws and high standards of business ethics. The Trust
Program contains the following elements:
•
written standards of conduct;
•
designation of a corporate compliance officer and
    compliance committee;
•
effective training and education;
•
effective lines for reporting and communication;
•
enforcement of standards through disciplinary
    guidelines and actions;
•
internal monitoring and auditing; and
•
prompt response to detected offenses and
    development of corrective action plans.
Our board of directors has designated our General
Counsel to serve as our Chief Compliance Officer, with the
assistance of a Corporate Compliance Committee, to have the
authority to implement the Trust Program. The Chief Compliance
Officer is responsible for coordinating the efforts of all
associates involved in the Trust Program. Additionally, our
board of directors has authorized the Chief Compliance Officer
to convene a Corporate Compliance Committee consisting of
several of our senior executives.
Our associates who handle corporate compliance
work within our Legal Services area and assist the Corporate
Compliance Committee in implementing and monitoring the Trust
Program. All associates within the Legal Services area, all
department directors in each area, and certain others as needed,
are designated as "Compliance Coordinators" to assist
in implementing and monitoring the Trust Program. In that
capacity, the Compliance Coordinators are responsible for
ensuring compliance within their areas of operations and for
reporting suspected violations of the Trust Program, applicable
federal and state laws, and our high standards of business
ethics.
We maintain and update training and monitoring
programs to educate our directors, associates and independent
contractors on the legal and regulatory requirements of their
respective duties and positions and to detect possible
violations. These programs include additional written policies,
informational handouts and
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memoranda or, when appropriate, training seminars
in selected areas. We will continue to monitor and promote
compliance with new federal and state laws and regulations. To
help ensure compliance with the Trust Program, we also conduct
regular, periodic compliance audits by internal and external
auditors and compliance staff who have expertise in federal and
state healthcare laws and regulations.
Competition
In the Medicaid managed care market, our
principal competitors for state contracts, members and providers
include the following types of organizations:
•
Primary Care Case Management Programs.
Programs established by the states
    through contracts with primary care providers to provide to the
    Medicaid recipient primary care services, on a non-capitated,
    non-risk basis, as well as to provide limited oversight over
    other services.
•
Commercial HMOs.
National and regional commercial
    managed care organizations that have Medicaid members in
    addition to members in private commercial plans.
•
Medicaid HMOs.
Managed care organizations that focus
    solely on providing healthcare services to Medicaid recipients,
    typically on a capitated, full-risk basis. Many of these
    competitors operate in a single or small number of geographic
    locations. There are a few multi-state Medicaid-only
    organizations that tend to be larger in size and therefore able
    to leverage their infrastructure over a larger membership base.
In the Medicare managed care market, our primary
competitors for contracts, members and providers are national
and regional commercial managed care organizations that serve
Medicare recipients and provider-sponsored organizations. MMA
may cause a number of commercial managed care organizations
already in our service areas to decide to enter the Medicare
market. MMA also creates a new competitive bidding process
beginning in 2006 for setting the payment and the beneficiary
premium and benefits, without limiting the number of bidders
that may provide the benefits. We are currently evaluating the
effects of MMA and the implications for our business.
We will continue to face varying levels of
competition as we expand in our existing service areas or enter
new markets. However, the licensing requirements and bidding and
contracting procedures in some states present barriers to entry
into the Medicaid and Medicare managed care markets.
Many of our competitors are large companies that
have greater financial, technological and marketing resources
than we do. The competition we face in each of our markets is as
follows:
•
Florida: Our Medicaid plans collectively have
    approximately 50% market share in Florida, based on
    membership. These plans face competition from approximately
    14 competitors statewide, including Amerigroup Corporation,
    with approximately 20% of the market, and Humana, Inc., with
    approximately 8% of the market. Our Medicare plan in
    Florida has an approximately 8% market share, the fourth
    largest in the state. We compete with 15 other Medicare
    managed care plans in Florida including Humana, Inc.,
    UnitedHealthcare of Florida, Inc. and CarePlus Health Plans,
    Inc., which collectively have an approximately 58% market
    share.
•
New York: Our Medicaid plans have approximately
    2.2% market share in New York. Our plans face competition from
    over 30 competitors in New York, including HIP Health
    Plan of New York, with approximately 11% of the
    market, Fidelis Care New York, with approximately
    10% of the market, and others such as Healthfirst, Inc.,
    Health Plus PHSP, Inc., MetroPlus Health Plan, Inc., CarePlus
    Health Plan and Affinity Health Plan, each with less than
    10% of the market.
•
Connecticut: Our Medicaid plans have
    approximately 5% market share in Connecticut, and face
    competition from three main competitors: Anthem Blue Cross and
    Blue Shield, with approximately 41% of the market, HealthNet,
    Incorporated, with approximately 36% of the market, and
    Community Health Network of Connecticut, with approximately 18%
    of the market.
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We compete with other managed care organizations
for public-sector healthcare program contracts, members and
providers. States and the federal government generally use
either a competitive bidding process or award individual
contracts to any applicant that can demonstrate that it meets
the government's requirements. To select a winning bid or
award a contract, state governments and the federal government
consider many factors, including the plan's provider
network, quality and utilization management processes,
responsiveness to member complaints and grievances, timeliness
of claims payment and financial resources.
People who wish to enroll in a managed care plan
or change plans typically choose a plan based on a specific
provider being part of the network, the quality of care and
service offered, ease of access to services and the availability
of supplemental benefits.
In addition, beginning in 2006, a new regional
Medicare Preferred Provider Organization, or Medicare PPO,
program will be implemented pursuant to MMA. Medicare PPOs would
allow their members more flexibility to select physicians than
the current Medicare+Choice plans, which are HMOs that require
members to coordinate with a primary care physician. The
regional Medicare PPO program will compete with local
Medicare+Choice HMO plans, including the plans we offer.
We also compete with other managed care
organizations to enter into contracts with physicians, physician
groups and other providers. We believe the factors that
independent physicians, physician groups and other providers
consider in deciding whether to contract with us include
potential member volume, payment methods, timeliness of claims
payment, incentive programs and administrative service
capabilities.
Regulation
Our healthcare operations are regulated by both
state and federal government agencies. Regulation of managed
care products and healthcare services is an evolving area of law
that varies from jurisdiction to jurisdiction. Regulatory
agencies generally have discretion to issue regulations and
interpret and enforce laws and rules. Changes in applicable laws
and rules occur frequently.
In order to operate a health plan, we must apply
for and obtain a certificate of authority or license from each
state in which we intend to operate. However, starting in 2006,
regional Medicare Advantage plans that operate in more than one
state will initially only need a license from one state within a
region. Our health plans are licensed to operate as health
maintenance organizations in Florida, New York and Connecticut,
and we have an application pending in Louisiana. In those
jurisdictions, we are regulated by both the state insurance
departments and another state agency with responsibility for
oversight of health management organizations. The licensing
requirements are the same for us as they are for commercial
managed healthcare organizations. We must demonstrate to the
state that:
•
we have an adequate provider network;
•
our quality and utilization management processes
    comply with state requirements;
•
we have procedures in place for responding to
    member and provider complaints and grievances;
•
our systems are capable of processing
    providers' claims in a timely fashion and for collecting
    and analyzing the information needed to manage our business; and
•
we have the financial resources necessary to pay
    our anticipated medical care expenses and the infrastructure
    needed to account for our costs.
Each of our health plans is required to report
quarterly, if not monthly, on its performance to the appropriate
regulatory agency in the state in which the health plan is
licensed. Each plan also undergoes periodic examinations and
reviews by the applicable state. The plans generally must obtain
approval from the state before declaring dividends in excess of
certain thresholds. Each plan must maintain a net worth in an
amount determined by statute or regulation and we may only
invest in types of investments approved by the state. Any
acquisition of another plan's members must also be approved
by the state in which the plan is located.
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In addition, our Medicaid and SCHIP activities
are regulated by each state's department of health services
or equivalent agency, and our Medicare activities are regulated
by CMS. These agencies typically require demonstration of the
same capabilities mentioned above and perform periodic audits of
performance, usually annually.
Medicaid
Medicaid was established under the U.S. Social
Security Act of 1965 to provide medical assistance to low income
and disabled citizens. It is state-operated and implemented,
although it is funded by both the state and federal governments.
Our contracts with the state Medicaid programs place additional
requirements on us. Within broad guidelines established by the
federal government, each state:
•
establishes its own eligibility standards;
•
determines the type, amount, duration and scope
    of services;
•
sets the rate of payment for services; and
•
administers its own program.
Some states, such as those in which we operate,
award contracts to applicants that can demonstrate that they
meet the state's requirements. Other states engage in a
competitive bidding process for all or certain programs. We must
demonstrate to the satisfaction of the state Medicaid program
that we are able to meet the state's operational and
financial requirements. These requirements are in addition to
those required for a license and are targeted to the specific
needs of the Medicaid population. For example:
•
we must measure provider access and availability
    in terms of the time needed to reach the doctor's office
    using public transportation;
•
our quality improvement programs must emphasize
    member education and outreach and include measures designed to
    promote utilization of preventative services;
•
we must have linkages with schools, city or
    county health departments, and other community-based providers
    of healthcare, in order to demonstrate our ability to coordinate
    all of the sources from which our members may receive care;
•
we must have the capability to meet the needs of
    the disabled and others with "special needs;"
•
our providers and member service representatives
    must be able to communicate with members who do not speak
    English or who are deaf; and
•
our member handbook, newsletters and other
    communications must be written at the prescribed reading level
    and must be available in languages other than English.
In addition, we must demonstrate that we have the
systems required to process enrollment information, to report on
care and services provided, and to process claims for payment in
a timely fashion. We must also have adequate financial resources
needed to protect the state, our providers and our members
against the risk of our insolvency.
Once awarded, our contracts generally have terms
of one to two years, with renewal options at the discretion of
the states.
In addition to the operating requirements listed
above, the contracts with the states and regulatory provisions
applicable to us generally set forth in great detail provisions
relating to:
•
subcontractors;
•
marketing;
•
safeguarding of member information;
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•
fraud and abuse reporting; and
•
grievance procedures.
Our health plans are subject to periodic
financial and informational reporting and comprehensive quality
assurance evaluations. We submit periodic utilization reports
and other information to the state or county Medicaid program of
our operations.
Medicare
Medicare is a federal program that provides
eligible persons age 65 and over and some disabled persons a
variety of hospital and medical insurance benefits. Medicare
beneficiaries have the option to enroll in a Medicare+Choice
plan as an HMO benefit. Under Medicare+Choice, managed care
plans contract with CMS to provide comparable Medicare benefits
as a traditional fee-for-service Medicare in exchange for a
fixed monthly payment per member that varies based on the county
in which a member resides.
On December 8, 2003, President Bush signed
MMA, which made numerous changes to the Medicare program,
including expanding the Medicare program to include a
prescription drug benefit beginning in 2006, a transitional drug
discount card that will enable Medicare beneficiaries, beginning
in June 2004, to obtain discounts on drugs prior to receiving
drug coverage in 2006, and expanding the Medicare+Choice Program
and renaming it "Medicare Advantage" beginning in
2006. Medicare+Choice plans are eligible to sponsor the drug
discount card and transitional assistance program as well as the
new prescription drug plan. CMS, however, may limit the number
of prescription drug plan sponsors and endorsed drug card
sponsors that are selected in a particular area.
MMA creates the drug discount card and
transitional assistance program as an interim program until the
new drug benefit goes into effect January 1, 2006. The
voluntary drug discount card program will enable Medicare
beneficiaries to pay a fixed fee to access discounts on drugs.
Certain low income beneficiaries may enroll in the transitional
assistance program and receive a subsidy of up to $600 per
year for their drugs that are purchased using the drug discount
card. A Medicare+Choice plan may apply to be an endorsed sponsor
of the drug card as a stand alone product or may apply to offer
the drug discount card exclusively to its enrollees. The drug
discount card program is supposed go into effect by June 1,
2004 and sponsors may continue to enroll eligible individuals
through December 31, 2005. In 2006, endorsed card sponsors
must honor the drug card until the end of a transition period
which runs until the date of the individual's enrollment in
a new drug benefit or the end of the drug benefit enrollment
period.
Under MMA, commencing in 2006, a new voluntary
prescription drug benefit will be available under Medicare.
Medicare beneficiaries will pay a monthly premium for the
covered outpatient drug benefit. The drug benefit is subject to
certain cost sharing. Under the standard drug coverage, for
2006, the cost sharing is a $250 deductible, 25% coinsurance for
annual drug costs reimbursed by Medicare, up to $2,250, and no
reimbursement for drug costs above $2,250, until the beneficiary
has paid $3,600. After that, MMA provides catastrophic stop loss
coverage for annual incurred drug costs in excess of $3,600,
subject to nominal cost-sharing. Plans are not required to
mirror these limits; instead, drug plans are required to provide
coverage that is at least actuarially equivalent to plans that
incorporate the limits. These numbers will be adjusted on an
annual basis. MMA provides subsidies and the reduction or
elimination of cost sharing for certain low-income
beneficiaries, including dual-eligible individuals, who receive
benefits under both Medicare and Medicaid. This new drug benefit
will be offered by new regional prescription drug plans.
Medicare Advantage organizations must offer a plan with the drug
benefit. In addition, Medicare Advantage plans may bid to offer
a stand-alone prescription drug plan that beneficiaries who have
fee for service Medicare may elect.
MMA also revises payment methodologies for
Medicare+Choice plans beginning in 2004, and in 2006 MMA expands
the Medicare Advantage program to include, in addition to the
traditional coordinated care plans established by county, new
regional plans which will provide out-of-network benefits in
addition to in-network benefits. The Secretary of HHS will
create 10 to 50 regions, each of which may include more than one
state or portions of a particular state. MMA creates a new
competitive bidding process beginning in 2006 for both the local
HMO plan and the new regional plan for setting the payment to
the Medicare Advantage
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plan and the beneficiary premium and benefits.
The bidding process does not limit the number of plans that may
participate in the Medicare Advantage program.
MMA shifts coverage responsibility for the drug
benefit for dual-eligible individuals. Starting January 1,
2006, dual-eligibles will receive their drug coverage from the
Medicare program and not the Medicaid program.
SCHIP Programs
The State Children's Health Insurance
Program, or SCHIP, is a federal and state matching program
designed to help states expand health insurance to children
whose families earn too much to qualify for traditional
Medicaid, yet not enough to afford private health insurance.
States have the option of administering SCHIP through their
existing Medicaid programs, creating separate programs or
combining both strategies. The SCHIP programs in Florida, New
York and Connecticut are administered by the same agency that
administers the state's Medicaid program. Currently, all
50 states, the District of Columbia and all U.S.
territories have approved SCHIP plans, and many states continue
to submit plan amendments to further expand coverage under SCHIP.
HIPAA
In 1996, Congress enacted the Health Insurance
Portability and Accountability Act of 1996, or HIPAA. HIPAA is
intended to improve the portability and continuity of health
insurance coverage and simplify the administration of health
insurance claims. All health plans, including ours, are subject
to HIPAA. HIPAA generally requires health plans to:
•
protect the privacy of patient health information
    through physical and electronic security measures; and
•
establish the capability to receive and transmit
    electronically certain administrative healthcare transactions,
    such as claims payments, in a standardized format.
We believe we have achieved substantial
compliance with HIPAA by the applicable deadlines. However,
given its complexity, the recent adoption of some final
regulations, the possibility that the regulations may change and
may be subject to changing, and perhaps conflicting,
interpretation, our ability to comply with all of the HIPAA
requirements is uncertain.
Fraud and Abuse Laws
Federal and state governments have made a
priority of investigating and prosecuting healthcare fraud and
abuse. Fraud and abuse prohibitions encompass a wide range of
operating activities, including kickbacks for referral of
members, billing for unnecessary medical services, improper
marketing and violation of patient privacy rights. Companies
involved in public healthcare programs such as Medicaid are
often the subject of fraud and abuse investigations. The
regulations and contractual requirements applicable to
participants in these public-sector programs are complex and
subject to change. Although we believe that our compliance
efforts are adequate, ongoing vigorous law enforcement and the
highly technical regulatory scheme mean that our compliance
efforts in this area will continue to require significant
resources.
Required Statutory Capital
By law, regulation and government policy, our HMO
subsidiaries, which we refer to as our regulated subsidiaries,
are required to maintain minimum levels of statutory net worth.
The minimum statutory net worth requirements differ by state and
are generally based on a percentage of annualized premium
revenue, a percentage of annualized healthcare costs or
risk-based capital, or RBC, requirements. The RBC requirements
are based on guidelines established by the National Association
of Insurance Commissioners, or NAIC, and are administered by the
states. Currently, only our Connecticut subsidiary is subject to
RBC requirements. If adopted, the RBC requirements may be
modified as each state legislature deems appropriate for that
state. The RBC formula, based on asset risk, underwriting risk,
credit risk, business risk and other factors,
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generates the authorized control level, or ACL,
which represents the amount of net worth believed to be required
to support the regulated entity's business. For states in
which the RBC requirements have been adopted, the regulated
entity typically must maintain a minimum of the greater of the
required ACL or the minimum statutory net worth requirement
calculated pursuant to pre-RBC guidelines. In addition to the
foregoing requirements, our regulated subsidiaries are subject
to restrictions on their ability to make dividend payments,
loans and other transfers of cash.
The statutory framework for our regulated
subsidiaries' statutory net worth requirements may change
over time. For instance, RBC requirements may be adopted by the
states in which we operate. These subsidiaries are also subject
to their state regulators' overall oversight powers. Those
regulators could require our subsidiaries to maintain minimum
levels of statutory net worth in excess of the amount required
under the applicable state laws if the regulators determine that
maintaining such additional statutory net worth is in the best
interest of our members.
Marketing
The marketing activities of Medicare managed care
plans are strictly regulated by CMS. CMS must approve all
marketing materials before they can be used unless a plan uses
standard marketing materials that have already been approved by
CMS. The Federal Balanced Budget Act of 1997 precludes states
from imposing additional marketing restrictions on Medicare
managed care plans. However, states remain free to regulate, and
typically do regulate, the marketing activities of plans that
enroll Medicaid and commercial beneficiaries. Each of the states
in which we operate regulates Medicaid marketing efforts.
Technology
A foundation of our approach to managed care is
the accurate and timely capture, processing and analysis of
critical data. Focusing on data is essential to our being able
to operate our business in a cost effective manner. Data
processing and data-driven decision making are key components of
both administrative efficiency and medical cost management. We
have successfully developed a system that enables our management
team to better assess and control medical costs. Our system
gathers information from our centralized computer-based
information system, Perot Systems' Diamond 950
software, an enterprise software solution designed to be
scalable to accommodate growth. In a study by the manufacturer,
the Diamond system demonstrated scalability to more than
6.5 million members and 2,800 concurrent users. This system
supports our core transaction processing functions and is
designed to be scalable to accommodate internal growth and
growth from acquisitions. Its integrated database architecture
helps to assure that consistent sources of claim and member
information are provided across all of our health plans. We use
our information system for premium billing, claims processing,
utilization management, reporting, medical cost trending,
planning and analysis. The system also supports member and
provider service functions, including enrollment, member
eligibility verification, primary care and specialist physician
roster access, claims status inquiries, and referrals and
authorizations.
We are in the process of implementing a
comprehensive disaster recovery and business continuity plan. We
have contracted with SunGard Recovery Services LP to provide
these services, and expect the disaster recovery and emergency
mode operations systems to be fully implemented by April 2004.
We expect that our business continuity plan will be completed by
the end of 2004.
Employees
As of December 31, 2003, we had
approximately 1,148 full-time associates. Our associates
are not represented by any collective bargaining agreement, and
we have never experienced a work stoppage. We believe we have
good relations with our associates.
Facilities
Our principal administrative, sales and marketing
facilities are located at our headquarters in Tampa, Florida. We
currently occupy approximately 92,000 square feet of office
space in the Tampa facility. We have
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negotiated a termination of our current lease,
effective December 2004. We intend to lease new office space for
our corporate headquarters in the second quarter of 2004. We
also lease office space for our health plans in New York, New
York and North Haven, Connecticut, as well as in other locations
within those states. We believe these facilities are suitable
and provide the appropriate level of capacity for our current
operations.
Legal Proceedings
In early 1999, an action was filed against one of
our HMO subsidiaries by a sales agency that had contracted to
market our predecessor's commercial health plan. The
action, entitled
E.S. Thomas vs. Well Care HMO, Inc.
, was
brought in Circuit Court in Hillsborough County, Florida, Case
No. 01001408. The plaintiff alleges that its contract
requires our Well Care HMO subsidiary to allow the plaintiff to
serve as a sales agent for Well Care HMO's Medicare health
plans and seeks an unspecified amount of damages, including lost
profits, based on our refusal to do so. A trial is scheduled to
commence in February 2004. We intend to defend this matter
vigorously.
In addition, we are involved in legal actions in
the normal course of business, some of which seek monetary
damages, including claims for punitive damages, which are not
covered by insurance. These actions, including the
E.S. Thomas
litigation, when finally concluded and
determined, will not, in our opinion, have a material adverse
effect on our financial position, results of operations or cash
flows.
We believe that we have provided adequate
reserves, where appropriate, in connection with these legal
proceedings.
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MANAGEMENT
Our directors, executive officers and other
management associates and their respective ages and positions as
of February 13, 2004 are as follows.
Name
Age
Position
Executive Officers and Directors:
Todd S. Farha
35
President and Chief Executive Officer, Director
Paul L. Behrens
42
Senior Vice President and Chief Financial Officer
Thaddeus Bereday
38
Senior Vice President and General Counsel
Heath Schiesser
36
Senior Vice President, Marketing & Sales
Rupesh Shah
42
Senior Vice President, Market Expansion
Randall Zomermaand
53
Senior Vice President, Health Services
Robert Slepin
44
Chief Information Officer
Regina Herzlinger
60
Director
Kevin Hickey
52
Director
Alif Hourani
51
Director
Glen R. Johnson, M.D.
60
Director
Ruben Jose King-Shaw, Jr.
42
Director
Christian P. Michalik
35
Director
Neal Moszkowski
38
Chairman of the Board of Directors
Key Associates:
Gretchen Demartini
50
Vice President, Human Resources
Kevin P. Enterlein
39
Vice President, Provider Contracting
John J. Esslinger, M.D.
51
Medical Director
Enrique Diaz-Granados
44
Vice President, Corporate Sales
Douglas Hayward
53
Vice President, Connecticut
William L. Kale
54
Vice President, Behavioral Health
Vince P. Kunz, M.D.
57
Medical Director
Stephen W. Ogilvie
55
Vice President, Operations
Daniel Parietti
40
Vice President, New York
John L. Sirera
52
Vice President, Pharmacy
Brendan R. Shanahan
41
Vice President, Financial Planning and Analysis
Alan R. Smith, M.D.
