Filed by: Anthem, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: WellPoint Health Networks Inc.
Commission File Number for Related Registration Statement: 333-110830
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking information about Anthem, Inc. (“Anthem”), WellPoint Health Networks Inc. (“WellPoint”) and the combined company after completion of the proposed transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Anthem and WellPoint, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include: those discussed and identified in public filings with the U.S. Securities and Exchange Commission (“SEC”) made by Anthem and WellPoint; trends in health care costs and utilization rates; our ability to secure sufficient premium rate increases; competitor pricing below market trends of increasing costs; increased government regulation of health benefits and managed care; significant acquisitions or divestitures by major competitors; introduction and utilization of new prescription drugs and technology; a downgrade in our financial strength ratings; litigation targeted at health benefits companies; our ability to contract with providers consistent with past practice; our ability to consummate Anthem’s merger with WellPoint, to achieve expected synergies and operating efficiencies in the merger within the expected time-frames or at all and to successfully integrate our operations; such integration may be more difficult, time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the transaction; the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; our ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction and the value of the transaction consideration; future bio-terrorist activity or other potential public health epidemics; and general economic downturns. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.
Neither Anthem nor WellPoint undertakes any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures in Anthem’s and WellPoint’s various SEC reports, including but not limited to the Anthem’s and WellPoint’s Annual Report on Form 10-K for the year ended December 31, 2003 and Anthem’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Anthem has filed on November 26, 2003 a preliminary registration statement on Form S-4, including the preliminary joint proxy statement/prospectus constituting a part thereof, with the SEC in connection with Anthem’s proposed merger with WellPoint. Anthem will file a final registration statement, including a definitive joint proxy statement/prospectus constituting a part thereof, and other documents with the SEC. SHAREHOLDERS OF ANTHEM AND STOCKHOLDERS OF WELLPOINT ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement prospectus will be mailed to shareholders of Anthem and stockholders of WellPoint. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, www.sec.gov, from Anthem Investor Relations at 120 Monument Circle, Indianapolis, IN 46204-4903, or from WellPoint Investor Relations at 1 WellPoint Way, Thousand Oaks, CA 91362.
PARTICIPANTS IN SOLICITATION
Anthem, WellPoint and their directors and executive officers and other members of their management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information concerning Anthem’s participants is set forth in the proxy statement, dated April 16, 2004, for Anthem’s 2004 annual meeting of shareholders as filed with the SEC on Schedule 14A. Information concerning WellPoint’s participants is set forth in the Amendment No. 1 on Form 10-K/A filed with the SEC by WellPoint on April 29, 2004. Additional information regarding the interests of Anthem’s and WellPoint’s participants in the solicitation of proxies in respect of the proposed transaction is included in the registration statement and joint proxy statement/prospectus filed with the SEC.
Anthem and WellPoint made the following joint presentation on May 6, 2004:
Larry Glasscock, Chairman & Chief Executive Officer
SM
David Colby, Executive Vice President & Chief Financial Officer
May 6, 2004
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking information about Anthem, Inc. (“Anthem”), WellPoint Health Networks Inc. (“WellPoint”) and the combined company after completion of the proposed transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “expect(s)”, “feel(s)”, “believe(s)”, “will”, “may”, “anticipate(s)” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Anthem and WellPoint, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include: those discussed and identified in public filings with the U.S. Securities and Exchange Commission (“SEC”) made by Anthem and WellPoint; trends in health care costs and utilization rates; our ability to secure sufficient premium rate increases; competitor pricing below market trends of increasing costs; increased government regulation of health benefits and managed care; significant acquisitions or divestitures by major competitors; introduction and utilization of new prescription drugs and technology; a downgrade in our financial strength ratings; litigation targeted at health benefits companies; our ability to contract with providers consistent with past practice; our ability to consummate Anthem’s merger with WellPoint, to achieve expected synergies and operating efficiencies in the merger within the expected time-frames or at all and to successfully integrate our operations; such integration may be more difficult, time-consuming or costly than expected; revenues following the transaction may be lower than expected; operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the transaction; the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; our ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction and the value of the transaction consideration; future bio-terrorist activity or other potential public health epidemics; and general economic downturns. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Neither Anthem nor WellPoint undertakes any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures in Anthem’s and WellPoint’s various SEC reports, including but not limited to Anthem’s Annual Report on Form 10-K for the year ended December 31, 2003,
WellPoint’s Annual Report on Form 10-K for the year ended December 31, 2003 as amended by Amendment No. 1 on Form 10K/A.
