Points from Paul

Looking Back, Moving Forward

After a challenging 2006 on several fronts, CoreSource entered 2007 with a clear strategy and a renewed sense of optimism about the future. We were dedicated to the premise that strong local leadership that understands the needs of local brokers and employers, backed by a corporate structure providing new solutions, would drive our growth in the future.

Has our strategy worked? The good news is that when the books close on 2007, we’ll have about $5.3 million in new sales for January 1 — that’s the best 1/1 sales cycle we’ve had in the last five years. That tells me that the market is starting to validate our strong local leadership strategy, and that we need to stay the course. Unfortunately, those record sales were offset by a higher termination rate than we’ve seen over the past few years. The clients who chose to leave us did so for many different reasons, but regardless of the reason, it should be clear to us all that if we want to grow, we need to maintain our existing client base.

Some other 2007 highlights:

• We developed CoreCare, a new “total population management” product that is already exceeding our sales expectations for 2008
• Our partnership with LifeWell Health Plans in Atlanta has given us traction in a market where we previously haven’t had much success
• For our “legacy” locations, we successfully completed the upgrade to the ECAMS platform
• Ben Frisch was named President of FMH Benefit Solutions in Kansas City, replacing the retiring George McDonnell and Scott Holland. George and Scott built FMH into one of the nation’s premier TPAs, and I believe Ben is the right person to build on their track record of success.

Looking ahead to 2008, we are not backing off our locally focused strategy. At this time next year, I expect to be congratulating all of you for a record year in both sales and retention. I foresee a number of ways that, working together, we can make that expectation a reality. We are prepared to succeed in 2008 and beyond by:

• Identifying and exploiting niche markets
• Competing more in geographies that are not dominated by the national health plans
• Forging stronger strategic relationships with key brokers
• Providing service and flexibility equal to top tier TPAs
• Differentiating ourselves from other TPAs with value-added solutions (like CoreCare and Community Health Plans)

While you might not recognize all of these initiatives, you’ll hear more about all of them in the coming year.

In summary, we’ve come a long way but we’ve got a long way to go. I appreciate the contributions each and every one of you have made in the last year to the rebirth of CoreSource; together, I’m sure we’ll achieve the growth we all know we’re capable of achieving.

I wish you and your families a very Happy Holiday.

Paul