54
Medical Director
David K. Smith
49
Vice President, Finance
Robert G. Strickland
49
Vice President, Process Improvement
William S. White
40
Corporate Controller
Diane Wilkosz
45
Vice President, Provider Relations— Florida
Executive Officers
Todd S. Farha
has
served as our President and Chief Executive Officer and as a
member of our board of directors since May 2002. From 2000 to
2001, Mr. Farha served as Chief Executive Officer of Best
Doctors, Inc., a provider of information and referral services
for patients suffering from critical illnesses. Prior to that,
from 1998 to 2002, Mr. Farha served as President and Chief
Executive Officer of a company he founded, Medical Technology
Management LLC, a provider of shared medical equipment and
services for physicians and hospitals. From 1996 to 1998,
Mr. Farha served as Chief Executive Officer of Oxford
Specialty Management, a subsidiary of Oxford Health Plans
focusing on the management of acute clinical conditions in six
specialty areas. In 1995, Mr. Farha served in the Office of
the Chief Executive Officer of Oxford Health Plans. Prior to
that, from 1990 to 1993, he held various positions with
Physician Corporation of America, a
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Florida-based health plan focused on Medicaid
recipients. Mr. Farha received his undergraduate degree
from Trinity University and a masters of business administration
from Harvard Business School. Mr. Farha is a cousin of
Mr. Hourani.
Paul L. Behrens
has
served as our Senior Vice President and Chief Financial Officer
since September 2003. Prior to that, Mr. Behrens was a
partner in the healthcare practice of Ernst & Young LLP,
which he joined in 1983. Mr. Behrens received his
undergraduate degree from Dana College. Mr. Behrens is a
certified public accountant.
Thaddeus Bereday
has
served as our Senior Vice President and General Counsel since
November 2002. From 2001 to 2002, Mr. Bereday was a partner
at Brobeck, Phleger & Harrison, LLP, and from 2000 to 2001,
he was a partner at Morgan, Lewis & Bockius, LLP. From 1998
to 1999, Mr. Bereday served as Vice President and General
Counsel of SmarTalk TeleServices, Inc., a publicly-traded
telecommunications company, and as its President and Acting
General Counsel from 1999 to 2000, after the company filed for
Chapter 11 bankruptcy protection. Mr. Bereday received
his undergraduate degree from Brown University and a juris
doctor,
magna cum laude,
from Case Western Reserve
University School of Law.
Heath Schiesser
has
served as our Senior Vice President, Marketing & Sales
since July 2002. Prior to that, from May 2002 to July 2002,
Mr. Schiesser was a consultant to us. For part of 2001,
Mr. Schiesser served as Vice President of the Emerging
Business Group at Enron Corporation. In 2000 and 2001,
Mr. Schiesser served as a Managing Director at Idealab, an
investment firm that developed and funded seed-stage businesses.
During 2000, he lead the turnaround and sale of an Idealab
portfolio company, iExchange, as President and Chief Executive
Officer. From 1998 to 1999, he co-founded and served as the
Vice-President of Business Development for YourPharmacy.com,
which was sold in October 1999. From 1993 to 1998,
Mr. Schiesser worked at McKinsey & Company, an
international management consulting firm. Mr. Schiesser
received his undergraduate degree from Trinity University and a
masters of business administration from Harvard Business School.
Rupesh Shah
has
served as our Senior Vice President, Market Expansion since July
2002. From 1994 to 2002, he served as the Chief Executive
Officer of Well Care HMO, Inc., one of our predecessor
companies, of which he was also a co-founder. Mr. Shah
received his bachelor's degrees from St. Xavier's
College and Gujarat University in India and received his masters
of business administration from the University of South Florida.
Randall Zomermaand
has served as our Senior Vice
President, Health Services since May 2003. From October 1997 to
May 2003, Mr. Zomermaand served as President of Zomermaand
Management Services, Inc., a healthcare consulting company,
where he worked with numerous healthcare companies, including us
from September 2002 to May 2003. Mr. Zomermaand received
his undergraduate degree from Hope College and his masters of
business administration from Fordham University.
Robert Slepin
has
served as our Chief Information Officer since May 2003. From
January 2001 to May 2003, Mr. Slepin served as Vice
President, Computer Operations of Deltnanet, Inc., an
information technology company focused on the healthcare
industry. From March 1998 to December 2000, he served as Vice
President and Chief Information Officer for Sutter Health,
not-for-profit network of community-based health care providers.
Mr. Slepin received his undergraduate degree from Duke
University.
Non-Employee Directors
Regina Herzlinger
has been a member of our board of
directors since August 2003. Dr. Herzlinger is the Nancy R.
McPherson Professor of Business Administration at the Harvard
Business School and has been teaching at Harvard since 1971. She
is a member of the boards of directors of C.R. Bard, Inc., Noven
Pharmaceuticals, Inc. and Zimmer Holdings, Inc.
Dr. Herzlinger received her undergraduate degree from
Massachusetts Institute of Technology and her doctorate from the
Harvard Business School.
Kevin Hickey
has
been a member of our board of directors since November 2002.
Since 1999, Mr. Hickey has served as the Chairman and Chief
Executive Officer of IntelliClaim, Inc., a privately-held
application service provider that provides insurance payors with
capabilities for enhancing claim processing
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efficiency and productivity. From 1997 until
1998, Mr. Hickey was Executive Vice President of Operations
and Technology for Oxford Health Plans. Mr. Hickey has also
served as a director of the American Association of Preferred
Provider Organizations from 1999 until 2002; a director of First
Health/ HealtheSolutions, a privately-held company, since 1982;
a director of Benefit Management Group, a privately-held
company, since 1997; a director of Healthaxis Inc., a technology
and business process services firm for the health benefits
industry, since 2001; and a director of HealthMarket, Inc., a
consumer directed health plan, since 2002. Mr. Hickey
received his undergraduate degree from Harvard University, a
masters in health services administration from the University of
Michigan and a juris doctor from Loyola College of Law.
Alif Hourani
has
been a member of our board of directors since August 2003. Since
1997, Mr. Hourani has served as Chairman and Chief
Executive Officer of Pulse Systems, Inc. a practice management
and clinical records software company. From 1987 to 1997,
Mr. Hourani held various positions, including Chief
Executive Officer of Physician Corporation of America/ Data
Systems, Senior Vice President of Management Information Systems
of Physician Corporation of America, and Manager of Computer
Engineering at the Wolf Creek Nuclear Operating Corporation.
Mr. Hourani received his undergraduate degree from the
University of Lyon and his masters of science degree and
doctorate degrees from the University of Strasbourg.
Mr. Hourani is a cousin of Mr. Farha.
Glen R. Johnson, M.D.
has been a member of our board of
directors since January 2004. Since May 1998, Dr. Johnson
has served as President and Chief Executive Officer of Community
Health Choice, Inc., a managed health care organization that
provides healthcare services to Medicaid members in the Houston,
Texas area. Since March 2003, Dr. Johnson has also served
as an expert consultant to the Texas State Board of Medical
Examiners, and since 1999 he has been a clinical associate
professor in the Department of Family Medicine at Baylor College
of Medicine in Houston. From 1990 to October 1997,
Dr. Johnson served as Senior Vice President for Medical
Affairs and as Corporate Chief Medical Officer of Physician
Corporation of America. Dr. Johnson is a delegate of the
American Academy of Family Physicians to the American Medical
Association and is the former Vice President of The American
Academy of Family Physicians. Dr. Johnson received his
undergraduate degree and his doctorate from Howard University,
and is a certified physician executive.
Ruben Jose King-Shaw, Jr.
has been a member of our board of
directors since August 2003. Mr. King-Shaw served as Senior
Advisor to the Secretary of the Department of the Treasury from
January 2003 to June 2003. From July 2001 to April 2003,
Mr. King-Shaw served as Chief Operating Officer and Deputy
Administrator of CMS. Prior to that, from January 1999 to July
2001, he served as Secretary of the Agency for Health Care
Administration of the State of Florida. Mr. King-Shaw
received his undergraduate degree from Cornell University and a
masters of business administration from Florida International
University.
Christian P. Michalik
has been a member of our Board of
Directors since May 2002. Mr. Michalik is currently a
private investor and was a partner in Soros Private Equity
Partners LLC, the private equity investment business of Soros
Fund Management LLC, from 1999 through 2003. From 1997 to 1999,
Mr. Michalik was an investment manager with Capital
Resource Partners, a private equity investment firm. From 1995
to 1996, Mr. Michalik was an associate at Colony Capital, a
real estate investment firm. Mr. Michalik currently serves
as a director of DISA, Inc., a third party administrator of
employee screening services; Oculan Corporation, a provider of
network, system and security management solutions for small and
medium-sized businesses; and RLX Technologies, Inc., a provider
of modular computing solutions. Mr. Michalik received his
undergraduate degree from Yale University and his masters of
business administration from Harvard Business School.
Neal Moszkowski
has
been the Chairman of our board of directors since May 2002.
Mr. Moszkowski is the Co-Head of Soros Private Equity
Partners LLC, the private equity investment business of Soros
Fund Management LLC, where he has been a partner since August
1998. From August 1993 to August 1998, Mr. Moszkowski
worked for Goldman, Sachs & Co. and affiliates, where he
served as a Vice President and an Executive Director in the
Principal Investment Area. Mr. Moszkowski currently serves
as a director of Bluefly, Inc., an online discount apparel
retailer; Integra LifeSciences Holdings Corporation, a developer
and marketer of medical products primarily for surgical and
neurosurgical applications, and JetBlue Airways
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Corporation, a passenger airline.
Mr. Moszkowski received his undergraduate degree from
Amherst College and his masters of business administration from
the Graduate School of Business of Stanford University.
Key Associates
Gretchen Demartini
has served as our Vice President,
Human Resources since February 2003. From 2001 to 2003,
Ms. Demartini was a consultant and did volunteer work,
including serving on the boards of directors of local agencies.
From 1995 to 2001, Ms. Demartini served as Vice President
of Human Resources for First American Real Estate Information
Services, a division of First American Corporation.
Ms. Demartini received her undergraduate degree from
Montclair State College and a masters degree from Stevens
Institute of Technology.
Kevin P. Enterlein
has served as our Vice President,
Provider Contracting since December 2003. From 1998 to 2003,
Mr. Enterlein worked with Aetna, Inc. in several
capacities, including as Regional Vice President, Network
Management. Mr. Enterlein received a degree from
Westchester Community College.
John J. Esslinger, M.D.
has served as one of our Medical
Directors since January 2004. From 2001 to 2003,
Dr. Esslinger served as Medical Director of Aetna
Healthcare, Inc. Prior to that, from 1999 to 2001,
Dr. Esslinger served as Medical Director of Paidos Health
Management Services, Inc., a neonatal disease management
company. Dr. Esslinger received his undergraduate degree
and an M.D. from the University of Minnesota and a masters
degree from Tulane University.
Enrique Diaz-Granados
has served as our Vice President,
Corporate Sales since December 2003. From February 2003 through
December 2003, Mr. Granados served as President of
Diversified Consultant Services, a business that conducted sales
efforts on behalf of Medicare plans (including ours) and sold
other insurance products. From 1992 to 2003, Mr. Granados
worked with Humana Health Care Plans in several capacities,
including as Regional Vice President, Sales Public Programs.
Mr. Granados received his undergraduate degree from the
University of Tennessee.
Douglas Hayward
has
served as the Vice President of our Connecticut business since
July 2003. From 1998 until June 2003, Mr. Hayward served as
Chief Executive Officer of InvestCare, an independent consulting
firm that provided consulting services to our Connecticut
operations. From 1996 to 1998, Mr. Hayward served as
President and Chief Executive Officer of WellCare of
Connecticut. Mr. Hayward received his undergraduate and
masters degrees from the University of Michigan and completed a
fellowship in HMO management at Georgetown University.
William L. Kale
has
served as our Vice President, Behavioral Health since November
2002 and was our Director of Behavioral Health from 1999 until
November 2002. From 1985 to 1996, Dr. Kale was President of
Professional Psychological Services, a behavioral health
management company, which was sold to Horizon Health
Corporation, where he continued as President until 1998. Dr.
Kale received his undergraduate degree from Ohio State
University and his masters and doctorate degrees from the
University of South Florida.
Vince P. Kunz, M.D.
has served as one of our Medical Directors since February 2003.
From 2000 to 2003, Dr. Kunz served as Market and Network
Medical Director of CIGNA HealthCare of Florida. Prior to that,
from 1998 to 2000, Dr. Kunz served as Medical Director of
MVP Health Care, a not-for-profit health plan. Dr. Kunz
received his undergraduate degree from College of Holy Cross and
his M.D. from New Jersey Medical School.
Stephen W. Ogilvie
has served as our Vice President, Operations since October 2003.
In 2003, Mr. Ogilvie served as Senior Account Manager,
Healthcare Group of Perot Systems Corporation, a provider of
information technology services and business solutions. From
1998 to 2002, Mr. Ogilvie was Director— Government
Business Practice and Director— Healthplan Practice of
First Consulting Group, a provider of consulting, technology,
applied research and outsourcing services to healthcare
providers, health plan insurers, government healthcare and life
sciences companies.
Daniel Parietti
has
served as Vice President of our New York business since
September 2002. From 2001 to 2002, Mr. Parietti served as
Chief Operating Officer of La Cruz Azul de Puerto Rico, a large
health plan in
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Puerto Rico. Prior to that, from 2000 to 2001,
Mr. Parietti service as Vice President, Network and
Delivery Systems Management with Health Net, Inc. From 1993 to
2001, Mr. Parietti worked with Humana, Inc. in several
capacities, including as Associate Executive Director, Humana
Puerto Rico. Mr. Parietti received his undergraduate degree
from the United States Military Academy at West Point, and a
masters of business administration from George Mason University.
John L. Sirera
has
served as our Vice President, Pharmacy since September 2002.
From 2000 to 2002, Mr. Sirera served as Regional Account
Manager for Managed Markets Organization for Pharmacia
Corporation. From 1999 to 2000, Mr. Sirera was a consultant
to AMD Specialty Pharmacy, where he acted as Vice President of
Managed Care Services and a consultant to Florida Health Choice,
where he acted as Pharmacy Director. From 1998 to 1999,
Mr. Sirera served as Operations Director, Eastern Region
for Integrated Pharmaceutical Services. Mr. Sirera received
his undergraduate degree from the University of Pittsburgh.
Brendan R. Shanahan
has served as our Vice President,
Financial Planning and Analysis since August 2003. From 2002 to
August 2003, Mr. Shanahan was the Chief Financial Officer
of Destiny Health, a consumer-focused health insurer. From 1998
to 2002, Mr. Shanahan served as the Chief Financial Officer
of IntelliClaim, Inc., a privately-held application service
provider that provides insurance payors with capabilities for
enhancing claim processing efficiency and productivity.
Mr. Shanahan received his undergraduate degree from The
Citadel and a masters in business administration from Hofstra
University. Mr. Shanahan is a certified public accountant.
Alan R. Smith, M.D.
has served as one of our Medical
Directors since February 2003. From 1996 to 2003, Dr. Smith
served as Senior Regional Quality Management Medical Director
for Aetna U.S. Healthcare, Southeast Region. Since 1998,
Dr. Smith has served as a surveyor and advisor for the
Patient Advisory Group of the National Committee for Quality
Assurance. Dr. Smith received his undergraduate degree and
M.D. from the University of Chicago.
David K. Smith
has
served as our Vice President, Finance since August 2002. From
2000 to July 2002, Mr. Smith was President of David Kelsey
Smith & Associates, an independent healthcare consultancy.
Prior to that, from 1998 to 2000, Mr. Smith served as
President and Chief Executive Officer of Pioneer Eye Care, a
specialty physician practice management and managed care
company. Mr. Smith received his undergraduate degree from
Suffolk University and a masters degree from Cambridge College.
Robert Strickland
has served as our Vice President,
Process Improvement since October 2003. From 2000 to 2003,
Mr. Strickland worked with Healthplan Southeast (a Division
of Vista Healthplan) in several capacities, including Executive
Director. Prior to that, from 1993 to 2000, Mr. Strickland
worked with Wheaton Franciscan Services, a not-for-profit health
care and housing company, in several capacities, including as
Senior Vice President, Operations. Mr. Strickland received
his undergraduate and masters degrees from Florida State
University and his masters of management from Northwestern
University.
William S. White
has
served as our Corporate Controller since March 2003. From 1997
to 2002, Mr. White held several positions, including
Corporate Controller, at Blue Cross and Blue Shield of North
Carolina. Prior to that, Mr. White was a senior manager in
the financial services practice of Price Waterhouse, LLP.
Mr. White received his undergraduate degree from
North Carolina Wesleyan College. Mr. White is a
certified public accountant.
Diane Wilkosz
has
served as our Vice President, Provider Relations since February
2003. From 1981 to 2002, Ms. Wilkosz worked with CIGNA
HealthCare of Florida in several capacities, including as Vice
President, Executive Director, Practice Management.
Ms. Wilkosz received her undergraduate degree from the
University of Buffalo and a masters of business administration
from the University of Tampa.
Terms of Office
At present, all directors are elected and serve
until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal. Our executive
officers are elected by, and serve until dismissed by, the board
of directors.
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Upon the completion of this offering, our board
will be divided into three classes, as nearly equal in number as
possible, with each director serving a three-year term and one
class being elected at each year's annual meeting of
stockholders. Messrs. Farha and Hickey and
Dr. Herzlinger will be in the class of directors whose term
expires at the 2005 annual meeting of our stockholders.
Messrs. King-Shaw and Michalik and Dr. Johnson will be
in the class of directors whose term expires at the 2006 annual
meeting of our stockholders. Messrs. Hourani and Moszkowski will
be in the class of directors whose term expires at the 2007
annual meeting of our stockholders. At each annual meeting of
our stockholders, successors to the class of directors whose
term expires at such meeting will be elected to serve for
three-year terms or until their respective successors are
elected and qualified.
Board Committees
The audit committee of the board of directors
makes recommendations concerning the engagement of independent
public accountants. The audit committee charter mandates that
the audit committee approve all audit, audit-related, tax and
other services conducted by our independent accountants. In
addition, the committee reviews the plans, results and fees of
the audit engagement with our independent public accountants,
and any independence issues with our independent public
accountants. The audit committee also reviews the adequacy of
our internal accounting controls. The current members of the
audit committee are Messrs. Hickey and Michalik and
Dr. Herzlinger.
The compensation committee of the board of
directors determines compensation for our executive officers and
administers our equity plans. The compensation committee
currently consists of Messrs. Hickey, Hourani and
Moszkowski.
The nominating and corporate governance committee
of the board of directors nominates candidates for election to
the board of directors and oversees corporate governance
processes. The nominating and corporate governance committee
currently consists of Messrs. Hourani, Michalik and
Moszkowski.
Employment Contracts, Termination of
Employment and Change-in-Control Arrangements
Todd S. Farha serves as our Chief Executive
Officer, President and a member of our board of directors
pursuant to an employment agreement dated July 31, 2002.
The agreement has an initial term of three years, and will
automatically renew for an additional three-year period unless
either party notifies the other that the term will not be
extended. Under the agreement, Mr. Farha is entitled to an
annual salary of $300,000, subject to annual review and
potential increase by our board of directors. In addition,
Mr. Farha is eligible to receive an annual cash bonus,
based upon the satisfaction of performance criteria to be
established annually by our compensation committee. If
Mr. Farha's employment is terminated by us without
cause, or by Mr. Farha for good reason, then Mr. Farha
will be entitled to continue to receive his base salary for the
shorter of 12 months (or 24 months if the termination
occurs after a change of control) or the then-remaining portion
of the term of the agreement. He will also be entitled to
receive an amount equal to his target bonus for the year in
which the termination occurs, payable one year after the date of
termination, as well as continuation of benefits for
12 months following termination. Mr. Farha has agreed
not to compete with us during the term of his employment and for
one year thereafter, except that if Mr. Farha's
employment terminates because we notify him that the term of his
agreement will not be renewed, the non-competition covenant will
not apply following the term unless we elect to continue to pay
him his base salary during that period. In addition, if we
terminate his employment without cause within one year prior to
the end of the term of the agreement, then the non-competition
covenant will not apply during the period following the end of
the term of the agreement, unless we elect to continue to pay
him his base salary during that period.
Paul Behrens serves as our Senior Vice President
and Chief Financial Officer, Thaddeus Bereday serves as our
Senior Vice President and General Counsel, and Heath Schiesser
serves as our Senior Vice President, Marketing & Sales,
pursuant to employment agreements with us. Each agreement has an
initial term of three years, and will automatically renew for
successive additional one-year periods thereafter unless either
party notifies the other that the term will not be extended.
Under the agreements, Mr. Behrens is entitled to an annual
salary of $275,000, Mr. Bereday is entitled to an annual
salary of $250,000, and Mr. Schiesser is
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entitled to an annual salary of $250,000, in each
case subject to annual review and potential increase by our
board of directors. In addition, each is eligible to receive an
annual bonus, payable in the form of cash or equity, based upon
the satisfaction of performance criteria to be established
annually by our compensation committee. If the employment of any
of these executives is terminated by us without cause, or by the
executive for good reason, the executive will be entitled to
continue to receive his base salary and benefits for
12 months following the date of termination. In addition,
in the case of Mr. Schiesser, if the termination occurs
within six months after a change of control has occurred or a
definitive agreement providing for a change of control has been
signed, or if a definitive agreement providing for a change of
control is signed within six months after the date of
termination, he would also be entitled to receive an amount
equal to his expected potential bonus payable for the 12-month
period following the termination. Each of the executives has
agreed not to compete with us during the term of his employment
and for one year thereafter.
Compensation Committee Interlocks and Insider
Participation
No member of the compensation committee serves as
a member of the board of directors or compensation committee of
any other entity that has one or more executive officers serving
as a member of our board of directors or compensation committee.
Director Compensation
We reimburse each member of our board of
directors for out-of-pocket expenses incurred in connection with
attending board meetings. We pay each member of our board who is
not an associate an annual director's fee of $25,000 for
attending meetings of the board of directors and committee
meetings.
During 2003, certain of our directors were given
the opportunity to purchase a specified number of Class A
Common Units. As a result of those purchases, those directors
were granted, for no additional consideration, a specified
number of Class C Common Units, subject to vesting over a
four-year period from the date of grant. Upon the completion of
our reorganization, all of these units will convert into shares
of our common stock, and the vesting restrictions will remain in
place. In May 2003, Mr. Hickey
purchased                      shares,
and was
granted                      shares,
under this program, and in September 2003, Dr. Herzlinger
and Messrs. King-Shaw and Hourani each
purchased                      shares,
and was
granted                      shares,
under this program. In addition, in December 2003,
Mr. Michalik
purchased                      shares
of our common stock, and was granted options to purchase an
additional                      shares
at an exercise price of
$           per
share, subject to vesting over a four-year period commencing in
June 2003. The aggregate price paid by each director for the
shares purchased by him or her in 2003 was $50,000.
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Executive Compensation
The table below summarizes information concerning
the compensation earned during 2003 for services rendered to us
in all capacities by our chief executive officer and each of the
executive officers listed below. The compensation table excludes
other compensation in the form of perquisites and other personal
benefits to a named executive officer where that compensation
constituted less than the lesser of $50,000 or 10% of his total
annual salary and bonus for such fiscal year. We have prepared
this table as if our reorganization as a corporation had already
occurred at the time that the restricted stock awards were made.