2
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Anthem has filed on November 26, 2003 a preliminary registration statement on Form S-4, including the preliminary joint proxy statement/prospectus constituting a part thereof, with the SEC in connection with Anthem’s proposed merger with WellPoint. Anthem will file a final registration statement, including a definitive joint proxy statement/prospectus constituting a part thereof, and other documents with the SEC. SHAREHOLDERS OF ANTHEM AND STOCKHOLDERS OF WELLPOINT ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement / prospectus will be mailed to shareholders of Anthem and stockholders of WellPoint. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, www.sec.gov, from Anthem Investor Relations at 120 Monument Circle, Indianapolis, IN 46204-4903, or from WellPoint Investor Relations at 1 WellPoint Way, Thousand Oaks, CA 91362.
PARTICIPANTS IN SOLICITATION
Anthem, WellPoint and their directors and executive officers and other members of their management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information concerning Anthem’s participants is set forth in the proxy statement, dated April 16, 2004, for Anthem’s 2004 annual meeting of shareholders as filed with the SEC on Schedule 14A. Information concerning WellPoint’s participants is set forth in the Amendment No. 1 on Form 10K/A filed with SEC by WellPoint on April 29, 2004 Additional information regarding the interests of Anthem’s and WellPoint’s participants in the solicitation of proxies in respect of the proposed transaction will be included in the registration statement and joint proxy statement/prospectus filed with the SEC.
Agenda
• WellPoint Profile
• Anthem Profile
• Merger Summary
This presentation contains non-GAAP financial measures, as defined in the rules of the Securities and Exchange Commission. As required by the rules, a reconciliation of those measures to the most directly comparable GAAP measures is available at the WellPoint website, which can be found at www.wellpoint.com.
WellPoint Profile
• Second largest health plan in U.S.
• Broad range of medical and specialty products
• Organized by customer segment with a diverse customer base
• Regional geographic focus
• One Company, multiple brands
Non-Blue Brands
Broad Product Choice
Pharmacy
Dental Behavioral Health
Life/Long Term Care
Disability
Medical Management
Network Access
CHOICE = VALUE
Organized by Customer Segment . . .
Market Segment Size
Individual 1
Senior 1
Small Group 2 – 50
Key Accounts 51 – 250
Major Accounts 251 – 2,000
Special Accounts 2,001+
Public Entities* varies
State Sponsored Programs** varies
* Employees of schools, municipalities, Federal Employees Program
** Beneficiaries of Medicaid, State Children Health Insurance Program and similar programs
to better understand and meet the unique needs of these customers
Diverse Customer Base
March 31, 2004 Enrollment
448,000 Seniors
6,414,000 Large Group ASO*
4,065,000 Large Group Insured
847,000 Medi-Cal
654,000 Other State Sponsored Programs
1,524,000 Individual
1,425,000 Small Group
* Includes 1.0 million network access members and 1.2 million BlueCard “host” members
Regional Concentration
• Health care is locally delivered and locally consumed
• Better network leverage
• Greater actuarial precision
• More efficient marketing/operations
Blue Cross license service areas
UNICARE regions
HealthLink states (also includes Missouri, Indiana & Illinois)
Membership Growth
Total Medical Membership
16,000 (in thousands) 15,377
15,011
14,000 13,811
12,000
10,908
10,000
8,201
8,000 7,515
6,638 6,892
6,000
4,485
4,000
2,797
2,000
0
1995 1996 1997 1998 1999 2000 2001* 2002* 2003* 1Q04*
* Total medical membership as Dec. 31, 2001, 2002, and 2003 and March 31, 2004 includes BlueCard “host” members of 380, 587, 1,002 and 1,196, respectively
Membership Growth
(in thousands)
8000
BCC 3000 BCBSGA
7000
6000 2500
5000
4000 2000
1999 2000 2001 2002 2003 1Q04 2001 2002 2003 1Q04
“Same-store” Growth : (1) 950 BCBSMO
• 21% medical membership growth since 1999
• 20% growth in ISG business since 1999
• 121% growth in BlueCard Program “home” membership since 2001
900
2002 2003 1Q04
Note: Membership numbers exclude BlueCard “host” members.