None of the named executive officers were granted any options to
acquire our stock in 2003.
Summary Compensation Table
Long-Term
Annual Compensation
Compensation
Other Annual
Compensation
Restricted Stock
All Other
Name and Principal Position
Year
Salary($)
Bonus($)
($)
Awards($)
Compensation
Todd S. Farha
2003
$
300,000
(3)
$
65,427
(6)
$
—
(12)
$
554
(17)
President and Chief Executive Officer
Paul L. Behrens
2003
68,750
(1)
$
85,000
(4)
19,286
(7)
(13)
—
Senior Vice President and Chief Financial Officer
Thaddeus Bereday
2003
250,000
10,000
(5)
83,141
(8)
(14)
—
Senior Vice President and General Counsel
Heath Schiesser
2003
250,000
10,000
(5)
60,808
(9)
(15)
2,400
(17)
Senior Vice President, Marketing & Sales
Rupesh Shah
2003
275,000
100,000
3,969
(10)
—
—
Senior Vice President, Market Expansion
Randall Zomermaand
2003
121,846
(2)
5,000
(5)
30,749
(11)
(16)
66,256
(18)
Senior Vice President, Health Services
(1)
Mr. Behrens commenced employment with us on
    September 15, 2003. His annual salary is $275,000.
(2)
Mr. Zomermaand commenced employment with us
    on May 1, 2003. His annual salary is $220,000.
(3)
The amount of bonus earned in 2003 is not
    calculable as of the date of the filing of this registration
    statement.
(4)
Includes a signing bonus of $75,000. The
    remaining portion of the amount of bonus earned in 2003 is not
    calculable as of the date of the filing of this registration
    statement.
(5)
The remaining portion of the amount of bonus
    earned in 2003 is not calculable as of the date of the filing of
    this registration statement.
(6)
Represents a housing allowance of $35,980, an
    automobile allowance of $9,921 and a gross up payment for income
    taxes relating to these allowances of $19,526.
(7)
Represents a reimbursement for relocation
    expenses of $12,088 and a gross up payment for income taxes
    relating to this reimbursement of $7,198.
(8)
Represents a reimbursement for relocation
    expenses of $59,433 and a gross up payment for income taxes
    relating to this reimbursement of $23,708.
(9)
Represents a reimbursement for relocation
    expenses of $42,138 and a gross up payment for income taxes
    relating to this reimbursement of $18,670.
(10)
Represents an automobile allowance.
(11)
Represents a reimbursement for relocation
    expenses of $27,978 and a gross up payment for income taxes
    relating to the reimbursement of $2,771.
(12)
On September 6, 2002, Mr. Farha
    received an award
    of                restricted
    shares of common stock, of which
    were                                              unvested
    as of December 31, 2003. The value of the aggregate
    unvested restricted shares held by Mr. Farha as of
    December 31, 2003 was $3,060,507, based on the fair market
    value of our common stock on December 31, 2003. The
    restricted stock award was 25% vested on the date of grant, and
    the remainder vests over a three-year period, at a rate of
    2.0833% upon the end of each full calendar
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month after the grant date. The grant would
    immediately vest in full upon a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
(13)
On September 30, 2003, Mr. Behrens
    received an award
    of                restricted
    shares of common stock, all of which were unvested as of
    December 31, 2003. The value of this award as reflected in
    the Summary Compensation Table is based on the fair market value
    of our common stock on the date of grant. The value of the
    aggregate unvested restricted shares held by Mr. Behrens as
    of December 31, 2003 was $1,962,531, based on the fair
    market value of our common stock on December 31, 2003. The
    restricted stock award vests over a four-year period, at a rate
    of 25% on September 15, 2004 and 2.0833% upon the end of
    each full calendar month thereafter. The grant would immediately
    vest in full upon the termination of Mr. Behrens'
    employment by WellCare without cause, or by Mr. Behrens for
    good reason, following a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
(14)
On May 31, 2003, Mr. Bereday received a
    grant
    of                restricted
    shares of common stock, shares of which were unvested as of
    December 31, 2003. The value of this award as reflected in
    the Summary Compensation Table is based on the fair market value
    of our common stock on the date of grant. The value of the
    aggregate unvested restricted shares held by Mr. Bereday as
    of December 31, 2003 was $1,022,151 based on the fair
    market value of our common stock on December 31, 2003. The
    restricted stock award vests over a four-year period, at a rate
    of 2.0833% upon the end of each full calendar month following
    the date of grant. The grant would immediately vest in full upon
    the termination of Mr. Bereday's employment by
    WellCare without cause, or by Mr. Bereday for good reason,
    within 12 months following a change of control of WellCare.
    Dividends, if any are declared, will be paid on the restricted
    shares.
(15)
On May 30, 2003, Mr. Schiesser received
    a grant of restricted shares of common stock, shares of which
    were unvested as of December 31, 2003. The value of this
    award as reflected in the Summary Compensation Table is based on
    the fair market value of our common stock on the date of grant.
    The value of the aggregate unvested restricted shares held by
    Mr. Schiesser as of December 31, 2003 was $1,308,353,
    based on the fair market value of our common stock on
    December 31, 2003. The restricted stock award vests over a
    four-year period, at a rate of 2.0833% upon the end of each full
    calendar month following the date of grant. The grant would
    immediately vest in full upon the termination of
    Mr. Schiesser's employment by WellCare without cause,
    or by Mr. Schiesser for good reason, within six months of a
    change of control of WellCare. Dividends, if any are declared,
    will be paid on the restricted shares.
(16)
On May 30, 2003, Mr. Zomermaand
    received a grant of restricted shares of common stock, all of
    which were unvested as of December 31, 2003. The value of
    this award as reflected in the Summary Compensation Table is
    based on the fair market value of our common stock on the date
    of grant. The value of the aggregate unvested restricted shares
    held by Mr. Zomermaand as of December 31, 2003 was
    $348,000, based on the fair market value of our common stock on
    December 31, 2003. The restricted stock award vests over a
    four-year period, at a rate of 25% on May 1, 2004 and
    2.0833% upon the end of each full calendar month thereafter.
    Dividends, if any are declared, will be paid on the restricted
    shares.
(17)
Represents company matching of 401(k)
    contributions.
(18)
Represents consulting fees paid prior to becoming
    an associate.
Employee Benefit Plans
2004 Equity Incentive Plan
In connection with our reorganization as a
corporation immediately prior to the closing of this offering,
our board of directors plans to adopt and submit to our
stockholders for approval our 2004 Equity Incentive Plan, which
will be effective immediately prior to the closing of our
reorganization. The Equity Incentive Plan is designed to enable
us to attract, retain and motivate our directors, officers,
associates and consultants, and to further align their interests
with those of our stockholders, by providing for or increasing
their ownership interests in our company.
Administration.
The
Equity Incentive Plan will be administered by the compensation
committee of our board of directors. Our board may, however, at
any time resolve to administer the Equity Incentive Plan.
Subject to the specific provisions of the Equity Incentive Plan,
the compensation committee is authorized to select persons to
participate in the Equity Incentive Plan, determine the form and
substance of grants made under the Equity Incentive Plan to each
participant, and otherwise make all determinations for the
administration of the Equity Incentive Plan.
Participation.
Individuals who will be eligible to participate in the Equity
Incentive Plan will be directors (including non-employee
directors), officers (including non-employee officers) and
employees of, and other individuals performing services for, or
to whom an offer of employment has been extended by, us or our
subsidiaries.
Type of Awards.
The
Equity Incentive Plan will provide for the issuance of stock
options, stock appreciation rights, or SARs, restricted stock,
deferred stock, dividend equivalents, other stock-based awards
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and performance awards. Performance awards may be
based on the achievement of certain business or personal
criteria or goals, as determined by the compensation committee.
Available Shares.
An
aggregate
of                      shares
of our common stock will be reserved for issuance under the
Equity Incentive Plan, subject to certain adjustments reflecting
changes in our capitalization. If any grant under the Equity
Incentive Plan expires or terminates unexercised, becomes
unexercisable or is forfeited as to any shares, or is tendered
or withheld as to any shares in payment of the exercise price of
the grant or the taxes payable with respect to the exercise,
then such unpurchased, forfeited, tendered or withheld shares
will thereafter be available for further grants under the Equity
Incentive Plan unless, in the case of options granted under the
Equity Incentive Plan, related SARs are exercised. The Equity
Incentive Plan will provide that the compensation committee
shall not grant, in any one calendar year, to any one
participant awards to purchase or acquire a number of shares of
common stock in excess
of                %
of the total number of shares authorized for issuance under the
Equity Incentive Plan.
Option Grants.
Options granted under the Equity Incentive Plan may be either
incentive stock options within the meaning of Section 422
of the Internal Revenue Code or non-qualified stock options, as
the compensation committee may determine. The exercise price per
share for each option will be established by the compensation
committee, except that in the case of the grant of any incentive
stock option, the exercise price may not be less than 100% of
the fair market value of a share of common stock as of the date
of grant of the option. In the case of the grant of any
incentive stock option to an employee who, at the time of the
grant, owns more than 10% of the total combined voting power of
all of our classes of stock, the exercise price may not be less
than 110% of the fair market value of a share of common stock as
of the date of grant of the option.
Terms of Options.
The term during which each option may be exercised will be
determined by the compensation committee, but if required by the
Internal Revenue Code and except as otherwise provided in the
Equity Incentive Plan, no option will be exercisable in whole or
in part more than ten years from the date it is granted, and no
incentive stock option granted to an employee who at the time of
the grant owns more than 10% of the total combined voting power
of all of our classes of stock will be exercisable more than
five years from the date it is granted. All rights to purchase
shares pursuant to an option will, unless sooner terminated,
expire at the date designated by the compensation committee. The
compensation committee will determine the date on which each
option will become exercisable and may provide that an option
will become exercisable in installments. The shares constituting
each installment may be purchased in whole or in part at any
time after such installment becomes exercisable, subject to such
minimum exercise requirements as may be designated by the
compensation committee. Prior to the exercise of an option and
delivery of the shares represented thereby, the optionee will
have no rights as a stockholder, including any dividend or
voting rights, with respect to any shares covered by such
outstanding option. If required by the Internal Revenue Code,
the aggregate fair market value, determined as of the grant
date, of shares for which an incentive stock option is
exercisable for the first time during any calendar year under
all of our equity incentive plans may not exceed $100,000.
Termination of
Options.
Unless otherwise determined
by the compensation committee, and subject to certain exemptions
and conditions, if a participant ceases to be a director,
officer or employee of, or to otherwise perform services for us
for any reason other than death, disability, retirement or
termination for cause, all of the participant's options and
SARs that were exercisable on the date of such cessation will
remain exercisable for, and will otherwise terminate at the end
of, a period of 30 days after the date of such cessation. In the
case of death or disability, all of the participant's
options and SARs that were exercisable on the date of such death
or disability will remain so for a period of 180 days from
the date of such death or disability. In the case of retirement,
all of the participant's options and SARs that were
exercisable on the date of retirement will remain exercisable
for, and shall otherwise terminate at the end of, a period of
90 days after the date of retirement. In the case of a
termination for cause, or if a participant does not become a
director, officer or employee of, or does not begin performing
other services for us for any reason, all of the
participant's options and SARs will expire and be forfeited
immediately upon such cessation or non-commencement, whether or
not then exercisable.
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Amendment of Options and Amendment/
Termination of Plan.
The board of
directors or the compensation committee generally will have the
power and authority to amend or terminate the Equity Incentive
Plan at any time without approval from our stockholders. The
compensation committee generally will have the authority to
amend the terms of any outstanding award under the plan,
including, without limitation, the ability to reduce the
exercise price of any options or SARs or to accelerate the dates
on which they become exercisable or vest, at any time without
approval from our stockholders. No amendment will become
effective without the prior approval of our stockholders if
stockholder approval would be required by applicable law or
regulations, including if required for continued compliance with
the performance-based compensation exception of
Section 162(m) of the Internal Revenue Code, under
provisions of Section 422 of the Internal Revenue Code or
by any listing requirement of the principal stock exchange on
which our common stock is then listed. Unless previously
terminated by the board or the committee, the Equity Incentive
Plan will terminate on the tenth anniversary of its adoption. No
termination of the Equity Incentive Plan will materially and
adversely affect any of the rights or obligations of any person,
without his or her written consent, under any grant of options
or other incentives theretofore granted under the Equity
Incentive Plan.
2002 Equity Plans
Our 2002 Senior Executive Equity Plan and our
2002 Employee Option Plan were both adopted by the board of
directors and became effective in September 2002. A maximum
of                shares
of common stock in the aggregate were reserved for issuances to
associates under the plans. Both plans are administered by our
board of directors and the compensation committee.
Under the Senior Executive Equity Plan, each
participant was given the opportunity to purchase a specified
number of what were, prior to our reorganization as a
corporation, Class A Common Units. As a result of that
purchase, each participant was granted, for no consideration, a
specified number of what were Class C Common Units. Under
the Employee Option Plan, each participant was granted an option
to purchase a specified number of what were Class A Common
Units. The securities that were granted under both plans are
subject to the terms, including vesting, set forth in each
subscription agreement or option agreement, as applicable. All
securities granted pursuant to the plans are subject to
repurchase by us at fair market value if the participant ceases
to be employed by us.
Upon the closing of our reorganization as a
corporation, the Class C Common Units granted under the
Senior Executive Equity Plan will be converted automatically
into shares of our common stock, and the options granted under
the Employee Option Plan will be converted automatically into
equivalent options to purchase our common stock. Each granted
share and option will be subject to the same vesting terms as in
each holder's original subscription or option agreement, as
applicable. The number of shares subject to each option and
their exercise price will be adjusted to reflect any stock split
effected in connection with the restructuring. Following our
restructuring
transactions,           of
our employees will hold a total
of                      shares
under our Senior Executive Equity Plan, of
which                     will
be vested. In
addition,           of
our employees will hold options under our Employee Option Plan
exercisable for
approximately                      shares
of our common stock, at a weighted average exercise price
of                     ,
of
which                     will
be vested. We do not intend to issue any additional securities
under either of these plans.
Employee Stock Purchase
    Plan
.
2004 Employee Stock Purchase
Plan.
Our board of directors plans to
adopt and submit to our stockholders for approval our 2004
Employee Stock Purchase Plan. The purpose of the plan is to
provide an incentive for our employees (and employees of our
subsidiaries designated by our board of directors) to purchase
our common stock and acquire a proprietary interest in us.
Administration.
A
committee designated by our board will administer the plan. The
plan vests the committee with the authority to interpret the
plan, to prescribe, amend, and rescind rules and regulations
relating to the plan, and to make all other determinations
necessary or advisable for the administration of the plan,
although our board of directors may exercise any such authority
in lieu of the committee. In all cases, the plan will be
required to be administered in such a manner as to comply with
applicable requirements of
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Rule 16b-3 of the Securities Exchange Act of
1934, as amended, and Section 423 of the Internal Revenue
Code of 1986, as amended.
Eligibility and
Participation.
As of the date of this
offering, each person who is employed either by us or by one of
our designated subsidiaries and is expected on a
regularly-scheduled basis to work more than 20 hours per
week for more than five months per calendar year, automatically
will be enrolled in the plan. Persons who subsequently become
employed by us or one of our designated subsidiaries will be
eligible once they have completed three months of service,
provided they are expected on a regularly-scheduled basis to
work more than 20 hours per week for more than five months
per calendar year.
Options to Purchase/ Purchase of
Shares.
Each participant will be
granted an option to purchase shares of our common stock at the
beginning of each 24-month "offering period" under the
plan, on each "exercise date," during the offering
period. Exercise dates will occur on each June 30 and
December 31. Participants will purchase the shares of our
common stock through after-tax payroll deductions, not to
exceed           of
the participant's total base salary. No participant may
purchase more
than            shares
of common stock on any one exercise date, or more than $25,000
of common stock in any one calendar year. The purchase price for
each share will generally be the lower of 85% of the fair market
value of a share on the first day of the offering period, or 85%
of the fair market value on the exercise date. If the fair
market value on any exercise date during an offering period is
lower than it was on the first day of the offering period, that
offering period will automatically terminate and a new 24-month
offering period will commence on the next July 1 or
January 1, as applicable. If a participant's
employment with us or one of our designated subsidiaries
terminates, any outstanding option of that participant also will
terminate.
Share
Reserve.
shares
of our common stock will be reserved for issuance over the term
of the plan. That amount will be increased each year by the
lowest
of                      shares,           of
all shares outstanding at the end of the previous year, or a
lower amount determined by our board. If any option to purchase
reserved shares is not exercised by a participant for any
reason, or if the option terminates, the shares that were not
purchased shall again become available under the plan. The
number of shares available under the plan also will be subject
to periodic adjustment for changes in the outstanding common
stock occasioned by stock splits, stock dividends,
recapitalizations or other similar changes affecting our
outstanding common stock.
Amendment and
Termination.
Our board or the
committee generally will have the power and authority to amend
the plan from time to time in any respect without the approval
of our stockholders. However, no amendment will become effective
without the prior approval of our stockholders if stockholder
approval would be required by applicable law or regulation,
including Rule 16b-3 under the Securities Exchange Act of
1934, Section 423 of the Internal Revenue Code, or any
listing requirement of the principal stock exchange on which our
common stock is then listed. Additionally, no amendment may make
any change to an option already granted that adversely affects
the rights of any participant. The plan will terminate at the
earliest of the tenth anniversary of its implementation, the
time when there are no remaining reserved shares available for
purchase under the plan, or an earlier time that our board may
determine.
401(k) Profit
Sharing Plan.
We have adopted a tax-qualified employee savings
and retirement plan, the 401(k) Profit Sharing Plan, for
eligible associates. Eligible associates may elect to defer a
portion of their eligible compensation, subject to the
statutorily prescribed annual limit. We may make matching
contributions on behalf of all participants who have elected to
make deferrals to the 401(k) Profit Sharing Plan in an amount
determined annually by us. Any contributions to the plan by us
or the participants are paid to a trustee. The contributions
made by us, if any, are subject to a vesting schedule; all other
contributions are fully vested at all times. The 401(k) Profit
Sharing Plan, and the accompanying trust, is intended to qualify
under Sections 401(k) and 501 of the Internal Revenue Code,
so that contributions by us or by associates and income earned
(if any) on plan contributions are not taxable to associates
until withdrawn and contributions by us, if any, will be
deductible by the company when made. At the direction of each
participant, the trustee invests the contributions made to the
401(k) Profit Sharing Plan in any number of investment options.
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Limitations on Liability of Directors and
Officers and Indemnification
Limitation of Liability
Our certificate of incorporation which will take
effect upon completion of this offering will provide that our
officers and directors will not be personally liable to us or
our stockholders for monetary damages resulting from a breach of
fiduciary duty, to the maximum extent permitted by Delaware law.
Under Delaware law, directors of a corporation will not be
personally liable for monetary damages for breach of their
fiduciary duties as directors, except for:
•
any breach of the duty of loyalty to the
    corporation or its stockholders;
•
acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
•
unlawful payments of dividends or unlawful stock
    repurchases or redemptions; or
•
any transaction from which the director derived
    an improper personal benefit.
This limitation of liability does not apply to
non-monetary remedies that may be available, such as injunctive
relief or rescission, nor does it relieve our officers and
directors from complying with federal or state securities laws.
Indemnification
Our certificate of incorporation and bylaws will
provide that we shall indemnify our directors and executive
officers, and may indemnify our other corporate agents, to the
fullest extent permitted by law. An officer or director shall
not be entitled to indemnification if:
•
the officer or director did not act in good faith
    and in a manner reasonably believed to be in, or not opposed to
    our best interests; or
•
the officer or director is subject to criminal
    action or proceedings and had reasonable cause to believe the
    conduct was unlawful.
We have entered into agreements to indemnify our
directors and certain executive officers in addition to the
indemnification provided for in our certificate of incorporation
and our bylaws. These agreements, among other things, provide
for indemnification of our directors and officers for expenses
specified in the agreements, including attorneys' fees,
judgments, fines and settlement amounts incurred by any of these
persons in any action or proceeding arising out of these
persons' services as a director or officer for us, any of
our subsidiaries or any other entity to which the person
provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain
qualified persons as directors and officers.
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CERTAIN TRANSACTIONS
The summaries of the agreements described below
are not complete and you should read the agreements in their
entirety. These agreements have been filed as exhibits to the
registration statement of which this prospectus is a part.
Other than the transactions described below, for
the last three full fiscal years there has not been, nor is
there currently proposed, any transaction or series of similar
transactions to which we are or will be a party in which the
amount involved exceeded or will exceed $60,000, and in which
any director, executive officer, holder of more than 5% of our
common stock on an as-converted basis or any member of their
immediate family has or will have a direct or indirect material
interest.
Although we do not have a separate conflicts
policy, we comply with Delaware law with respect to transactions
involving potential conflicts. Delaware law requires that all
transactions between us and any director or executive officer
are subject to full disclosure and approval of the majority of
the disinterested members of our board of directors, approval of
the majority of our stockholders or the determination that the
contract or transaction is intrinsically fair to us.
Acquisition Agreements
We were formed in May 2002 for the purpose of
acquiring the WellCare group of companies. That acquisition was
completed in July 2002, through two transactions. In the first,
we acquired our Florida operations, including our Well Care HMO
and HealthEase subsidiaries, in a stock purchase from Rupesh
Shah and certain other stockholders, pursuant to a purchase
agreement. The purchase price for this transaction consisted of:
•
$50 million in cash;
•
the issuance of a senior subordinated
    non-negotiable promissory note in the original principal amount
    of $53 million, subject to adjustments for earnouts and
    other purchase price adjustments; and
•
warrants to purchase 2,287,037 Class B
    Common Units of WellCare Holdings, LLC.
The purchase price was subject to adjustment,
based upon a number of earn-outs and other calculations. In
February 2004, the remaining principal amount of the note was
fixed at $119.7 million pursuant to the terms of a
settlement agreement with the selling stockholders. See
"— Amendment and Settlement Agreement."
In the second transaction, we acquired The
WellCare Management Group, Inc., a publicly-traded holding
company and the parent company of our New York and Connecticut
operations, by means of a merger of that company into a
wholly-owned subsidiary of ours, pursuant to an agreement and
plan of merger. The purchase price for this transaction
consisted of approximately $7.72 million in cash.
Other Agreements with Selling
Stockholders
In connection with our acquisition of our Florida
business pursuant to the purchase agreement, we entered into the
following agreements with Mr. Shah and the other selling
stockholders:
Seller Note.
As part
of the consideration for the acquisition, we issued a senior
subordinated promissory note in the original principal amount of
$53 million to the stockholder representative on behalf of
the stockholders of the Florida business, including
Mr. Shah. In February 2004, the remaining principal amount
of the note was fixed at $119.7 million pursuant to the
terms of a settlement agreement with the selling stockholders.
See "— Amendment and Settlement Agreement."
Warrants.
As further
consideration for the acquisition, we entered into an equity and
warrant agreement with Mr. Shah and two other selling
stockholders. Under the equity and warrant agreement, the
stockholders were issued warrants to purchase an aggregate of
2,287,037 Class B Common Units. The warrants were fully
exercised in December 2003.
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Investor Rights
Agreement.
We entered into an investor
rights agreement with Mr. Shah and the two other selling
stockholders who received warrants under the equity and warrant
agreement. Under the investor rights agreement, after this
offering the stockholders will have "piggyback"
registration rights to include their shares in any registration
statement we file on our own behalf (other than for employee
benefit plans and other exceptions) or on behalf of other
stockholders, subject to other stockholders' priority
rights of registration. The stockholders also have the right to
require us to register their shares on Form S-3, if
available for such an offering and if the aggregate price of the
shares to be sold would be at least $1.0 million, not more
than once during any 12-month period. The stockholders would be
responsible for the expenses of any such registration on
Form S-3. The stockholders also received information rights
and a right to participate in some types of sales by us of our
equity securities. Those rights will terminate upon the closing
of this offering.
Pledge and Escrow
Agreements.
As security for our
obligations under the seller note, we entered into a pledge
agreement with the stockholder representative on behalf of the
stockholders of the Florida business, including Mr. Shah,
pursuant to which we pledged a portion of the shares of capital
stock of WellCare Health Plans, Inc. held by us. Initially, 100%
of the shares were subject to the pledge. After the payment of a
portion of the principal amount under the note with a portion of
the proceeds from this offering, 49% of the shares will be
released and the remaining 51% will remain subject to the
pledge. Upon the payment in full of the note, all of the shares
will be released.
Amendment and Settlement
Agreement.
In February 2004, we
entered into a settlement agreement with Mr. Shah and the
other selling stockholders that fixed the remaining amount of
the seller note at $119.7 million. Under the terms of the
settlement agreement, the aggregate indemnification obligations
of the selling stockholders under the purchase agreement were
reduced, subject to certain exceptions.
Agreements with SPEI
Initial Capitalization and Contribution
Agreement.
We were formed in
May 2002 by our equity sponsor, Soros Private Equity
Investors LP. At that time, SPEI contributed $1,000 in cash to
us in exchange for one Class A Common Unit. In
July 2002, in connection with the consummation of the
acquisition of the WellCare businesses, SPEI contributed an
additional $70.0 million in cash to us, in exchange for
additional Class A Common Units, pursuant to a contribution
agreement. Under that agreement, we also granted SPEI certain
information rights. Those rights will terminate upon the closing
of this offering.
Registration Rights
Agreement.
We are party to a
registration rights agreement with SPEI, Todd Farha and some of
our other stockholders, pursuant to which we granted
registration rights to those stockholders. Under the agreement,
holders of a majority of shares held by SPEI or any of its
affiliates may require us to effect the registration of their
shares from time to time. In addition, the stockholders party to
the agreement have "piggyback" registration rights to
include their shares in any registration statement we file on
our own behalf (other than for employee benefit plans and other
exceptions) or on behalf of other stockholders. We are required
to pay all registration expenses in connection with any demand
or piggyback registrations. Notwithstanding the other provisions
of the agreement, we are not obligated to effect any demand
registration within 180 days after the effective date of
either:
•
any registration we effect on Form S-1, or
    any similar "long-form" registration (including this
    offering); or
•
any other offering in which stockholders party to
    the agreement were given "piggyback" rights pursuant
    to the agreement, if the offering includes at least 80% of the
    number of shares requested by the stockholders to be included.
Reorganization
In February 2004, upon our incorporation, we
issued 100 shares of common stock to WellCare Holdings, LLC in
exchange for $1,000.
In February 2004, the Board of Directors of
WellCare Holdings, LLC authorized a plan to reorganize WellCare
Holdings, LLC as a corporation, by means of a merger of WellCare
Holdings, LLC with and into
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WellCare Group, Inc. Upon the consummation of the
reorganization, which will take place immediately prior to the
closing of this offering:
•
assuming an initial public offering price of
    $           per
    share, we will issue an aggregate
    of                      shares
    of common stock in exchange
    for                     Class A
    Common
    Units,                      Class B
    Common Units
    and                     Class C
    Common Units of WellCare Holdings, LLC;
•
all outstanding options issued by WellCare
    Holdings, LLC will automatically be converted into options to
    acquire shares of our common stock; and
•
our name will be changed to WellCare Health
    Plans, Inc.
Equity Sales and Grants
The executive officers and directors listed below
purchased what were, prior to our reorganization as a
corporation, our Class A Common Units. As a result of those
purchases, those officers and directors were granted, for no
additional consideration, a specified number of what were
Class C Common Units, subject to vesting restrictions. Upon
the completion of our reorganization, all of these units will
convert into shares of our common stock, and the vesting
restrictions will remain in place. The information below is
presented as if our reorganization as a corporation had already
occurred at the time the grants were made.
On September 6, 2002, Todd Farha
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares.
On May 30, 2003, Kevin Hickey
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares.
On May 30, 2003, Heath Schiesser
purchased                      shares,
for an aggregate purchase price of $10,000, and was
granted                     restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
On May 30, 2003, Randall Zomermaand
purchased                      shares,
for an aggregate purchase price of $5,000, and was
granted                     restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
On May 31, 2003, Thaddeus Bereday
purchased                      shares,
for an aggregate purchase price of $10,000, and was
granted                     restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
On September 30, 2003, Paul L. Behrens
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares, pursuant to our 2002 Senior Executive Equity Plan.
On September 30, 2003, Regina Herzlinger
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares.
On September 30, 2003, Ruben King-Shaw
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares.
On September 30, 2003, Alif Hourani
purchased                      shares,
for an aggregate purchase price of $50,000, and was
granted                     restricted
shares.
Option Grants
The executive officers and directors listed below
were granted options to purchase what were, prior to our
reorganization as a corporation, Class A Common Units,
subject to vesting over a four-year period. Upon the completion
of our reorganization, these options will become exercisable to
purchase shares of our common stock, and the vesting
restrictions will remain in place. The information below is
presented as if our reorganization as a corporation had already
occurred at the time the grants were made.
On May 31, 2003, September 30, 2003 and
January 2, 2004, Robert Slepin was granted options to
purchase                      shares,                      shares
and                      shares,
respectively, at a per share exercise price of
$          ,
$ and
$          ,
respectively, pursuant to our 2002 Employee Option Plan.
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On December 31, 2003, Christian Michalik was
granted options to
purchase                      shares,
at a per share exercise price of
$          .
On January 2, 2004, Todd Farha was granted
options to
purchase                      shares,
at a per share exercise price of
$          ,
pursuant to our 2002 Employee Option Plan.
On January 2, 2004, Paul Behrens was granted
options to
purchase                      shares,
at a per share exercise price of
$          ,
pursuant to our 2002 Employee Option Plan.
On January 2, 2004, Thaddeus Bereday was
granted options to
purchase                      shares,
at a per share exercise price of
$          ,
pursuant to our 2002 Employee Option Plan.
On January 2, 2004, Heath Schiesser was
granted options to
purchase                      shares,
at a per share exercise price of
$          ,
pursuant to our 2002 Employee Option Plan.
On January 2, 2004, Randall Zomermaand was
granted options to
purchase                      shares,
at a per share exercise price of
$          ,
pursuant to our 2002 Employee Option Plan.
On February 5, 2004, Glen Johnson was
granted options to
purchase                      shares,
at a per share exercise price of
$          .
Other Agreements
IntelliClaim.
In
March 2003, we entered into an agreement with IntelliClaim,
Inc., pursuant to which we license software, and obtain
maintenance, support and related services, from IntelliClaim.
Kevin Hickey, a member of our board of directors, is the
Chairman and Chief Executive Officer of IntelliClaim. In 2003,
we paid $225,000 in the aggregate to IntelliClaim under this
agreement.
Ruben King-Shaw, Jr.
In November 2003, we entered into a consulting agreement with
Ruben King-Shaw, Jr., one of our directors, pursuant to which
Mr. King-Shaw oversees governmental and regulatory issues
for us, including current and proposed federal and state
legislation and federal and state government affairs activities.
In 2003, we paid $6,000 to Mr. King-Shaw under this
agreement.
Randall Zomermaand.
In September 2002, we entered into a consulting agreement with
Randall Zomermaand, our Senior Vice President, Health Services.
Under the agreement, Mr. Zomermaand provided healthcare
consulting services to us relating to our health services area,
including quality improvement, utilization management and
pharmacy and behavioral health services. In 2003, we paid
$66,256 to Mr. Zomermaand under this agreement.
Employment
Agreements.
We have entered into
employment agreements with some of our executive officers, as
described in "Management— Employment Contracts,
Termination of Employment and Change-in-Control
Arrangements."
Indemnification
Agreements.
We have entered into
indemnification agreements with our directors and some of our
executive officers, as described in "Management—
Limitations on Liability of Directors and Officers and
Indemnification."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information
regarding the beneficial ownership of our common stock as
of                     ,
2004 after giving effect to our reorganization as a corporation
and the resultant conversion of all outstanding limited
liability company units for shares of our common stock by:
•
each person or entity who is known by us to own
    beneficially more than 5% of our outstanding common stock;
•
each of our executive officers named in the
    Summary Compensation Table;
•
each of our directors; and
•
all directors and executive officers as a group.
Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common
stock subject to options held by that person that are currently
exercisable or will become exercisable within 60 days
after                     ,
2004, are deemed outstanding, while the shares are not deemed
outstanding for purposes of computing percentage ownership of
any other person. Unless otherwise indicated in the footnotes
below, the persons and entities named in the table have sole
voting or investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
The number and percentage of shares beneficially
owned are based on the aggregate of
(i)                      shares
of common stock outstanding as
of                     ,
2004, after giving effect to our reorganization as a corporation
and the resultant conversion of all outstanding limited
liability company units for shares of our common stock and
(ii) shares of common stock issued in this offering.
Unless otherwise indicated, the principal address
of each of the stockholders below is c/o WellCare Health
Plans, Inc., 6800 North Dale Mabry Highway, Suite 268,
Tampa, Florida 33614.
Percentage
Beneficially Owned
Shares Beneficially
Owned Prior to
Before
After
Name of Beneficial Owner
the Offering
Offering
Offering
Executive Officers and Directors
Todd S. Farha
(1)
Regina Herzlinger
Kevin Hickey
Alif Hourani
Glen R. Johnson, M.D.
Ruben Jose King-Shaw, Jr.
Christian P. Michalik
Neal Moszkowski
Paul Behrens
Thaddeus Bereday
Heath Schiesser
Rupesh Shah
Randall Zomermaand
All directors and officers as a group
    (14 persons)
Other 5% Stockholders
Soros Private Equity Investors LP
(2)
(1)
Includes                      shares
    subject to stock options exercisable within 60 days
    of                     ,
    2004.
(2)
Soros Private Equity Investors LP
    ("SPEI") is a Delaware limited partnership. Its
    general partner is SPEP General Partner LP, a Delaware limited
    partnership ("SPEP GP LP"). An investment committee of
    SPEP GP LP exercises exclusive decision-making authority with
    regard to the acquisition and disposition of, and voting power
    with respect to, investments by SPEI. SPEP GP LP's general
    partner is SPEP General Partner LLC, a Delaware limited
    liability company, whose managing member is QIH
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Management Investor, L.P., a Delaware limited
    partnership, whose sole general partner is QIH Management LLC, a
    Delaware limited liability company, whose sole managing member
    is Soros Fund Management LLC, a Delaware limited liability
    company ("SFM"). George Soros is the Chairman of SFM
    and, in such capacity, may be deemed to have voting and
    dispositive power over securities held for the account of SPEI.
    Each has their principal office at 888 Seventh Avenue,
    33rd Floor, New York, New York 10106.
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SELLING STOCKHOLDER
The following table presents certain information
regarding the beneficial ownership of our common stock
outstanding as
of                     ,
2004 (but without giving effect to the underwriters'
exercise of the over-allotment option) by the selling
stockholder. Please see "Certain Transactions" for a
description of the material relationships between us and the
selling stockholder.
Shares Beneficially
Shares Beneficially
Owned Prior to the
Owned After the
Offering
Shares Being
Offering
Sold in the
Name of Beneficial Owner
Number
Percentage
Offering
Number
Percentage
Soros Private Equity Investors LP
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DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and
preferred stock and the relevant provisions of our amended and
restated certificate of incorporation and amended and restated
bylaws as will be in effect upon the closing of this offering
are summaries and are qualified by reference to these documents.
Forms have been filed with the Securities and Exchange
Commission as exhibits to our registration statement, of which
this prospectus forms a part.
Upon the closing of this offering, our authorized
capital stock will consist
of                      shares
of common stock, par value $.01 per share
and                      shares
of preferred stock, par value $.01 per share.
Common Stock
Immediately following our reorganization as a
corporation, there will
be                      shares
of common stock outstanding held of record
by                      stockholders.
Based upon the number of shares outstanding as of that date and
giving effect to the sale of shares of common stock in this
offering, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options
after                     ,
2004, there will be
approximately                      shares
of common stock outstanding at the closing of this offering.
Holders of common stock are entitled to one vote
per share on all matters submitted to a vote
of                      stockholders.
Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to receive dividends as may
be declared from time to time by the board of directors out of
funds legally available for the payment of dividends, subject to
the preferences that apply to any outstanding preferred stock.
See "Dividend Policy." Upon our liquidation,
dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment
of liabilities and after giving effect to the liquidation
preference of any outstanding preferred stock. The common stock
has no preemptive or conversion rights and no additional
subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable. The
shares issued in this offering will be fully paid and
nonassessable.
Preferred Stock
Our certificate of incorporation authorizes the
board of directors, without stockholder action, to designate and
issue from time to time shares of preferred stock in one or more
series. The board of directors may designate the price, rights,
preferences and privileges of the shares of each series of
preferred stock, which may be greater than the rights of the
common stock. It is not possible to state the actual effect of
the issuance of any shares of preferred stock upon the rights of
holders of common stock until the board of directors determines
the specific rights of the preferred stock. However, possible
effects of issuing preferred stock with voting and conversion
rights include:
•
restricting dividends on common stock;
•
diluting the voting power of common stock;
•
impairing the liquidation rights of the common
    stock;
•
delaying or preventing a change of control of us
    without stockholder action; and
•
harming the market price of common stock.
Upon the closing of this offering, no shares of
our preferred stock will be outstanding. We have no present
plans to issue any shares of preferred stock.
Registration Rights
The holders
of                      shares
of common stock, including SPEI, are entitled to demand
registration rights requiring us to register the sale of their
shares under the Securities Act of 1933, under the terms of an
agreement between us and the holders of these shares. The
holders of a majority of the shares held by SPEI or its
affiliates are entitled to demand that we register their shares
under the Securities Act, subject to various
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limitations. In addition, these holders are
entitled to piggyback registration rights with respect to the
registration of their shares under the Securities Act, subject
to various limitations.
In addition, the holders of an
additional                      shares
of common stock will be entitled to piggyback registration
rights, subject to various limitations. Further, at any time
after we become eligible to file a registration statement on
Form S-3, these holders may require us to file registration
statements on Form S-3 under the Securities Act with
respect to their shares of common stock. These registration
rights are subject to certain conditions and limitations, among
them the right of the underwriters of an offering to limit the
number of shares of common stock held by these holders with
registration rights to be included in a registration. We are
generally required to bear all of the expenses of all of these
registrations, except underwriting discounts and selling
commissions. Registration of any of the shares of common stock
held by these holders with registration rights would result in
shares becoming freely tradable without restriction under the
Securities Act immediately upon effectiveness of such
registration.
Delaware Anti-Takeover Law and Provisions in
Our Charter and Bylaws
Delaware Anti-Takeover
Statute.
We are subject to
Section 203 of the Delaware General Corporation Law. In
general, these provisions prohibit a Delaware corporation from
engaging in any business combination with any interested
stockholder for a period of three years following the date that
the stockholder became an interested stockholder, unless the
transaction in which the person became an interested stockholder
is approved in a manner presented in Section 203 of the
Delaware General Corporation Law. Generally, a "business
combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a
stockholder. In general, an "interested stockholder"
is a person who, together with affiliates and associates, owns,
or within three years, did own, 15% or more of a
corporation's voting stock.
Certificate of
Incorporation.
Upon the closing of
this offering, our certificate of incorporation will provide
that:
•
our board of directors may issue, without further
    action by the stockholders, up
    to                      shares
    of undesignated preferred stock;
•
any action to be taken by our stockholders must
    be effected at a duly called annual or special meeting and not
    by a consent in writing;
•
our board of directors shall be divided into
    three classes, with each class serving for a term of three years;
•
vacancies on the board, including newly created
    directorships, can be filled by a majority of the directors then
    in office; and
•
our directors may be removed only for cause.
Bylaws.
Our bylaws
will provide that stockholders seeking to bring business before
an annual meeting of stockholders or to nominate candidates for
election as directors at an annual meeting of stockholders, must
provide timely notice to use in writing. To be timely, a
stockholder's notice must be received at our principal
executive offices not less than 90 days nor more than
120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders. In the event that the
annual meeting is called for a date that is not within
30 days before or 60 days after the anniversary date,
in order to be timely notice from the stockholder must be
received:
•
not earlier than 120 days prior to the
    annual meeting of stockholders; and
•
not later than 90 days prior to the annual
    meeting of stockholders or the tenth day following the date on
    which notice of the annual meeting was made public.
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In the case of a special meeting of stockholders
called for the purpose of electing directors, notice by the
stockholder, in order to be timely, must be received:
•
not earlier than 120 days prior to the
    special meeting; and
•
not later than 90 days prior to the special
    meeting or the close of business on the tenth day following the
    day on which public disclosure of the date of the special
    meeting was made.
Our bylaws will also specify requirements as to
the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters
before an annual or special meeting of stockholders or from
making nominations for directors at an annual or special meeting
of stockholders or from making nominations for directors at an
annual or special meeting of stockholders. In addition, a
two-thirds supermajority vote of stockholders will be required
to amend our amended and restated bylaws.
The provisions in our certificate of
incorporation and our bylaws are intended to enhance the
likelihood of continuity and stability in the composition of the
board of directors and in the policies formulated by the board
of directors and to discourage certain types of transactions
that may involve an actual or threatened change of control of
WellCare. These provisions also are designed to reduce our
vulnerability to an unsolicited proposal for a takeover of
WellCare that does not contemplate the acquisition of all of its
outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of WellCare. These
provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of
WellCare. They may also have the effect of preventing changes in
our management.
Transfer Agent
The transfer agent and registrar for our common
stock
is                    .
Listing
We have applied to list our common stock on the
New York Stock Exchange under the symbol "WCG."
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no market for
our common stock. We cannot predict the effect, if any, that the
sale of our common stock or the availability of shares of common
stock for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of
common stock in the public market following the offering could
adversely affect the market price of the common stock and
adversely affect our ability to raise capital at a time and on
terms favorable to us.
Sale of Restricted Shares
Upon completion of this offering, we will
have                      shares
of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option. Of these shares of
common stock,
the                      shares
of common stock being sold in this offering, plus any shares
sold upon exercise of the underwriters' over-allotment
option, will be freely tradeable without restriction under the
Securities Act, except for any such shares which may be held or
acquired by an "affiliate" of ours, as that term is
defined in Rule 144 under the Securities Act, which shares
will be subject to the volume limitations and other restrictions
of Rule 144 described below. The remaining shares of common
stock held by our existing stockholders upon completion of the
offering will be "restricted securities," as that
phrase is defined in Rule 144, and may not be resold in the
absence of registration under the Securities Act or pursuant to
an exemption from such registration, including among others, the
exemptions provided by Rule 144, 144(k) or 701 under the
Securities Act, which rules, are summarized below. Taking into
account the lock-up agreements described below and the
provisions of Rules 144, 144(k) and 701, additional shares
will be available for sale in the public market as follows:
•
shares will be available for immediate sale on
    the date of this prospectus;
•
shares will be available for sale 180 days
    after the date of this prospectus, the expiration date for the
    lock-up agreements, pursuant to Rules 144, 144(k) and 701
    in the event stockholders are entitled to tack their respective
    holding periods of the limited liability company units; or
•
shares will be available for sale on the first
    anniversary of the date of the prospectus pursuant to
    Rule 144 in the event stockholders are not entitled to tack
    their respective holding periods of the limited liability
    company units.
In general, under Rule 144 as currently in
effect, a person who has beneficially owned shares for at least
one year, including an "affiliate," as that term is
defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the
greater of:
•
one percent of the then outstanding shares of our
    common stock
    (approximately                      shares
    immediately following the offering); or
•
the average weekly trading volume during the four
    calendar weeks preceding filing of notice of such sale.
Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the
availability of current public information about us. A
stockholder who is deemed not to have been an
"affiliate" of ours at any time during the
90 days preceding a sale, and who has beneficially owned
restricted shares for at least two years, would be entitled to
sell such shares under Rule 144(k) without regard to the
volume, limitations, manner of sale provisions or public
information requirements.
Securities issued in reliance on Rule 701
are also restricted and may be sold by stockholders other than
affiliates of ours subject only to the manner of sale provisions
of Rule 144 and by affiliates under Rule 144 without
compliance with its one-year holding period requirement.
All of our affiliates have agreed to further
restrict their shares by entering into lock-up arrangements
discussed below.
We have granted options to purchase shares of our
common stock under our equity plans. As of December 31,
2003, after giving effect to our reorganization, options to
purchase an aggregate
of                      shares
of our common stock were fully vested and exercisable. An
additional                      shares
were
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reserved for issuance under our equity plans. We
intend to register the shares of common stock issuable or
reserved for issuance under the plan within 180 days after
the date of this prospectus.
Lock-up Arrangements
Our officers and directors, associates and other
stockholders have agreed not to sell or otherwise dispose of any
shares of common stock for a period of 180 days after the
date of this prospectus without the prior written consent of
Morgan Stanley & Co. Incorporated, on behalf of the
underwriters. Upon the expiration of these lock-up agreements,
additional shares will be available for sale in the public
market.
Registration Rights
After completion of this offering, the holders of
approximately                  shares
of our common stock will be entitled to certain rights with
respect to the registration of such shares under the Securities
Act. See "Certain Transactions— Agreements with
SPEI." All holders with registration rights have agreed not
to exercise their rights until 180 days following the date
of this prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated, on behalf of the
underwriters.
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CERTAIN UNITED STATES TAX
CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of the
material U.S. federal income and estate tax consequences of
the ownership and disposition of our common stock by a non-U.S.
holder. As used in this discussion, the term "non-U.S.
holder" means a beneficial owner of our common stock that
is not, for U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the
    United States;
•
a corporation created or organized in or under
    the laws of the United States or any political subdivision of
    the United States;
•
an estate whose income is includible in gross
    income for U.S. federal income tax purposes regardless of
    its source; or
•
a trust, in general, if (i) a U.S. court is
    able to exercise primary supervision over the administration of
    the trust, and one or more United States persons have the
    authority to control all substantial decisions of the trust, or
    (ii) the trust was in existence on August 20, 1996 and
    properly elected to continue to be treated as a United States
    person.
If an entity classified as a partnership for
U.S. federal income tax purposes holds our common stock,
the tax treatment of a partner generally will depend on the
status of the partner and the activities of the partnership. If
you are a partnership holding our common stock, or a partner in
such a partnership, you should consult your tax advisers.
An individual may be treated as a resident of the
United States in any calendar year for U.S. federal income
tax purposes, instead of a nonresident, by, among other ways,
being present in the United States on at least 31 days in
that calendar year and for an aggregate of at least
183 days during the current calendar year and the two
immediately preceding calendar years. For purposes of this
calculation, you would count all of the days present in the
current year, one-third of the days present in the immediately
preceding year and one-sixth of the days present in the second
preceding year. Residents are taxed for U.S. federal income
purposes as if they were U.S. citizens.
This discussion does not consider:
•
U.S. state and local or non-U.S. tax consequences;
•
specific facts and circumstances that may be
    relevant to a particular non-U.S. holder's tax position,
    including, if the non-U.S. holder is a partnership, that the
    U.S. tax consequences of holding and disposing of our
    common stock may be affected by certain determinations made at
    the partner level;
•
the tax consequences to the stockholders or
    beneficiaries of a non-U.S. holder;
•
special tax rules that may apply to particular
    non-U.S. holders, including financial institutions, insurance
    companies, tax-exempt organizations, U.S. expatriates,
    broker-dealers and traders in securities; or
•
special tax rules that may apply to a non-U.S.
    holder that holds our common stock as part of a
    "straddle," "hedge," "conversion
    transaction," "synthetic security" or other
    integrated investment.
The following discussion is based on provisions
of the U.S. Internal Revenue Code of 1986, as amended,
applicable U.S. Treasury regulations and administrative and
judicial interpretations, all as in effect on the date of this
prospectus, and all of which are subject to change,
retroactively or prospectively. The following discussion also
assumes that a non-U.S. holder holds our common stock as a
capital asset.
EACH NON-U.S. HOLDER SHOULD CONSULT ITS TAX
ADVISER REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND
NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING
AND DISPOSING OF SHARES OF OUR COMMON STOCK.
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Dividends
The gross amount of dividends paid to a
non-U.S. holder of our common stock ordinarily will be
subject to withholding of U.S. federal income tax at a 30%
rate, or at a lower rate if an applicable income tax treaty so
provides and we have received proper certification of the
application of that treaty.
Dividends that are effectively connected with a
non-U.S. holder's conduct of trade or business in the
United States and, if provided in an applicable income tax
treaty, attributable to a permanent establishment or fixed base
in the United States, are not subject to the U.S. federal
withholding tax but instead are taxed in the manner applicable
to United States persons. In that case, we will not have to
withhold U.S. federal withholding tax provided the non-U.S.
holder complies with applicable certification and disclosure
requirements. In addition, dividends received by a foreign
corporation that are effectively connected with the conduct of
trade or business in the United States may be subject to a
branch profits tax at a 30% rate, or at a lower rate if provided
by an applicable income tax treaty.
Non-U.S. holders should consult their tax
advisers regarding their entitlement to benefits under an
applicable income tax treaty and the manner of claiming the
benefits of the treaty. A non-U.S. holder that is eligible
for a reduced rate of U.S. federal withholding tax under an
income tax treaty may obtain a refund or credit of any excess
amounts withheld by timely filing an appropriate claim for a
refund with the IRS.
Gain on Disposition of Common Stock
A non-U.S. holder generally will not be
taxed on gain recognized on a disposition of our common stock
unless:
•
the non-U.S. holder is an individual who
    holds our common stock as a capital asset, is present in the
    United States for 183 days or more during the taxable year
    of the disposition and meets certain other conditions;
•
the gain is effectively connected with the
    non-U.S. holder's conduct of trade or business in the
    United States and, in some instances if an income tax treaty
    applies, is attributable to a permanent establishment or fixed
    base maintained by the non-U.S. holder in the United
    States; or
•
we are or have been a "United States real
    property holding corporation" for U.S. federal income
    tax purposes at any time during the shorter of the five-year
    period ending on the date of disposition and the period that the
    non-U.S. holder held our common stock.
We have determined that we are not, and we
believe we will not become, a United States real property
holding corporation.
An individual non-U.S. holder described in
the first bullet point immediately above is taxed on his gains
(including gain from the sale of our common stock, net of
applicable U.S. losses incurred on sales or exchanges of other
capital assets during the year) at a flat rate of 30%. Other
non-U.S. holders who may be subject to U.S. federal
income tax on the disposition of our common stock will be taxed
on the disposition in the same manner in which citizens or
residents of the United States would be taxed.
Federal Estate Tax
Common stock owned or treated as owned by an
individual who is not a U.S. citizen will be included in
the individual's gross estate for U.S. federal estate
tax purposes and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
U.S. federal legislation enacted in the spring of 2001
provides for reductions in the U.S. federal estate tax
through 2009 and the elimination of the tax entirely in 2010.
Under the legislation, the U.S. federal estate tax would be
fully reinstated, as in effect prior to the reductions,
in 2011.
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Information Reporting and Backup
Withholding
U.S. information reporting requirements and
backup withholding tax will not apply to dividends paid on our
common stock to a non-U.S. holder, provided that the non-U.S.
holder provides a Form W-8BEN (or satisfies certain
documentary evidence requirements for establishing that it is
not a United States person) or otherwise establishes an
exemption.
Information reporting and backup withholding also
generally will not apply to a payment of the proceeds of a sale
of common stock effected outside the United States by a foreign
office of a foreign broker. However, information reporting
requirements (but not backup withholding) will apply to a
payment of the proceeds of a sale of common stock effected
outside the United States by a foreign office of a broker
if the broker (i) is a United States person,
(ii) derives 50% or more of its gross income for certain
periods from the conduct of trade or business in the United
States, (iii) is a "controlled foreign
corporation" as to the United States or (iv) is a
foreign partnership that, at any time during its taxable year,
is more than 50% (by income or capital interest) owned by United
States persons or is engaged in the conduct of a U.S. trade or
business, unless in any such case the broker has documentary
evidence in its records that the holder is a non-U.S. holder and
certain conditions are met, or the holder otherwise establishes
an exemption. Payment by a U.S. office of a broker of the
proceeds of a sale of common stock will be subject to both
backup withholding and information reporting unless the holder
certifies under penalties of perjury that it is not a United
States person or otherwise establishes an exemption.
NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISERS REGARDING THE APPLICATION OF THE INFORMATION REPORTING
AND BACKUP WITHHOLDING RULES TO THEM.
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UNDERWRITERS
Under the terms and subject to the conditions
contained in the underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, Credit Suisse First Boston LLC,
SG Cowen Securities Corporation and Raymond James &
Associates, Inc. are acting as representatives, have severally
agreed to purchase, and we have agreed to sell to them,
severally, the number of shares of common stock indicated below:
Name
Number of Shares
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston LLC
SG Cowen Securities Corporation
Raymond James & Associates,
    Inc.
Total
The underwriters and the representatives are
collectively referred to as the "underwriters" and the
"representatives," respectively. The underwriters are
offering the shares of common stock subject to their acceptance
of the shares from us and subject to prior sale. The
underwriting agreement provides that the obligations of the
several underwriters to pay for and accept delivery of the
shares of our common stock offered by this prospectus are
subject to the approval of legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered by this
prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option
described below.
The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$          a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$          a
share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering
price and other selling terms may from time to time be varied by
the representatives.
We have granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus,
to purchase up to an aggregate
of                      additional
shares of our common stock at the public offering price listed
on the cover page of this prospectus, less underwriting
discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of our
common stock offered by this prospectus. To the extent the
option is exercised, each underwriter will become obligated,
subject to limited conditions, to purchase approximately the
same percentage of the additional shares of our common stock as
the number listed next to the underwriter's name in the
preceding table bears to the total number of shares of our
common stock listed next to the names of all underwriters in the
preceding table. If the underwriters' over-allotment option
is exercised in full, the total price to the public would be
$                    ,
the total underwriters' discounts and commissions would be
$                    ,
and the total proceeds to us would be
$                    .
We estimate that the total expenses of this
offering, excluding underwriting discounts and commissions, will
be approximately
$                    .
The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed
five percent of the total number of shares of our common
stock offered by them.
We have applied for listing of our common stock
on the NYSE under the symbol "WCG."
Each of us, our directors, executive officers,
certain of our other stockholders and certain other stockholders
has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on
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behalf of the underwriters, each of us will not,
during the period ending 180 days after the date of this
prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of our common stock or any securities convertible into or
    exercisable or exchangeable for our common stock; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise.
The restrictions described in the preceding
paragraph do not apply to:
•
the sale of shares to the underwriters;
•
the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
•
transaction by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares; or
•
certain gratuitous transfers by any person other
    than us to family member, trusts and/or controlled entities of
    such person in connection with estate planning or charitable
    contributions, provided that each transferee also agrees to the
    restrictions described above.
In order to facilitate the offering of our common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of our common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position in our common stock for their own
account. A short sale is covered if the short position is no
greater than the number of shares available for purchase by the
underwriters under the over-allotment option. The underwriters
can close out a covered short sale by exercising the
over-allotment option or purchasing shares in the open market.
In determining the source of shares to close out a covered short
sale, the underwriters will consider, among other things, the
open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell
shares in excess of the over-allotment option, creating a naked
short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
our common stock in the open market after pricing that could
adversely affect investors who purchase in the offering. In
addition, in order to cover any over-allotments or to stabilize
the price of our common stock, the underwriters may bid for, and
purchase, shares of our common stock in the open market.
Finally, the underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for
distributing our common stock in the offering, if the syndicate
repurchases previously distributed shares of our common stock to
cover syndicate short positions or to stabilize the price of the
common stock. Any of these activities may stabilize or maintain
the market price of our common stock above independent market
levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
We and the underwriters have each agreed to
indemnify each other against specified liabilities, including
liabilities under the Securities Act.
Directed Share Program
At our request, the underwriters have reserved
for sale, at the initial public offering price, up to
approximately                      shares
of common stock to our directors, officers, associates,
customers and other business associates. The number of shares of
common stock available for sale to the general public will be
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reduced to the extent these parties purchase the
reserved shares. Any reserved shares that are not so purchased
will be offered by the underwriters to the general public on the
same basis as the other shares offered by this prospectus.
Pricing of the Offering
Prior to this offering, there has been no public
market for the shares of our common stock. The initial public
offering price will be determined by negotiations between us and
the representatives of the underwriters. Among the factors to be
considered in determining the initial public offering price will
be:
•
future prospects of our company and our industry
    in general;
•
our record of operations and our current
    financial position;
•
the experience of our management;
•
sales, earnings and certain of our other
    financial and operating information in recent periods; and
•
the price-earnings ratios, price-sales ratios,
    market prices of securities and financial and operating
    information of companies engaged in activities similar to ours.
VALIDITY
Greenberg Traurig, LLP, Washington, D.C., will
provide WellCare an opinion relating to the validity of the
common stock issued in this offering. Cleary, Gottlieb, Steen
& Hamilton, New York, New York will provide the underwriters
an opinion relating to the validity of the common stock issued
in this offering.
EXPERTS
The financial statements included in this
prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration
statement, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the Commission a registration
statement on Form S-1 with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information
set forth in the registration statement or the exhibits and
schedules which are part of the registration statement. For
further information with respect us and the common stock,
reference is made to the registration statement and the exhibits
and schedules thereto. You may read and copy any document we
file at the Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further
information about the public reference rooms. Our SEC filings
are also available to the public from the Commission's Web
site at http://www.sec.gov. Upon completion of this offering, we
will become subject to the information and periodic reporting
requirements of the Securities Exchange Act and, in accordance
therewith, will file periodic reports, proxy statements and
other information with the Commission. Such periodic reports,
proxy statements and other information will be available for
inspection and copying at the Commission's public reference
rooms and the Web site of the Commission referred to above.
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INDEX TO FINANCIAL STATEMENTS
WELLCARE HOLDINGS, LLC
Page
Independent Auditors' Report
F-2
Consolidated Balance Sheets as of
    December 31, 2003 and 2002
F-3
Consolidated Statements of Income for the year
    ended December 31, 2003 and five-month period ended
    December 31, 2002, and Combined Predecessor Statements of
    Income for the seven-month period ended July 31, 2002 and
    the year ended December 31, 2001
F-4
Consolidated Statements of Changes in
    Members' Equity and Comprehensive Income for the year ended
    December 31, 2003 and five-month period ended
    December 31, 2002, and Combined Predecessor Statements of
    Changes in Stockholders' Equity and Comprehensive Income
    for the seven-month period ended July 31, 2002 and the year
    ended December 31, 2001
F-5
Consolidated Statements of Cash Flows for the
    year ended December 31, 2003 and five-month period ended
    December 31, 2002, and Combined Predecessor Statements of
    Cash Flows for the seven-month period ended July 31, 2002
    and the year ended December 31, 2001
F-6
Notes to Consolidated and Combined Financial
    Statements
F-7
WELLCARE GROUP, INC.
Independent Auditors' Report
F-29
Balance Sheet as of February 9, 2004
F-30
Notes to Financial Statements
F-31
F-1
Table of Contents
Independent Auditors' Report
The Board of
Directors and Members of
WellCare Holdings,
LLC
Tampa, Florida
We have audited the accompanying consolidated
balance sheets of WellCare Holdings, LLC (the Company) as of
December 31, 2003 and 2002, and the related consolidated
statements of income, of changes in members' equity, and of
cash flows for the year ended December 31, 2003 and the
five-month period ended December 31, 2002, and the combined
statements of income, of changes in stockholders' equity,
and of cash flows for the seven-month period ended July 31,
2002 and the year ended December 31, 2001 of The WellCare
Management Group, Inc and subsidiaries, Well Care HMO, Inc.,
HealthEase of Florida, Inc., Comprehensive Health Management,
Inc. and Comprehensive Health Management of Florida, L.C.; these
companies are under common ownership and common management (the
Predecessor). Our audits also included the financial statement
schedule listed in the Index at Item 16. These financial
statements and financial statement schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion such consolidated and combined
financial statements present fairly, in all material respects,
the consolidated financial position of WellCare Holdings, LLC as
of December 31, 2003 and 2002, and the results of their
operations and cash flows for the year ended December 31,
2003 and the five-month period ended December 31, 2002, and
the Predecessor combined results of operations and cash flows
for the seven-month period ended July 31, 2002 and the year
ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated and combined
financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
Tampa, Florida
February 12, 2004
F-2
Table of Contents
WELLCARE HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except unit
data)
December 31,
December 31,
2003
2002
Assets
Current Assets:
Cash and cash equivalents
$
237,321
$
146,784
Investments
33,778
69,010
Premiums and other receivables
12,792
23,088
Prepaid expenses and other current assets
3,663
2,595
Deferred income taxes
12,036
8,897
Total current assets
299,590
250,374
Property and equipment, net
4,717
4,207
Goodwill
158,725
117,095
Other intangibles, net
12,403
16,940
Restricted assets
21,392
20,683
Deposits
280
205
Total Assets
$
497,107
$
409,504
Liabilities and Members' Equity
Current Liabilities:
Medical benefits payable
$
148,297
$
113,670
Unearned premiums
76,248
23,664
Accounts payable and accrued expenses
29,830
29,681
Income taxes payable
143
9,255
Deferred income taxes
1,252
—
Current portion of notes payable to related party
48,170
21,806
Current portion of long-term debt
—
49,654
Total current liabilities
303,940
247,730
Notes payable to related party
71,568
84,794
Long-term debt
16,017
41
Accrued interest
1,782
1,252
Deferred income taxes
3,971
520
Other liabilities
252
250
Total liabilities
397,530
334,587
Commitments and Contingencies (Note 7)
Members' Equity:
Class A Common Units (23,507,839 and
    23,351,667 units issued and outstanding, no par)
—
—
Class B Common Units (No units issued and
    outstanding, no par)
—
—
Class C Common Units (4,842,508 and
    2,093,518 units issued and outstanding, no par)
—
—
Preferred Units (No units issued or outstanding)
—
—
Paid-in capital
71,382
70,227
Retained earnings
28,194
4,657
Accumulated other comprehensive income
1
33
Total members' equity
99,577
74,917
Total Liabilities and Members' Equity
$
497,107
$
409,504
See notes to consolidated and combined
financial statements.
F-3
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WELLCARE HOLDINGS, LLC
CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME
(Dollars in thousands, except per unit
data)
Successor
Predecessor
Five-Month
Seven-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31,
December 31,
July 31,
December 31,
2003
2002
2002
2001
Revenues:
Premium
$
1,042,852
$
398,653
$
517,213
$
739,863
Investment income
2,561
3,038
2,460
8,949
Other
569
114
359
1,472
Total revenues
1,045,982
401,805
520,032
750,284
Expenses:
Medical benefits
861,053
341,763
434,924
637,506
Selling, general and administrative
134,265
49,118
55,731
88,513
Interest
10,172
1,462
1,446
2,860
Total expenses
1,005,490
392,343
492,101
728,879
Income before income taxes
40,492
9,462
27,931
21,405
Income tax expense
16,955
4,805
—
—
Net income
23,537
4,657
$
27,931
$
21,405
Class A common unit yield
(5,997
)
(2,356
)
Net income attributable to common units
$
17,540
$
2,301
Net income attributable per common unit
    (Note 1):
Net income attributable per common
    unit — basic
$
0.66
$
0.09
Net income attributable per common
    unit — diluted
$
0.60
$
0.08
See notes to consolidated and combined
financial statements.
F-4
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WELLCARE HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN
MEMBERS' AND STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands, except unit and share
data)
Accumulated
Other
Total
Common
Paid-in
Retained
Comprehensive
Stockholders'
Stock
Capital
Earnings
Income
Equity
Predecessor:
Balance at December 31, 2001
$
255
$
81,314
$
(59,283
)
$
(241
)
$
22,045
Issuance of common stock
96
96
Shareholder withdrawals
(9,209
)
(9,209
)
Comprehensive income:
Net income
27,931
27,931
Change in unrealized gain/loss on investments,
    net of deferred taxes of $243
693
693
Comprehensive income
28,624
Balance at July 31, 2002
$
351
$
72,105
$
(31,352
)
$
452
$
41,556
Common
Units
Accumulated
Outstanding
Other
Total
Paid-in
Retained
Comprehensive
Members'
Class A
Class B
Class C
Capital
Earnings
Income
Equity
Balance at May 8, 2002
(date of inception)
—
—
—
$
—
$
—
$
—
$
—
Issuance of common units
23,351,667
2,093,518
70,227
70,227
Comprehensive income:
Net income
4,657
4,657
Change in unrealized gain/loss on investments,
    net of deferred taxes of $20
33
33
Balance at December 31, 2002
23,351,667
—
2,093,518
$
70,227
$
4,657
$
33
$
74,917
Issuance of common units
174,505
2,287,037
2,910,117
8,152
8,152
Receivables from related parties
(15,000
)
(2,287,037
)
(6,906
)
(6,906
)
Purchase of treasury units
(3,333
)
(161,127
)
(91
)
(91
)
Comprehensive income:
Net income
23,537
23,537
Change in unrealized gain/loss on investments,
    net of deferred taxes of $20
—
(32
)
(32
)
Comprehensive income
23,505
Balance at December 31, 2003
23,507,839
—
4,842,508
$
71,382
$
28,194
$
1
$
99,577
See notes to consolidated and combined
financial statements.
F-5
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WELLCARE HOLDINGS, LLC
CONSOLIDATED AND COMBINED STATEMENTS OF CASH
FLOWS
(Dollars in thousands)
Successor
Predecessor
Five-Month
Seven-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31, 2003
December 31, 2002
July 31, 2002
December 31, 2001
Cash from operating activities:
Net income
$
23,537
$
4,657
$
27,931
$
21,405
Adjustments to reconcile net income to net cash
    provided by operating activities:
Depreciation and amortization expense
8,159
3,734
1,239
2,234
Write-off of fixed assets
—
790
—
—
Stock compensation expense
746
172
—
—
Provision for doubtful receivables
4,247
580
—
—
Changes in operating accounts:
Accounts receivable
4,302
(4,365
)
3,852
(927
)
Advances to providers
216
1,089
1,805
(8,268
)
Other accounts receivables
1,530
315
(2,132
)
395
Prepaid expenses and other current assets
(1,142
)
(1,286
)
(121
)
575
Deferred income tax asset
(3,139
)
(8,377
)
—
—
Claims payable
34,627
2,958
11,363
11,600
Unearned premiums
52,584
22,060
(22,451
)
9,613
Accounts payables and other accrued expenses
149
18,680
(6,371
)
(8
)
Taxes payable and deferred liability
(4,409
)
9,255
—
—
Other, net
(42
)
755
(1,029
)
(414
)
Net cash provided by operations
121,365
51,017
14,086
36,205
Cash from investing activities:
Purchase of business
—
9,387
—
—
Proceeds from sale and maturities of investments
10,450
24,474
27,183
22,061
Purchases of investments
(25,012
)
(4,399
)
(20,761
)
(40,205
)
Purchases and dispositions of restricted
    investments
(709
)
(4,395
)
(4,237
)
(328
)
Additions to property and equipment, net
(3,042
)
(53
)
(1,495
)
(2,252
)
Net cash (used in) provided by investing
    activities
(18,313
)
25,014
690
(20,724
)
Cash from financing activities:
Shareholder withdrawals
—
—
(9,209
)
—
Contribution of capital
400
70,055
—
10,275
Proceeds from debt issuance, net
14,568
1,069
—
Payments on debt
(27,483
)
(371
)
(21
)
(1,040
)
Net cash (used in) provided by financing
    activities
(12,515
)
70,753
(9,230
)
9,235
Cash and cash equivalents:
Increase during period
90,537
146,784
5,546
24,716
Balance at beginning of period
146,784
—
75,414
50,698
Balance at end of period
$
237,321
$
146,784
$
80,960
$
75,414
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
    INFORMATION —
Cash paid for taxes
$
16,101
$
1,270
$
—
$
—
Cash paid for interest
$
7,416
$
—
$
—
$
—
See notes to consolidated and combined
financial statements.
F-6
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS
Year ended December 31, 2003, five-month
period ended December 31, 2002,
predecessor seven-month period ended
July 31, 2002, and predecessor
year ended December 31, 2001
(Dollars in thousands, except unit and per
unit data)
1.
ORGANIZATION, BASIS OF PRESENTATION AND
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wellcare Holdings, LLC (the "Company")
is a Delaware limited liability corporation formed on
May 8, 2002 (date of inception) for the purpose of
acquiring various subsidiaries that operate health plans focused
on government programs in various states. The Company began
operating on August 1, 2002 in conjunction with the
acquisition of its indirect operating subsidiaries and did not
have any activity from May 8, 2002 (date of inception)
through July 31, 2002. The Company's direct and
indirect subsidiaries are WellCare Health Plans, Inc.
("WHP"); Well Care HMO, Inc. ("WC") and
HealthEase of Florida, Inc. ("HE"), both
Florida-licensed health maintenance organizations
("HMOs"); WellCare of New York, Inc.
("WCNY"), a New York-licensed HMO; FirstChoice
HealthPlans of Connecticut, Inc. ("FC"), a
Connecticut-licensed HMO; The WellCare Management Group, Inc.
("WCMG"), a New York-domiciled holding company;
Comprehensive Health Management, Inc. ("CHMI"), a
Florida-domiciled third-party administrator ("TPA");
Comprehensive Health Management of Florida, L.C.
("LLC"), a Florida-domiciled guaranty company;
WellCare of Louisiana, Inc. ("LA"); WellCare
Behavioral Health, Inc. ("BH"); and WellCare Group,
Inc. ("WCG") (collectively, "the
Subsidiaries"). WC, HE, WCNY, FC, WCMG, CHMI and LLC are
referred to collectively as the "Acquired
Subsidiaries."
Through its operating subsidiaries, the Company
provides managed care programs and related benefits to over
555,000 individuals under Medicaid, Medicare and other state
sponsored children and family health insurance programs. Through
its indirect subsidiaries, the Company operates HMOs in the
states of Florida, New York and Connecticut. LA has applied for
a HMO license in Louisiana and plans to begin its start-up
operations in that state during late 2004.
Basis of
Presentation
The Acquired Subsidiaries, as they existed under
common control prior to their July 31, 2002 acquisition by
WHP, are referred to collectively as "Predecessor."
The Company, as it existed on and after July 31, 2002, is
referred to as the "Company" or "Successor."
The consolidated balance sheets, statements of
income, changes in members' equity and comprehensive income
and cash flows include the accounts of the Successor and all of
its subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
The combined balance sheets, statements of
income, changes in stockholders' equity and comprehensive
income and cash flows include all of the accounts of the
Predecessor prior to the July 31, 2002 acquisition of the
Acquired Subsidiaries. Significant intercompany accounts and
transactions have been eliminated.
The accompanying Predecessor's historical
combined financial statements for the periods ended
July 31, 2002 and prior represent the financial position
and corporate structure as of the dates indicated. The
Predecessor's historical combined financial statements do
not reflect the effects of the Company's new capital
structure (debt and equity), C Corporation tax structure
(previously an S Corporation), purchase accounting as a result
of the acquisition of the Acquired Subsidiaries, and accounting
for the acquired intangible assets and goodwill.
F-7
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The following table describes the periods
presented in these consolidated and combined financial
statements and related notes thereto:
Period
Referred to as:
Consolidated results for the Successor from
    January 1, 2003 through December 31, 2003
"Year ended December 31, 2003"
Consolidated results for the Successor from
    August 1, 2002 through December 31, 2002
"Five-month period ended December 31,
    2002"
Combined results for the Predecessor from
    January 1, 2002 through July 31, 2002
"Predecessor seven-month period ended
    July 31, 2002"
Combined results for the Predecessor from
    January 1, 2002 through July 31, 2002 and results for
    the Successor from August 1, 2002 through December 31,
    2002
"Combined year ended December 31,
    2002"
Combined results for the Predecessor from
    January 1, 2001 through December 31, 2001
"Predecessor year ended December 31,
    2001"
Use of
Estimates
The consolidated and combined financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States
("GAAP"). The preparation of financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
and combined financial statements and accompanying notes. These
estimates are based on knowledge of current events and
anticipated future events and accordingly, actual results may
differ from those estimates.
Cash and Cash
Equivalents
Cash and cash equivalents include cash and
short-term investments with original maturities of three months
or less. These amounts are recorded at cost, which approximates
fair value.
Investments
The Company's investments are classified as
available-for-sale securities and are reported at fair value
based on quoted market prices. Unrealized gains and losses on
available-for-sale securities are excluded from earnings and are
reported as a separate component of members' and
stockholders' equity as accumulated other comprehensive
income, net of income tax effects. The Company evaluates
securities for other-than-temporary impairment on a periodic
basis and principally considers the type of security, the
severity of the decline in fair value and the duration of the
decline in fair value in determining whether a security's
decline in fair value is other-than-temporary. Realized gains
and losses from the sale or write-down for other-than-temporary
impairments of available-for-sale debt and equity securities are
calculated using the specific identification method.
Restricted
Assets
Restricted assets consist of cash, cash
equivalents, and investments required by various state statutes
to be deposited or pledged to state agencies. At
December 31, 2003 and 2002, all restricted assets consisted
of cash and cash equivalents. Restricted assets are classified
as long-term, regardless of the contractual maturity date due to
the nature of the states' requirements.
F-8
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Premiums and
Other Receivables
Premiums and other receivables consist of
premiums due from federal and state agencies. Additionally,
premiums and other receivables consist of amounts advanced to
hospitals that are under contract with the Company to provide
medical services to members. Such advances provided funding to
these providers for medical benefits payable. The Company's
allowance for uncollectible premiums and other receivables was
approximately $4,827 and $580 at December 31, 2003 and
2002, respectively.
Property and
Equipment
Property and equipment is stated at cost, less
accumulated depreciation. Depreciation for financial reporting
purposes is computed using the straight-line method over the
estimated useful lives of the related assets, which is five
years for computer equipment and software and five years for
furniture and other equipment. Maintenance and repairs are
charged to operating expense when incurred. Major improvements
that extend the lives of the assets are capitalized. On an
on-going basis, the Company reviews events or changes in
circumstances that may indicate that the carrying value of an
asset may not be recoverable. If the carrying value of an asset
exceeds the sum of estimated undiscounted future cash flows,
then an impairment loss is recognized in the current period for
the difference between estimated fair value and carrying value.
Goodwill and
Intangible Assets
Goodwill represents the excess of the cost over
the fair market value of net assets acquired. The Company's
intangible assets were obtained as a result of its acquisitions
of the Acquired Subsidiaries and include provider networks,
membership contracts, trademark, noncompete agreements, state
contracts, licenses and permits. The Company's intangible
assets are amortized over their estimated useful lives ranging
from one to 15 years.
The Company reviews goodwill and intangible
assets for impairment at least annually or sooner if events or
changes in circumstances occur that may affect the estimated
useful life or the recoverability of the remaining balance of
goodwill. At December 31, 2003, the Company's
management believes that no impairment of goodwill or intangible
assets has occurred.
The purchase of the Acquired Subsidiaries was
partially financed through a contingent note ("Seller
Note") due to the former stockholders of WC, HE, CHMI and
LLC (collectively the "Florida Companies"). As more
fully described in Note 6, the principal amount of the Seller
Note was subject to adjustment for various contingencies
including the capital of various subsidiaries, the actual
medical benefits payable of certain subsidiaries and the
earnings (or losses) of certain subsidiaries and other potential
indemnification claims under the purchase agreement. Adjustments
to the Seller Note resulted in changes in the purchase price and
the amount of goodwill acquired. The Company entered into a
settlement agreement on February 12, 2004, that fixed the
amount of the Seller Note and finalized the settlement of all
purchase price adjustments.
The aggregate amount of goodwill acquired in 2002
was $117,064 and was increased in 2003 by $41,630 to account for
the aforementioned purchase price adjustment. Goodwill was
assigned to its two reporting units, which are also its
reporting segments. At December 31, 2003, goodwill of
$78,339 was assigned to the Medicare reporting unit and $80,386
was assigned to the Medicaid reporting unit. The purchase price
adjustment during 2003 was assigned to each unit based upon the
corresponding impact of the Seller Note adjustments. The fair
value of each reporting unit is estimated using the expected
present value of future cash flows.
F-9
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Medical
Benefits
The Company contracts with various healthcare
providers for the provision of certain medical care services to
its members and generally compensates those providers on a
fee-for-service basis or pursuant to certain risk-sharing
arrangements. Medical benefits expense consists of capitation
expenses and health benefit claims. Capitation represents fixed
payments on a per member per month basis to participating
physicians and other medical specialists, as compensation for
providing comprehensive health services. Participating physician
capitation payments for the year ended December 31, 2003,
five-month period ended December 31, 2002, seven-month
period ended July 31, 2002, year ended December 31,
2001 were 12%, 12%, 10% and 10%, respectively, of total medical
benefits expense.
Medical benefits payables consist primarily of
liabilities established for reported and unreported claims and
accrued capitation fees and adjustments, which are unpaid as of
the balance sheet date, and contractual liabilities under risk
sharing arrangements established through an estimation process
utilizing company-specific, industry-wide, and general economic
information and data. The estimation process also involves
continuous monitoring and evaluation of the submission,
adjudication, and payment cycles of claims. The Company's
year-end medical benefits payable is substantially satisfied
through claims payment in the subsequent year. The Company
estimates ultimate claims based upon historical experience and
other available information as well as assumptions about
emerging trends, which vary by business segment. Significant
assumptions used in the estimation process include trends in
benefit costs, seasonality, changes in member demographics,
utilization, provider contract terms and reimbursement
strategies, frequency and severity of claims incurred, known and
adjudicated claims and changes in the timing of the reporting of
claims. Additionally, as part of the review, the Company
estimates and accrues for the costs necessary to process unpaid
claims.
The Company records reserves for estimated
referral claims related to medical groups under contract with
the Company who are financially troubled or insolvent and who
may not be able to honor their obligations for the costs of
medical services provided by other providers. In these
instances, the Company may be required to honor these
obligations for legal or business reasons. Based on our current
assessment of providers under contract with the Company, such
losses are not expected to be significant.
Due to the numerous factors influencing this
liability, the Company develops a series of estimates based upon
generally accepted actuarial projection methodologies using
various scenarios with respect to claim submission and payment
patterns and cost trends. The Company's policy is to record
management's best estimate of medical and other benefits
payable that adequately provides for future payments of claims
incurred but not paid under moderately adverse conditions.
Deviations, whether positive or negative, between actual
experience and estimates used to establish the liability are
recorded in the period of claim payment on a consistent basis.
The Company continually monitors the reasonableness of the
assumptions and judgments used in prior estimates by comparison
with actual claim patterns and considers this information in
future estimates.
Medical and other benefits paid can also be
significantly impacted by outcomes from court decisions,
interpretations by regulatory authorities, and legislative
changes involving healthcare matters. As a result, amounts
ultimately paid may differ from initial estimates that did not
consider such outcomes, interpretations and changes.
Premium
Deficiency Reserves
Premium deficiency reserves are recognized when
it is probable that the future costs associated with a group of
existing contracts will exceed the anticipated future premiums,
investment income and stop-loss reinsurance recoveries on those
contracts. For purposes of determining whether a premium
deficiency exists, contracts are grouped in a manner consistent
with the Company's method of acquiring, servicing and
F-10
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
measuring profitability of such contracts. At
December 31, 2003 and 2002, the Company recorded premium
deficiency reserves of $500 and $1,875, respectively.
Income
Taxes
Deferred tax assets and liabilities are
recognized for the estimated future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is recognized
when, based on available evidence, it is more likely than not
that the deferred tax assets may not be realized.
Revenue
Recognition
The Company generally receives premiums in
advance of providing services, and recognizes premium revenue
during the period in which the Company is obligated to provide
services to its members. Premiums are billed monthly for
coverage in the following month and are recognized as revenue in
the month for which insurance coverage is provided. Premiums
collected in advance are deferred and reported as unearned
premiums in the accompanying Consolidated Balance Sheet. Any
amounts that have not been received by the end of the period
remain on the balance sheet classified as premium receivables.
Reinsurance
Certain premiums and medical benefits are ceded
to other insurance companies under various reinsurance
agreements. The ceded reinsurance agreements provide the Company
with increased capacity to write larger risks and maintain its
exposure to loss within its capital resources. The Company is
contingently liable in the event that the reinsurers do not meet
their contractual obligations.
Reinsurance premiums and medical benefits are
accounted for consistently with the accounting for the original
policies issued and other terms of the reinsurance contracts.
The Company had payments of $2,724, $1,071, $1,616 and $3,337,
respectively, for the year ended December 31, 2003, the
five-month period ended December 31, 2002, the Predecessor
seven-month period ended July 31, 2002 and the Predecessor
year ended December 31, 2001. The Company had recoveries of
$715, $985, $1,751 and $1,700, respectively, for the year ended
December 31, 2003, the five-month period ended December 31,
2002, the Predecessor seven-month period ended July 31,
2002 and the Predecessor year ended December 31, 2001.
Member
Acquisition Costs
Member acquisition costs consist of
administrative costs that the Company incurs to acquire new
business. The Company does not defer member acquisition costs.
Member acquisition costs are expensed in the period in which
they are incurred.
Unit-Based
Compensation
At December 31, 2003, the Company has two
equity-based employee compensation plans, which are described
more fully in Note 8. The Company accounts for these plans under
the recognition and measurement principles (the intrinsic-value
method) prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations.
Compensation cost for unit options is reflected in net income
and is measured as the excess of the market price of the
Company's unit at the date of grant over the amount an
employee must pay to acquire the unit.
In December 2002, SFAS No. 148,
"Accounting for Stock-Based Compensation—Transition
and Disclosure" was issued. SFAS No. 148 provides
alternative methods of transition to the fair value method of
F-11
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
accounting for equity-based employee
compensation. It also amends and expands the disclosure
provisions of SFAS No. 123 and APB Opinion No. 28,
"Interim Financial Reporting," to require disclosure
in the summary of significant accounting policies of the effects
of an entity's accounting policy with respect to
equity-based employee compensation on reported net income and
earnings per stock in annual and interim financial statements.
While SFAS No. 148 does not require companies to account
for employee equity options using the fair-value method, the
disclosure provisions of SFAS No. 148 are applicable to all
companies with equity-based employee compensation, regardless of
whether they account for that compensation using the fair-value
method of SFAS No. 123 or the intrinsic-value method of APB
Opinion No. 25. The Company has adopted the disclosure
requirements of SFAS No. 148.
The following table illustrates the effect on net
income and net income attributable to common units if the
Company had applied the fair value recognition provisions to
equity-based employee compensation.
Five-Month
Year Ended
Period Ended
December 31,
December 31,
2003
2002
Net income, as reported
$
23,537
$
4,657
Reconciling items (net of tax effects):
Add: equity-based employee compensation expense
    determined under the intrinsic-value based method for all awards
434
4
Deduct: equity-based employee compensation
    expense determined under the fair-value based method for all
    awards
(3,152
)
(67
)
Net adjustment
(2,718
)
(63
)
Net income, as adjusted
20,819
4,594
Class A common unit yield
(5,997
)
(2,356
)
Net income attributable to common unit
$
14,822
$
2,238
Net income attributable per common unit:
Basic-as reported
$
0.66
$
0.09
Basic-as adjusted
$
0.56
$
0.09
Diluted-as reported
$
0.60
$
0.08
Diluted-as adjusted
$
0.50
$
0.08
The Predecessor seven-month period ended
July 31, 2002 and the Predecessor year ended
December 31, 2001 did not have any equity-based employee
compensation and as a result, those periods are not displayed in
the table above.
Net Income
Attributable Per Unit
Basic net income attributable per unit is
computed by dividing the net income less the Class A common
unit yield for the period by the weighted average number of
units outstanding during the period, less units outstanding that
are unvested and subject to provisions that allow the Company to
repurchase units at its sole discretion. Diluted net income
attributable per unit is computed by dividing the net income for
the period less the Class A common unit yield by the
weighted average number of units outstanding during the period,
including the unvested units that are subject to provisions that
allow the Company to repurchase units at its sole discretion.
F-12
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The following table presents the calculation of
net income attributable per common units— basic and diluted:
Successor
Five-Month
Year ended
Period ended
December 31,
December 31,
2003
2002
Numerator:
Net income — basic and diluted
$
23,537
$
4,657
Class A Common unit yield
(5,997
)
(2,356
)
Net income attributable to common unit
$
17,540
$
2,301
Denominator
Weighted average units outstanding —
    basic
26,398,962
25,752,459
Adjustments for unvested outstanding Class C
    Common units
3,039,250
1,486,778
Weighted average units outstanding —
    diluted
29,438,212
27,239,237
Net income attributable per common unit:
Net income attributable per unit — basic
$
0.66
$
0.09
Net income attributable per unit —
    diluted
$
0.60
$
0.08
Accumulated
Other Comprehensive Income
Accumulated other comprehensive income consists
of gains and losses that are not recorded in the statements of
income but instead are recorded directly to members' and
stockholders' equity. The Company's components of
accumulated other comprehensive income include net unrealized
gain (loss) on available-for-sale securities, net of tax.
Concentrations
The operations of the Company's subsidiaries
in Florida represent a significant concentration of the
Company's revenues. The following table illustrates the
Company's Florida subsidiaries' revenue as a
percentage of the revenue for each segment and in total.
Successor
Predecessor
Five-Month
Seven-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31,
December 31,
July, 31
December 31,
2003
2002
2002
2001
Medicare
27
%
29
%
31
%
29
%
Medicaid
59
%
57
%
54
%
51
%
Total
86
%
86
%
85
%
80
%
The Company expects that the Florida
subsidiaries' Medicare and Medicaid contracts, which expire
on various dates between June 2004 and September 2005, will be
renewed. The Company's operating results could be
significantly constrained in the event that the compensation
provided under its Florida subsidiaries' Medicare and
Medicaid contracts is inadequate to fund medical benefits
expense or in the event that these contracts are not renewed.
F-13
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Fair Value
Information
The Company's Consolidated Balance Sheets
include the following financial instruments: cash and cash
equivalents, receivables, investments, accounts payable, medical
benefits payable, and notes payable. The carrying amounts of
current assets and liabilities approximate their fair value
because of the relatively short period of time between the
origination of these instruments and their expected realization.
The carrying value of the notes payable to related party is
estimated by management to approximate fair value based upon the
term, nature of the obligation and the arms-length negotiations
conducted during the purchase transaction. The carrying value of
other long-term debt obligations approximates their fair value
based on borrowing rates currently available to the Company for
instruments with similar terms and remaining maturities.
Recent
Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal
Activities," which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous
accounting guidance, principally Emerging Issues Task Force
("EITF") Issue No. 94-3 "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires recognition of
the liability for costs associated with an exit or disposal
activity when a company exits a facility, whereas under EITF
Issue No. 94-3, a liability for an exit cost is recognized
at the date a company commits to an exit plan. In addition, SFAS
No. 146 establishes that the liability should initially be
measured and recorded at fair value. Accordingly, SFAS
No. 146 may affect the timing of recognizing future
restructuring costs, as well as the amounts recognized.
Application of SFAS No. 146 was required for restructuring
activities initiated after December 31, 2002. Adoption of
this standard did not impact the Company's financial
statements.
In November 2002, the FASB issued Interpretation
No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others — an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB
Interpretation No. 34." The interpretation elaborates
on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain
guarantees that it has issued. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. In general, the interpretation applies to contracts
or indemnification agreements that contingently require the
guarantor to make payments to the guaranteed party based on
changes in an underlying obligation that is related to an asset,
liability or an equity security of the guaranteed party. The
initial recognition and measurement provisions of the
interpretation apply to guarantees issued or modified after
December 31, 2002. The adoption of this interpretation in
fiscal 2003 did not have an impact on the Company's
financial statements.
In January 2003, the FASB issued Interpretation
No. 46, "Consolidation of Variable Interest
Entities." This interpretation of Accounting Research
Bulletin No. 51, "Consolidated Financial
Statements," addresses consolidation by business
enterprises of variable interest entities ("VIEs")
when the VIEs either: (1) do not have sufficient equity
investment at risk to permit the entity to finance its
activities without additional subordinated financial support, or
(2) the equity investors lack an essential characteristic
of a controlling financial interest. As of December 31,
2003, the Company does not have any entities that require
disclosure or new consolidation as a result of adopting the
provisions of FASB Interpretation No. 46.
In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity." SFAS
No. 150 requires that certain financial instruments,
including mandatorily redeemable financial instruments, be
classified as liabilities. For existing financial instruments,
the standard is applicable for the first quarter beginning after
June 15, 2003. The adoption of SFAS No. 150 has not
impacted the Company's financial statements.
F-14
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
2.     BUSINESS
ACQUISITION
On July 31, 2002, the Company acquired
(directly or indirectly) 100 percent of the outstanding
stock or other ownership interests of the Acquired Subsidiaries.
The results of the Acquired Subsidiaries' operations have
been included in the consolidated financial statements since
that date.
The aggregate purchase price was estimated to be
$170,060, including cash compensation of $57,719, Seller Note,
which had an estimated initial aggregate principal amount of
$107,343 (see Note 6), transaction expenses of $4,748, and
a warrant to purchase 2,287,037 Class B Common Units at an
adjusted purchase price of $3.00 per unit (see Note 8).
The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed at the
date of acquisition, July 31, 2002. Because the value of
the Seller Note was contingent upon various factors, the amount
of goodwill was subject to future adjustment.
Cash, cash equivalents and investments
$
167,313
Premiums receivable and advances to providers
15,548
Restricted investments
16,023
Property and equipment and other assets
11,921
Intangible assets
19,970
Goodwill
117,064
Total assets acquired
347,839
Claims payable and unearned premiums
(108,199
)
Short-term debt and other liabilities
(69,580
)
Total liabilities assumed
(177,779
)
Net assets acquired
$
170,060
The acquisition was accounted for under the
provisions of Internal Revenue Code Section 338(h)10, thus
management believes the entire goodwill balance of $117,064 is
expected to be deductible for tax purposes.
The Seller Note contained the following
contingencies and adjustments that were to be established at or
around September 15, 2003 and 2004, in each case in
accordance with the definitions and procedures set forth in the
purchase agreement for the acquisition of the Florida Companies
("purchase agreement"):
Florida HMO Capital
    Adjustment
—the Seller Note
    was adjusted for the difference between aggregate actual and
    required capital at HE and WC at July 31, 2002, as
    determined in accordance with statutory accounting principles.
Medical Benefits
    Payable
—the Seller Note was
    adjusted for any deficiency between aggregate estimated and
    actual medical benefits payable at WCNY and FC at June 30,
    2002.
CHMI Capital
    Adjustment
—the Seller Note
    was adjusted for the difference between CHMI's actual net
    worth and $1,000 at July 31, 2002.
Medicare
    Adjustment
—the Seller Note
    was adjusted for 3.25 times Medicare earnings, as defined in the
    purchase agreement, for the period January 1, 2002 through
    December 31, 2003.
Commercial
    Adjustment
—the Seller Note
    was adjusted for commercial earnings or losses, as defined in
    the purchase agreement, for the periods January 1, 2002
    through December 31, 2002 and January 1, 2003 through
    December 31, 2003.
F-15
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
In addition, the Seller Note is subject to
adjustment based on the Company's claims for
indemnification arising under the purchase agreement.
The following is a summary of the acquired
intangible assets resulting from the business acquisition as of
December 31, 2003 and 2002:
2003
2002
Gross
Gross
Carrying
Accumulated
Carrying
Accumulated
Amount
Amortization
Amount
Amortization
Provider network
$
3,800
($
1,274
)
$
3,800
($375
)
Membership contracts
6,000
(4,870
)
6,000
(2,237
)
Trademark
6,500
(661
)
6,500
(194
)
Noncompete agreements
2,500
(652
)
2,500
(192
)
Licenses and permits
985
(93
)
985
(27
)
State contracts
185
(17
)
185
(5
)
$
19,970
($
7,567
)
$
19,970
($
3,030
)
Amortization expense for the year ended
December 31, 2003 and the five-month period ended
December 31, 2002 was $4,537 and $3,030 respectively. The
Company did not have any amortization expense for the
predecessor seven-month period ended July 31, 2002 or for
the predecessor year ended December 31, 2001. Amortization
expense expected to be recognized during fiscal years subsequent
to December 31, 2003 is as follows:
2004
$
2,449
2005
1,486
2006
1,195
2007
1,004
2008
735
2009 and thereafter
5,534
$
12,403
The weighted-average amortization periods of the
acquired intangible assets resulting from the business
acquisition are as follows:
Weighted-Average
Amortization
Period
(In Years)
Provider network
8.94
Membership contracts
3.42
Trademark
15.00
Noncompete agreements
5.00
Licenses and permits
15.00
State contracts
15.00
Total intangibles
10.74
The following unaudited pro forma financial
information is presented for illustrative purposes only, to give
effect to the acquisition of the Acquired Subsidiaries as if it
had been completed on January 1, 2001, and is not
F-16
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
necessarily indicative of the operating results
that would have actually occurred had the acquisition been
completed on that date, nor are they indicative of future
operating results.
Pro forma Combined
Year ended December 31,
2002
2001
(unaudited)
(unaudited)
Revenues
$
921,837
$
750,284
Income before income taxes
27,670
13,062
Net income
16,325
7,707
Class A common unit yield
(5,997
)
(2,356
)
Net income attributable to common units
$
10,328
$
5,351
Net income attributable per common
    unit — basic
$
0.39
$
0.20
Net income attributable per common
    unit — diluted
$
0.35
$
0.18
Weighted average units outstanding —
    basic
26,398,962
26,398,962
Weighted average units outstanding —
    diluted
29,438,212
29,438,212
3.     INVESTMENTS
The amortized cost and estimated fair values of
investments at December 31, 2003 and 2002 are as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
2003
Cost
Gains
Losses
Fair Value
Available for sale:
Certificates of deposit
$
33,777
$
1
—
$
33,778
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
2002
Cost
Gains
Losses
Fair Value
Available for sale:
Fixed maturities:
U.S. Treasury securities
$
25,384
$
34
—
$
25,418
U.S. Government agency securities
9,972
19
—
9,991
Certificates of deposit
33,601
—
—
33,601
$
68,957
$
53
—
$
69,010
All of the Company's investments at
December 31, 2003 and 2002 are due within one year.
F-17
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
4.     PROPERTY AND
EQUIPMENT
Property and equipment at December 31, 2003
and 2002 is summarized as follows:
2003
2002
Land
$
42
$
42
Leasehold improvements
2,991
2,987
Computer equipment and software
3,570
1,626
Furniture and other equipment
3,389
2,295
9,992
6,950
Less accumulated depreciation
(5,275
)
(2,743
)
$
4,717
$
4,207
The Company recognized depreciation expense on
property and equipment of $2,547, $703, $1,239 and $2,192 for
the year ended December 31, 2003, the five-month period
ended December 31, 2002, the predecessor seven-month period
ended July 31, 2002 and the predecessor year ended
December 31, 2001, respectively.
The Company committed to a plan to exit its
current corporate office in November 2003. All leasehold
improvements, which will remain with the lessor, were assigned a
remaining useful of eight months to coincide with the planned
exit date. This change in estimate resulted in an increase to
depreciation expense of approximately $1,019 for the year ended
December 31, 2003.
5.     MEDICAL
BENEFITS PAYABLE
The following table provides a reconciliation of
the beginning and ending balance of medical benefits payable for
the following periods:
Successor
Predecessor
Five-Month
Seven-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31,
December 31,
July 31,
December 31,
2003
2002
2002
2001
Balances as of beginning of period
$
113,670
$
109,054
$
98,314
$
86,714
Medical benefits incurred related to:
Current period
884,703
348,079
436,444
634,726
Prior periods
(23,650
)
(6,316
)
(1,520
)
2,780
Total
861,053
341,763
434,924
637,506
Medical benefits paid related to:
Current period
(751,826
)
(249,076
)
(335,938
)
(538,505
)
Prior periods
(74,600
)
(88,071
)
(88,246
)
(87,401
)
Total
(826,426
)
(337,147
)
(424,184
)
(625,906
)
Balances as of end of period
$
148,297
$
113,670
$
109,054
$
98,314
Medical benefits payable at December 31,
2002 and July 31, 2002 developed favorably in the
respective periods by $23,650 and $6,316 primarily due to
differences between estimated and actual utilization and
F-18
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
severity of claims principally on our Florida
Medicaid businesses. Medical benefits payable at
December 31, 2001 developed favorably by $1.5 million
due primarily to lower utilization of medical services than
anticipated.
6.     DEBT
The Company's outstanding debt at
December 31, 2003 and 2002 consists of the following:
Related Party
Other
2003
2002
2003
2002
Line of credit
$
—
$
—
$
—
$
—
Note payable
119,738
106,600
15,903
Short-term margin payable
—
—
—
49,579
Other
—
—
114
116
Total
119,738
106,600
16,017
49,695
Less: current portion of long-term debt
(48,170
)
(21,806
)
—
(49,654
)
$
71,568
$
84,794
$
16,017
$
41
Line of Credit
The Company obtained a $15,000 senior credit
facility with an unaffiliated bank in March 2003. The facility
has a floating interest rate based on the one month Eurodollar
rate and requires payment of any borrowings on the facility at
its maturity date in March 2005. During the year ended
December 31, 2003, no draws on the line of credit occurred.
Additionally, the line of credit has certain financial and
non-financial covenants which the Company was in compliance with
at December 31, 2003.
Note Payable
In March 2003, a Subsidiary of the Company also
issued senior discount notes with a principal amount at maturity
of $21,615. These notes bear interest at 8% and mature in March
2009. The Company received approximately $15,000 from the
issuance (prior to the transaction expenses). The notes require
semi-annual payments of interest. Principal payments are due in
two equal installments in March 2008 and 2009. The discount on
the note was approximately $6,600 and is being amortized over
the term of the notes. During 2003, approximately $903 was
amortized and is included as a component of interest expense in
the accompanying Consolidated Statements of Income.
Note Payable to Related
Party
In conjunction with the business combination
described in Note 2, the Company issued the Seller Note payable
to the former stockholders of the Florida Companies. The Seller
Note is secured by a portion of WHP's common stock, had an
initial principal amount of $53,000, bears interest at the rate
of 5.25% per annum and is payable from September 15, 2003
through September 15, 2006. The principal amount of the
Seller Note was subject to adjustment for various contingencies
as described in Note 2. As a result of the first Seller Note
adjustment and principal payments, the net balance of the Seller
Note was increased $13,138 in 2003. The principal balance of the
Seller Note at December 31, 2003 and 2002 was $119,738 and
$106,600, respectively. The Company entered into a settlement
agreement on February 12, 2004 that fixed the amount of the
Seller Note and finalized the settlement of all purchase price
adjustments to the amount recorded by the Company at
December 31, 2003. The seller continues to be obligated to
provide the Company with indemnification for potential
pre-acquisition claims.
F-19
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Short-Term Margin
Payable
The short-term margin payable consisted of
agreements with unaffiliated financial institutions whereby the
Company borrowed $50,000 under two separate margin agreements.
One of the $25,000 agreements bore interest at the financial
institutions base rate plus an applicable margin and the other
agreement had fixed rates within the range of 1.5% to 2.82%.
Both of these margin payable agreements were closed in 2003.
Scheduled maturities of the Company's debt,
including the accreted amount of the senior discount notes,
during fiscal years subsequent to December 31, 2003 are as
follows:
2004
$
48,170
2005
30,784
2006
40,784
2007
—
2008 and thereafter
21,615
$
141,353
7.     COMMITMENTS
AND CONTINGENCIES
Litigation
In early 1999, an action was filed against one of
our HMO subsidiaries by a sales agency that had contracted to
market our Predecessor's commercial health plan. The
plaintiff alleges that its contract requires WC to allow the
plaintiff to serve as a sales agent for its Medicare health
plans and seeks an unspecified amount of damages, including lost
profits, based on our refusal to do so. A trial is scheduled to
commence in February 2004. The Company intends to defend this
matter vigorously.
The Company is involved in legal actions in the
normal course of business, some of which seek monetary damages,
including claims for punitive damages, which are not covered by
insurance or indemnifications from the sellers. These actions,
including the action described in the preceding paragraph, when
finally concluded and determined, will not, in the opinion of
management, have a material adverse effect on our financial
position, results of operations or cash flows.
Operating
Leases
The Company has operating leases for office
space, electronic data processing equipment, automobiles,
software and terminal lines. Rental expense totaled $2,273,
$773, $993 and $1,701 for the year ended December 31, 2003, the
five-month period ended December 31, 2002, the predecessor
seven-month period ended July 31, 2002 and the predecessor
year ended December 31, 2001, respectively. Future minimum
lease payments under noncancelable operating leases with initial
or remaining lease terms in excess of one year at
December 31, 2003 were:
2004
$
1,641
2005
768
2006
535
2007
506
2008
527
Thereafter
881
$
4,858
F-20
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
8.     MEMBERS'
EQUITY
Under the Company's Second Amended and
Restated Limited Liability Company Agreement (the "LLC
Agreement"), membership interests in the Company are
represented by issued and outstanding Units. Units may be
divided into one or more types, classes or series, with each
type, class or series having the rights and privileges as may be
set forth in the LLC Agreement. The Company is currently
authorized to issue Preferred Units, Class A Common Units,
Class B Common Units, Class C Common Units and other
Common Units under the LLC Agreement.
Upon the execution of the LLC Agreement as of
September 5, 2002, the Company effected a unit split,
pursuant to which each common unit then issued and outstanding
was automatically converted into 333 1/3 of the same class
of common unit.
Each Class A Common Unit issued accrues, on
a quarterly basis, an amount, referred to as the
"Class A Common Yield," equal to 8% per annum on
the sum of (i) the Class A Common Capital Value of
$3.00 per Class A Common Unit, less any portion of such
amount previously distributed to the holder thereof pursuant to
the terms of the LLC Agreement, and (ii) the accrued but
unpaid portion of the Class A Common Yield for all prior
quarterly periods.
Class A Common Units and Class C Common
Units are voting units, and entitle the holders thereof to one
vote for each such Common Unit on all matters voted upon by
members of the Company. Class B Common Units and any
Preferred Units are non-voting units.
Pursuant to the terms of the LLC Agreement, any
distribution of cash or assets of the Company is to be made in
the following order and priority:
First, to the holders of Class A Common
Units, in proportion to and to the extent of the accrued but
unpaid Class A Common Yield on all outstanding Class A
Common Units at the time of the distribution, until the entire
amount of the accrued but unpaid Class A Common Yield on
all outstanding Class A Common Units has been paid in full;
Second, to the holders of Class A Common
Units, in proportion to and to the extent of the Class A
Common Capital Value of $3.00 per Class A Common Unit not
distributed to the holders prior to the time of the
distribution, until the entire amount of the Class A Common
Capital Value on all outstanding Class A Common Units has
been paid in full;
Third, to the holders of Class B Common
Units, in proportion to and to the extent of the Class B
Common Capital Value per Class B Common Unit not
distributed to the holders prior to the time of the
distribution, until the entire amount of the Class B Common
Capital Value on all outstanding Class B Common Units has
been paid in full; and
Fourth, pro rata, based on the total number of
common units of all classes outstanding, to the holders of all
common units of all classes.
The Company did not make any distributions during
the periods ended December 31, 2003 and 2002, respectively.
The aggregate amount of cumulative distribution preference,
Class A Common Yield, in arrears at December 31, 2003
and 2002 is $5,997 and $2,356, respectively.
The Company has entered into agreements with
certain members of management and others providing for the sale
and issuance of Class A Common Units and Class C
Common Units. The Class C Common Units issued or to be
issued to management are subject to certain vesting
restrictions, as set forth in the applicable agreements. A
receivable has been recorded as a reduction of units outstanding
and paid in capital for the amount of units issued to one of the
Company's board members.
F-21
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
In September 2002, the Company adopted two equity
plans, the 2002 Senior Executive Equity Plan (the
"Executive Plan") and the 2002 Employee Option Plan
(the "Employee Plan"). Both plans permit senior
executives and other key employees selected to participate to
acquire ownership interests in the Company. The Board of
Directors reserved an aggregate of 4,432,693 Common Units (which
may consist of any combination of Class A Common Units and
Class C Common Units) for issuance under the Executive Plan
and the Employee Plan.
Under the Executive Plan, participants are given
the opportunity to purchase a specified number of Class A
Common Units. As a result of such purchase, participants are
granted a specified number of Class C Common Units, which
may be subject to vesting over time or based upon the
fulfillment of specified conditions. During 2003 and the
five-month period ending December 31, 2002, the Company
sold 174,505 and 23,351,667 Class A Common Units,
respectively, under the plan, for net proceeds of $545 and
$70,055, respectively.
Under the Employee Plan, participants are granted
options to purchase Class A Common Units, at an exercise
price to be specified in each individual option grant agreement.
No options were exercised during 2003 or 2002.
All Class A Common Units sold and
Class C Common Units granted under the Executive Plan, and
all Class A Common Units issued upon exercise of options
granted under the Employee Plan, are subject to the
Company's right of repurchase upon the termination of the
participant's employment with the Company or any of its
subsidiaries. During the year ended December 31, 2003,
3,333 Class A Common Units and 161,127 Class C Common
Units were repurchased at the then fair market value at date of
repurchase.
The Board of Directors or any committee
designated by the Board has the authority to select executives
and other employees to participate in the Executive Plan and the
Employee Plan, to determine the number of Class A Common
Units to be sold and the number of Class C Common Units to
be granted to participants in the Executive Plan, to determine
the number of Class A Common Units subject to options
granted under the Employee Plan, to determine the vesting
schedule, if any, applicable to Class C Common Units issued
under the Executive Plan and options granted under the Employee
Plan, to determine the exercise price of option grants under the
Employee Plan, and to otherwise administer the plans.
Warrants
On July 31, 2002, in conjunction with the
purchase transaction, the Company issued to the sellers warrants
to purchase 2,287,037 Class B Common Units at an exercise
price of $3.00 per Class B Common Unit. On the same date,
in connection with WHP's acquisition of the Florida
Companies, WHP transferred the warrants to certain of the former
stockholders of the Florida Companies as part of the purchase
price paid by WHP for the Florida Companies. The warrants have a
10-year term and are nontransferable during a restricted period
from the date of issuance until the closing of a public offering
registered with the Securities and Exchange Commission under the
Securities Act of 1933. Management believes the warrants were
issued at the then fair market value. The warrants were
exercised in December 2003 by the former stockholders. The
former stockholders issued a non-recourse note for the aggregate
purchase price of $6,861 for the units; accordingly, the note
has been shown as an offset to the number of units issued and
outstanding and paid in capital.
F-22
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Unit Option
Activity
The following tables summarize information with
respect to unit option activity:
Restricted units issued in 2002
2,093,519
Restricted units issued in 2003
2,910,117
Unit-based compensation for five-months ended
    December 31, 2002
$
1
Unit-based compensation for year ended
    December 31, 2003
$
168
Restricted units subject to repurchase at
    December 31, 2003:
1,532,368
Restricted units forfeited in 2003
124,202
Year Ended
December 31, 2003
Weighted
Average
Exercise
Units
Price
Outstanding at beginning of year
—
—
Granted
1,099,500
$
3.69
Exercised
—
—
Forfeited
—
—
Outstanding at end of year
1,099,500
$
3.69
Outstanding options under the various unit
agreements vest over a one to four year period. As of
December 31, 2003, 75,417 options were exercisable at
exercise prices ranging from $3.00 to $5.26. Remaining
non-exercisable options as of December 31, 2003 become
exercisable as follows:
2004
325,646
2005
271,125
2006
254,458
2007
172,854
Total
1,024,083
The following table summarizes information
regarding options outstanding and exercisable as of
December 31, 2003:
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Weighted
Weighted
Range of
Contractual
Average
Average
Exercise
Number
Life
Exercise
Number
Exercise
Prices
Outstanding
(Years)
Price
Exercisable
Price
$3.00 — $5.26
1,099,500
9.54
$
3.69
75,417
$
3.00
F-23
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
Year Ended
December 31, 2003
Weighted average risk free interest rate
3.98%
Term
6.75
Expected dividend yield
0%
Volatility
50.2%
Weighted average fair value for options granted
    in 2003
$
3.40
The minimum fair value of each option grant is
estimated on the date of grant using the Black-Scholes Option
Pricing Model with the following assumptions used for grants
during the periods: dividend yield of 0%; expected option term
of 6.75 years; risk-free interest rates ranging from
3.37% – 4.52% for options granted during the year
ended December 31, 2003. The weighted average fair value of
options granted for the year ended December 31, 2003 was
$3.40.
9.  STATUTORY CAPITAL AND DIVIDEND
RESTRICTIONS
State insurance laws and regulations prescribe
accounting practices for determining statutory net income and
surplus for HMOs and require, among other matters, the filing of
financial statements prepared in accordance with statutory
accounting practices prescribed or permitted for HMOs. State
insurance regulations also require the maintenance of a minimum
compulsory surplus based on various factors. At
December 31, 2003, the Company's HMO subsidiaries were
in compliance with these minimum compulsory surplus
requirements. The combined statutory capital and surplus of the
Company's HMO subsidiaries was $59,592 and $37,629 at
December 31, 2003 and 2002, respectively, compared to the
required surplus of $33,028 and $23,881 at December 31,
2003 and 2002, respectively.
Dividends paid by the Company's HMO
subsidiaries are limited by state insurance regulations. The
insurance regulator in each state of domicile may disapprove any
dividend that, together with other dividends paid by a
subsidiary in the prior twelve months, exceeds the regulatory
maximum as computed for the HMO based on its statutory surplus
and net income.
10.  INCOME TAXES
The Company is considered a partnership for
federal income tax purposes and is not part of the consolidated
filing with its subsidiaries. The Companies' subsidiaries
file a consolidated federal income tax return. The Company and
the subsidiaries file separate state franchise, income and
premium tax returns as applicable.
F-24
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
The following table provides components of income
tax expense for the following periods:
Successor
Five-Month
Year Ended
Period Ended
December 31,
December 31,
2003
2002
Current:
Federal
$
13,465
$
8,705
State
1,906
1,820
15,371
10,525
Deferred:
Federal
1,398
(4,980
)
State
186
(740
)
1,584
(5,720
)
Total
$
16,955
$
4,805
A reconciliation of income tax at the effective
rate to income tax at the statutory federal rate is as follows:
Five-Month
Year ended
Period Ended
December 31,
December 31,
2003
2002
Income tax expense at statutory rate
$
14,256
$
4,063
Increase (reduction) resulting from:
State income tax net of federal benefit
1,611
708
Other, net
1,088
34
Total income tax expense
$
16,955
$
4,805
The significant components of the Company's
deferred tax assets and liabilities at December 31, 2003
and 2002 are as follows:
2003
2002
Deferred tax assets:
Medical and other benefits discounting
$
2,178
$
1,890
Unearned premium discounting
5,968
1,809
Accrued expenses
3,890
5,198
12,036
8,897
Deferred tax liabilities:
Goodwill and other intangibles
4,155
99
Prepaid liabilities
1,068
421
5,223
520
Net deferred tax asset
$
6,813
$
8,377
F-25
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
11.  RELATED-PARTY
TRANSACTIONS
Transaction
Expenses
The Company reimbursed expenses and paid
transaction fees of $83 and $3,668, for the year ended
December 31, 2003 and the five-month period ended
December 31, 2002, respectively, to the majority
stockholder of the Company.
Seller
Note
The Seller Note described in Notes 2 and 6
related to the acquisition of the Subsidiaries is due to a
former stockholder of the Florida Companies, who also serves as
a director for WC and HE.
Consulting
Fees
For the year ended December 31, 2003 and the
five-month period ended December 31, 2002, the Company
incurred consulting fees of $35 and $190, respectively, to
former stockholders of the Acquired Subsidiaries.
Empire
Solutions
Until June 2003, the Company retained Empire
Solutions to provide services such as claims data entry and
information technology-related services, pursuant to an
agreement between Empire Solutions and CHMI. The Company's
former majority stockholder, who also serves as a director of WC
and HE, is the Chief Executive Officer and sole owner of Empire
Solutions. From the date of the Company's acquisition of
the Acquired Subsidiaries through the date of the Company's
termination of the agreement, the Company purchased $584 in the
aggregate from Empire Solutions.
IntelliClaim
In March 2003, the Company entered into an
agreement with IntelliClaim, Inc. pursuant to which the Company
licenses software and purchases maintenance, support and related
services, from IntelliClaim. A member of the Company's
board of directors is the Chairman and Chief Executive Officer
of IntelliClaim. In 2003, the Company purchased $263 of services
in the aggregate from IntelliClaim.
Bay Area
Primary Care and Bay Area Multi Specialty Group
The Company conducts business with Bay Area
Primary Care and Bay Multi Specialty Group, which provide
medical and professional services to a portion of the
Company's membership base. These entities are owned and
controlled by a former stockholder of the Florida Companies, who
also serves as a director for WC and HE. In 2003 and 2002, the
Company purchased $1,131 and $2,280, respectively, in the
aggregate from Bay Area Primary Care and Bay Multi Specialty
Group.
12.  EMPLOYEE BENEFIT PLAN
The Company, through its subsidiary, CHMI, began
offering a defined contribution 401(k) in December 2002.
The amount of matching contribution expense incurred in the year
ended December 31, 2003 and the five-month period ended
December 31, 2002 was $241 and $14, respectively. The
Predecessor had a separate defined contribution 401(k) plan and
made matching contributions of $127 and $200 for the Predecessor
seven-month period ended July 31, 2002 and the Predecessor
year ended December 31, 2001.
F-26
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
13.  SEGMENT REPORTING:
The Company has two reportable
segments: Medicaid and Medicare. The segments were
determined based upon the type of governmental administration
and funding of the health plans. Segment performance is
evaluated based upon earnings from operations without corporate
allocations. Accounting policies of the segments are the same as
those described in Note 1.
The Medicaid segment includes operations to
provide healthcare services to recipients that are eligible for
state supported programs including Medicaid and children's
health programs. The Medicare segment includes operations to
provide healthcare services to recipients who are eligible for
the federally supported Medicare program. The corporate and
other segment includes revenue and claims associated with
commercial members, investment and other income and selling,
general and administrative expenses not allocated.
Assets and equity details by segment have not
been disclosed, as they are not reported internally by the
Company.
Successor
Predecessor
Five-Month
Seven-Month
Year Ended
Period Ended
Period Ended
Year Ended
December 31,
December 31,
July 31,
December 31,
2003
2002
2002
2001
Revenue:
Medicaid
$
741,328
$
269,197
$
330,490
$
455,764
Medicare
288,940
121,367
171,047
236,295
Corporate and other
15,714
11,241
18,495
58,225
Total
1,045,982
401,805
520,032
750,284
Medical benefits expense:
Medicaid
609,233
222,007
274,672
364,293
Medicare
238,933
107,384
145,768
219,505
Corporate and other
12,887
12,372
14,484
53,708
Total
861,053
341,763
434,924
637,506
Selling, general and administrative
    expense:
Medicaid
87,586
30,862
35,987
56,448
Medicare
33,307
13,119
16,354
25,057
Corporate and other
5,213
1,403
2,151
4,774
Total
126,106
45,384
54,492
86,279
EBITDA
Medicaid
44,509
16,328
19,831
35,023
Medicare
16,700
864
8,925
(8,267
)
Corporate and other
(2,386
)
(2,534
)
1,860
(257
)
F-27
Table of Contents
WELLCARE HOLDINGS, LLC
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS — (Continued)
14.  QUARTERLY FINANCIAL INFORMATION
(unaudited)
Selected unaudited quarterly financial data in
2003 and 2002 are as follows:
Successor
For the Three Month Period Ended
March 31,
June 30,
September 30,
December 31,
2003
2003
2003
2003
Total revenues
$
251,557
$
254,157
$
260,548
$
279,720
Income before income taxes
5,910
11,221
15,713
7,648
Net income
3,428
6,508
7,687
5,914
Class A common unit yield
(1,448
)
(1,478
)
(1,511
)
(1,560
)
Net income attributable to common units
$
1,980
$
5,030
$
6,176
$
4,354
Income per unit — basic
0.08
0.19
0.23
0.16
Income per unit — diluted
0.07
0.17
0.20
0.14
Period end membership
482,000
489,000
497,000
555,000
Pro Forma
Predecessor
Combined
Successor
For the Three Month Period Ended
March 31,
June 30,
September 30,
December 31,
2002
2002
2002
2002
Total revenues
$
213,766
$
226,566
$
240,681
$
240,824
Income before income taxes
11,887
11,299
6,454
7,753
Net income
11,887
11,299
5,923
3,479
Class A common unit yield
(936
)
(1,420
)
Net income attributable to common units
$
4,987
$
2,059
Income per unit — basic
0.19
0.08
Income per unit — diluted
0.19
0.07
Period end membership
412,000
436,000
447,000
470,000
The sum of the quarterly earnings per unit
amounts do not equal the amount reported since per unit amounts
are computed independently for each quarter and for the full
year based on respective weighted-average units outstanding and
other dilutive potential units.
15.  SUBSEQUENT EVENTS
Subsequent to December 31, 2003, our Board
of Directors authorized a plan to reorganize the Company as a
corporation by means of a merger of the Company with and into
WCG, a wholly-owned subsidiary of the Company, in connection
with a planned initial public offering of the reorganized
company's common stock.
F-28
Table of Contents
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
WellCare Group, Inc.
Tampa, Florida
We have audited the accompanying balance sheet of
WellCare Group, Inc. (the Company) as of February 9, 2004.
This financial statement is the responsibility of the
Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents
fairly, in all material respects, the financial position of the
Company as of February 9, 2004 in conformity with
accounting principles generally accepted in the United States of
America.
/s/ DELOITTE & TOUCHE LLP
Tampa, Florida
February 12, 2004
F-29
Table of Contents
WELLCARE GROUP, INC.
BALANCE SHEET
February 9, 2004
Assets
Cash
$
1,000
Total Assets
$
1,000
Shareholder's Equity
Shareholder's Equity:
Common Stock (100 shares authorized, issued
    and outstanding, $0.01 par value)
1
Paid-In Capital
999
Total Shareholders' Equity
$
1,000
See notes to financial statements.
F-30
Table of Contents
WELLCARE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
February 9, 2004
1.
ORGANIZATION, BASIS OF PRESENTATION, AND
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
WellCare Group, Inc. (the "Company") is
a Delaware corporation incorporated on February 5, 2004
(date of inception) for the purpose of merging with WellCare
Holdings, LLC ("Holdings") and its subsidiaries.
Holdings, through its subsidiaries, provides managed care
programs and related benefits to individuals under Medicaid,
Medicare, and other state-sponsored children and family health
insurance programs. Holdings operates in the states of Florida,
New York and Connecticut.
The Company did not have any operating activity
during the period February 5, 2004 (date of inception) to
February 9, 2004.
Basis of
Presentation
The financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States.
Cash
The Company holds cash in a demand deposit
account.
2.
INITIAL PUBLIC OFFERING AND RELATED SUBSEQUENT
    EVENTS
In February 2004, the Board of Directors of
Holdings authorized a plan to reorganize Holdings as a
corporation, by means of a merger of Holdings with and into the
Company, in anticipation of a planned initial public offering of
the reorganized company's common stock.
F-31
Table of Contents
[INSIDE BACK COVER: COVER ART]
[A close-up picture of an elderly couple occupies
approximately three-fifths of the page from the top.
The logo for WellCare Health Plans, Inc. is
immediately below followed by the narrative:
"Our team of over 1,100 associates and
    over 17,000 physician partners serve over half a million
    members in the states of Florida, New York and Connecticut.
    Headquartered in Tampa, Florida, the WellCare Group of Companies
    operates plans under several local brands — WellCare,
    Staywell, HealthEase and PreferredOne."
To the left of the narrative is a vertical
listing of "WellCare," PreferredOne,"
"HealthEase" and "StayWell." The tagline
"The Common Sense Approach to Healthcare" runs across
the bottom of the page.]
Table of Contents
Table of Contents
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13.
Other
Expenses of Issuance and Distribution
The expenses (other than underwriting discounts
and commissions and the underwriters' non-accountable
expense allowance) payable in connection with the sale of the
common stock offered in this Registration Statement are as
follows:
Securities and Exchange Commission registration
    fee
$
126,700
NASD filing fee
10,500
NYSE filing fee
*
Printing and engraving expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue Sky fees and expenses (including legal fees)
*
Transfer agent and rights agent and registrar
    fees and expenses
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
All expenses are estimated except for the SEC fee
and the NASD fee.
Item 14.
Indemnification
of Directors and Officers
Section 145 of the Delaware General
Corporation Law (the "DGCL") provides, in effect, that
any person made a party to any action by reason of the fact that
he is or was a director, officer, associate or agent of WellCare
may and, in certain cases, must be indemnified by WellCare
against, in the case of a non-derivative action, judgments,
fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) incurred by him as a result of
such action, and in the case of a derivative action, against
expenses (including attorneys' fees), if in either type of
action he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of
WellCare. This indemnification does not apply, in a derivative
action, to matters as to which it is adjudged that the director,
officer, associate or agent is liable to WellCare, unless upon
court order it is determined that, despite such adjudication of
liability, but in view of all the circumstances of the case, he
is fairly and reasonably entitled to indemnity for expenses,
and, in a non-derivative action, to any criminal proceeding in
which such person had reasonable cause to believe his conduct
was unlawful.
Article 6 of WellCare's certificate of
incorporation provides that no director of WellCare shall be
liable to WellCare or its stockholders for monetary damages for
breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL.
Article 7 of WellCare's certificate of
incorporation also provides that WellCare shall indemnify to the
fullest extent permitted by Delaware law any and all of its
directors and officers, or former directors and officers, or any
person who may have served at WellCare's request as a
director or officer of another corporation, partnership, joint
venture, trust or other enterprise.
Reference is made to Section 9 of the
underwriting agreement to be filed as Exhibit 1.1 hereto,
pursuant to which the underwriters have agreed to indemnify
officers and directors of WellCare against certain liabilities
under the Securities Act.
WellCare has entered into indemnification
agreements with each director and certain officers of WellCare,
a form of which is to be filed as Exhibit 10.24 to this
registration statement. Pursuant to such agreements, WellCare
will be obligated, to the extent permitted by applicable law, to
indemnify such directors
II-1
Table of Contents
and officers against all expenses, judgments,
fines and penalties incurred in connection with the defense or
settlement of any actions brought against them by reason of the
fact that they were directors or officers of WellCare or assumed
certain responsibilities at the direction of WellCare. WellCare
also intends to purchase directors and officers liability
insurance in order to limit its exposure to liability for
indemnification of directors and officers.
Item 15.
Recent Sales of Unregistered
    Securities
Certain Sales of Securities.
Except as set forth below, in the three years
preceding the filing of this registration statement, the
registrant has not issued any securities that were not
registered under the Securities Act.
In February 2004, upon the incorporation of the
registrant, the registrant issued 100 shares of common stock to
WellCare Holdings, LLC ("Holdings") in exchange for
$1,000.
In February 2004, the Board of Directors of
Holdings authorized a plan to reorganize Holdings as a
corporation, by means of a merger of Holdings with and into the
registrant. Upon the consummation of the reorganization, which
will take place immediately prior to the closing of the offering
contemplated by this registration statement:
•
assuming an initial public offering price of
    $           per
    share, the registrant will issue an aggregate
    of                      shares
    of common stock in exchange
    for                     Class A
    Common
    Units,                      Class B
    Common Units
    and                     Class C
    Common Units of Holdings;
•
all outstanding options issued by Holdings will
    automatically be converted into options to acquire shares of
    common stock of the registrant.
The foregoing sales of securities were made, or
will be made, in reliance upon the exemption from the
registration provisions of the Securities Act provided for by
Section 4(2) thereof for transactions not involving a
public offering. All of the foregoing securities are deemed
restricted securities for the purposes of the Securities Act.
Item 16.
Exhibits
and Financial Statement Schedules
(a)
Exhibits
1.1*
Form of Underwriting Agreement.
2.1*
Agreement and Plan of Merger, dated as
    of           ,
    2004, between WellCare Holdings, LLC and WellCare Group, Inc.
3.1
Certificate of Incorporation.
3.2*
Form of Amended and Restated Certificate of
    Incorporation (to be filed with the Delaware Secretary of State
    immediately prior to the closing of the offering covered by this
    Registration Statement).
3.3
Bylaws.
3.4*
Form of Amended and Restated Bylaws (to be
    adopted immediately prior to the closing of the offering covered
    by this Registration Statement).
4.1*
Specimen common stock certificate.
5.1*
Opinion of Greenberg Traurig, LLP.
10.1
Form of AHCA 2002-2004 Medicaid Health
    Maintenance Organization Contract, dated July 2002.
10.2
Amendment Nos. 1 through 7 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for Well Care HMO, Inc.
10.3
Amendment Nos. 1 through 9 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for HealthEase of Florida, Inc.
10.4
Contract, dated September 26, 2003, between
    the Centers for Medicare & Medicaid Services and Well Care
    HMO, Inc.
II-2
Table of Contents
10.5
Purchase Agreement, dated as of May 17,
    2002, by and among WellCare Holdings, LLC, WellCare Acquisition
    Company, the stockholders listed on the signature page thereto,
    Well Care HMO, Inc., HealthEase of Florida, Inc., Comprehensive
    Health Management of Florida, Inc. and Comprehensive Health
    Management, L.C.
10.6*
Amended and Restated Senior Subordinated
    Non-Negotiable Promissory Note, dated February 12, 2004.
10.7*
Amendment and Settlement Agreement, dated
    February 12, 2004, among WellCare Holdings, LLC. WellCare
    Health Plans, Inc., Kiran C. Patel, Pallavi Patel Pradip C.
    Patel, Swati Patel, Rupesh Shah and Nita Shah.
10.8
Equity and Warrant Agreement, dated as of
    July 31, 2002, among WellCare Holdings, LLC, Kiran C.
    Patel, M.D., Pradip C. Patel and Rupesh Shah.
10.9
Investor Rights Agreement, dated as of
    July 31, 2002, by and among WellCare Holdings, LLC, Kiran
    C. Patel, M.D., Pradip C. Patel and Rupesh Shah.
10.10
Pledge Agreement, dated as of July 31, 2002,
    by and between WellCare Holdings, LLC and Kiran C. Patel, as
    Stockholder Representative.
10.11
Merger Agreement, dated as of May 17, 2002,
    by and among WellCare Acquisition Company, WellCare Merger Sub,
    Inc. and The WellCare Management Group, Inc.
10.12
Contribution Agreement, dated as of July 31,
    2002, by and between WellCare Holdings, LLC and Soros Private
    Equity Investors LP.
10.13
Registration Rights Agreement, dated as of
    September 6, 2002, by and among WellCare Holdings, LLC and
    certain equityholders.
10.14
WellCare Holdings, LLC 2002 Senior Executive
    Equity Plan.
10.15
Form of Subscription Agreement under 2002 Senior
    Executive Equity Plan.
10.16
WellCare Holdings, LLC 2002 Employee Option Plan.
10.17
Form of Time Vesting Option Agreement under 2002
    Employee Option Plan.
10.18*
2004 Equity Incentive Plan.
10.19*
Employee Stock Purchase Plan.
10.20*
Employment Agreement, dated as of July 31,
    2002, among WellCare Acquisition Company, Comprehensive Health
    Management, Inc. and Todd S. Farha.
10.21*
Employment Agreement, dated as of
    October 10, 2002, among WellCare Acquisition Company,
    Comprehensive Health Management, Inc. and Heath Schiesser.
10.22*
Employment Agreement, dated as of
    November 18, 2002, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Thaddeus Bereday.
10.23*
Employment Agreement, dated as of
    September 15, 2003, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Paul Behrens.
10.24*
Form of Indemnification Agreement.
10.25
Management Subscription Agreement, dated as of
    September 6, 2002, between WellCare Holdings, LLC and Todd
    S. Farha.
10.26
Agreement, dated March 25, 2003, between
    Comprehensive Health Management, Inc. and IntelliClaim, Inc.
10.27
Consulting Agreement, dated November 2003,
    between Comprehensive Health Management, Inc. and Ruben
    King-Shaw, Jr.
16.1
Letter regarding change in certifying accountant.
21.1*
List of subsidiaries.
23.1
Consents of Deloitte & Touche, LLP.
23.2*
Consent of Greenberg Traurig, LLP (included in
    Exhibit 5.1).
24.1
Power of Attorney (contained in the signature
    page to this Registration Statement).
*
To be filed by amendment.
(b)
Financial Statement Schedules
The following financial statement schedule is
filed as part of this Registration Statement:
Schedule II — Valuation and Qualifying
    Accounts and Reserves
S-1
II-3
Table of Contents
Item 17.
Undertakings
The undersigned registrant hereby undertakes
(1) To file, during any period in which
    offers or sales are being made, a post-effective amendment to
    this registration statement:
(i) To include any prospectus required by
    Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
    or events arising after the effective date of the registration
    statement (or the most recent post-effective amendment thereof)
    which, individually or in the aggregate, represent a fundamental
    change in the information set forth in the registration
    statement. Notwithstanding the foregoing, any increase or
    decrease in volume of securities offered (if the total dollar
    value of securities offered would not exceed that which was
    registered) and any deviation from the low or high end of the
    estimated maximum offering range may be reflected in the form of
    prospectus filed with the Commission pursuant to
    Rule 424(b) if, in the aggregate, the changes in volume and
    price represent no more than 20 percent change in the
    maximum aggregate offering price set forth in the
    "Calculation of Registration Fee" table in the
    effective registration statement; and
(iii) To include any material information
    with respect to the plan of distribution not previously
    disclosed in the registration statement or any material change
    to such information in the registration statement.
(2) That, for the purpose of determining any
    liability under the Securities Act of 1933, each such
    post-effective amendment shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of
    a post-effective amendment any of the securities being
    registered which remain unsold at the termination of the
    offering.
Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to provisions
described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes
(1) to provide to the underwriter at the closing specified
in the standby underwriting agreement, certificates in such
denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser;
(2) that for purposes of determining any liability under
the Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective;
and (3) that for the purpose of determining any liability
under the Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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Table of Contents
The undersigned registrant hereby undertakes to
supplement the prospectus, after the expiration of the
subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities
to be purchased by the underwriters, and the terms of any
subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective
amendment will be filed to set forth the terms of such offering.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Tampa, Florida, on
February 13, 2004.
WELLCARE GROUP, INC.
By:
/s/ TODD S. FARHA
Todd S. Farha
Chief Executive Officer
Know All Persons By These Presents, that each
person whose signature appears below constitutes and appoints
Todd S. Farha and Thaddeus Bereday or either of them acting
alone, his or her true and lawful attorney-in-fact and agent,
with full power of substitution and revocation, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign (i) any and all amendments (including
post-effective amendments) to this registration statement and to
file the same with all exhibits thereto, and other documents in
connection therewith and (ii) any registration statement
and any and all amendments thereto, relating to the offer
covered hereby filed pursuant to Rule 462(b) under the
Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done as fully to all intents
and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
Signature
Title
Date
/s/ TODD S. FARHA
Todd S. Farha
President, Chief Executive Officer and Director
    (Principal Executive Officer)
February 13, 2004
/s/ PAUL BEHRENS
Paul Behrens
Chief Financial Officer (Principal Financial and
    Accounting Officer)
February 13, 2004
/s/ REGINA HERZLINGER
Regina Herzlinger
Director
February 13, 2004
/s/ KEVIN HICKEY
Kevin Hickey
Director
February 13, 2004
/s/ ALIF HOURANI
Alif Hourani
Director
February 13, 2004
/s/ GLEN R. JOHNSON
Glen R. Johnson
Director
February 13, 2004
/s/ RUBEN JOSE KING-SHAW, JR.
Ruben Jose King-Shaw, Jr.
Director
February 13, 2004
II-6
Table of Contents
Signature
Title
Date
/s/ CHRISTIAN MICHALIK
Christian Michalik
Director
February 13, 2004
/s/ NEAL MOSZKOWSKI
Neal Moszkowski
Director
February 13, 2004
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Table of Contents
Schedule II — Valuation and
Qualifying Accounts and Reserves
Balance at
Beginning of
Charged to
Balance at
Period
Costs and Expenses
Deductions
End of Period
(in thousands)
Year Ended December 31, 2003
Deducted from assets:
Allowance for uncollectible accounts; Medicare
    Advances
$
580
$
4,479
$
232
$
4,827
Year Ended December 31, 2002
Deducted from assets:
Allowance for uncollectible accounts; Medical
    Advances
—
580
—
580
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EXHIBIT INDEX
Exhibit
Number
Description
1.1*
Form of Underwriting Agreement.
2.1*
Agreement and Plan of Merger, dated as
    of           ,
    2004, between WellCare Holdings, LLC and WellCare Group, Inc.
3.1
Certificate of Incorporation.
3.2*
Form of Amended and Restated Certificate of
    Incorporation (to be filed with the Delaware Secretary of State
    immediately prior to the closing of the offering covered by this
    Registration Statement).
3.3
Bylaws.
3.4*
Form of Amended and Restated Bylaws (to be
    adopted immediately prior to the closing of the offering covered
    by this Registration Statement).
4.1*
Specimen common stock certificate.
5.1*
Opinion of Greenberg Traurig, LLP.
10.1
Form of AHCA 2002-2004 Medicaid Health
    Maintenance Organization Contract, dated July 2002.
10.2
Amendment Nos. 1 through 7 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for Well Care HMO, Inc.
10.3
Amendment Nos. 1 through 9 to AHCA 2002-2004
    Medicaid Health Maintenance Organization Contract, dated July
    2002, for HealthEase of Florida, Inc.
10.4
Contract, dated September 26, 2003, between
    the Centers for Medicare & Medicaid Services and Well Care
    HMO, Inc.
10.5
Purchase Agreement, dated as of May 17,
    2002, by and among WellCare Holdings, LLC, WellCare Acquisition
    Company, the stockholders listed on the signature page thereto,
    Well Care HMO, Inc., HealthEase of Florida, Inc., Comprehensive
    Health Management of Florida, Inc. and Comprehensive Health
    Management, L.C.
10.6*
Amended and Restated Senior Subordinated
    Non-Negotiable Promissory Note, dated February 12, 2004.
10.7*
Amendment and Settlement Agreement, dated
    February 12, 2004, among WellCare Holdings, LLC, WellCare
    Health Plans, Inc., Kiran C. Patel, Pallavi Patel, Pradip C.
    Patel, Swati Patel, Rupesh Shah and Nita Shah.
10.8
Equity and Warrant Agreement, dated as of
    July 31, 2002, among WellCare Holdings, LLC, Kiran C.
    Patel, M.D., Pradip C. Patel and Rupesh Shah.
10.9
Investor Rights Agreement, dated as of
    July 31, 2002, by and among WellCare Holdings, LLC, Kiran
    C. Patel, M.D., Pradip C. Patel and Rupesh Shah.
10.10
Pledge Agreement, dated as of July 31, 2002,
    by and between WellCare Holdings, LLC and Kiran C. Patel, as
    Stockholder Representative.
10.11
Merger Agreement, dated as of May 17, 2002,
    by and among WellCare Acquisition Company, WellCare Merger Sub,
    Inc. and The WellCare Management Group, Inc.
10.12
Contribution Agreement, dated as of July 31,
    2002, by and between WellCare Holdings, LLC and Soros Private
    Equity Investors LP.
10.13
Registration Rights Agreement, dated as of
    September 6, 2002, by and among WellCare Holdings, LLC and
    certain equityholders.
10.14
WellCare Holdings, LLC 2002 Senior Executive
    Equity Plan.
10.15
Form of Subscription Agreement under 2002 Senior
    Executive Equity Plan.
10.16
WellCare Holdings, LLC 2002 Employee Option Plan.
10.17
Form of Time Vesting Option Agreement under 2002
    Employee Option Plan.
10.18*
2004 Equity Incentive Plan.
10.19*
Employee Stock Purchase Plan.
10.20*
Employment Agreement, dated as of July 31,
    2002, among WellCare Acquisition Company, Comprehensive Health
    Management, Inc. and Todd S. Farha.
10.21*
Employment Agreement, dated as of
    October 10, 2002, among WellCare Acquisition Company,
    Comprehensive Health Management, Inc. and Heath Schiesser.
Table of Contents
Exhibit
Number
Description
10.22*
Employment Agreement, dated as of
    November 18, 2002, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Thaddeus Bereday.
10.23*
Employment Agreement, dated as of
    September 15, 2003, among WellCare Health Plans, Inc.,
    Comprehensive Health Management, Inc. and Paul Behrens.
10.24*
Form of Indemnification Agreement.
10.25
Management Subscription Agreement, dated as of
    September 6, 2002, between WellCare Holdings, LLC and Todd
    S. Farha.
10.26
Agreement, dated March 25, 2003, between
    Comprehensive Health Management, Inc. and IntelliClaim, Inc.
10.27
Consulting Agreement, dated November 2003,
    between Comprehensive Health Management, Inc. and Ruben
    King-Shaw, Jr.
16.1
Letter regarding change in certifying accountant.
21.1*
List of subsidiaries.
23.1
Consents of Deloitte & Touche, LLP.
23.2*
Consent of Greenberg Traurig, LLP (included in
    Exhibit 5.1).
24.1
Power of Attorney (contained in the signature
    page to this Registration Statement).
*
To be filed by amendment.