(1) “Same-store” growth excludes members gained through acquisitions
Big Plans Will Get Larger
Top Ten Health Plans*
1995
Medical Members
Total Insured 223.7 Million
Top 10 = 61.1 Million
2003*
Medical Members
Total Insured 245.4 Million
Top 10 = 102.4 Million
* Top 10 Health Plans as of 9/30/03: UNH, WLP, AET, ATH, CI, Kaiser Foundation, HUM, Health Care Services Corp., HNT, WC
Source: Bear Stearns, Centers for Medicare & Medicaid Services, Office of Actuary, U.S. Census Bureau, and SEC filings of publicly traded companies
Fragmented Industry
Many smaller, regional players in key geographies
California
Georgia Illinois
• Alameda Alliance for Health
• Athens Area Health Plan • Harmony Health Plan of Ill.
• Care 1st Health Plan
• Columbus Physician Organization • Health Alliance Medical Plans, Inc.
• Chinese Community Health Plan
• Healthcare, Inc. • Health Marketing, Inc.
• Community Health Group
• HealthOne • Healthcare’s Finest Network
• Community Health Plan
• Medical Resource Network • One Health Plan of Ill., Inc.
• Contra Costa Health Plan
• One Health Plan of GA • OSF HealthPlans, Inc.
• Health Plan of San Joaquin
• Phoebe Health Partners, Inc. • Quincy Health Care Management
• Inland Empire Health Plan
• RCare PPO
• Interplan Corp
• Rockford Health Plans
• One Health Plan of CA
• The Preferred Plan, Inc.
• Primecare Medical Network
• Trinity PHO, Ltd.
• ProMed Health Care Administrators
Missouri
• Union Health Service, Inc.
• Safeguard Health Plans
• San Francisco Health Plan • Community Care Plus Texas
• Santa Clara Family Health Plan • Community Health Plan • Access Direct-A preferred Provider Network
• Scripps Clinic Health Plan • Cox Health System, Inc. • Advantage Care Network, Inc.
• Sharp Health Plan • Family Health Partners • Alliance Regional Health Network
• Sistemas Medicos Nacionales • FirstGuard Health Plan • Brazos Valley Health Network
• Universal Care • Group Health Plan • Galaxy Health Network
• Western Health Advantage • Health Care USA, Missouri, LLC • IntegraHome
• Mercy Health Plans of Mo. Inc. • Preferred Care
• One Health Plan of • ProAmerica
Kansas/Missouri, Inc. • SETON Healthcare Network
• TexCare Partnership
• The MEGS Life & Health Ins. Co.
• USA Managed Care Organization
Represents more than 18 million lives in these states
Sources: InterStudy PPO Directory and Performance Report 3.0; The InterStudy Competitive Edge, Part I: HMO Directory, July 1, 2002
Uninsured Opportunity
Uninsured 18 million
• Moderate to high income
• 11.4 million earn >300% FPL
• 6.4 million earn 200–299% FPL
14 million
• Eligible for public programs but not enrolled
• Earn <100% FPL
9 million
• Low income, not eligible for public programs
• Earn 100-199% FPL
• Demonstrate value
• Potential tax subsidies
• Enrollment programs
• Education
• Community outreach
• Increased State funding ?
• Federal assistance?
Potential Solutions
• Existing commercial programs
• Existing Medicaid and SCHIP Programs
• Expanded government programs ?
Source: NIHCM Foundation, 2002, RWJF-sponsored project. Based on 2001 data.
Ethnic Outreach Programs
Agent support
• Community programs
• Media relations
• Partnership activities
• Example: HealthyCheck Program in California
– Experience higher incidence of preventable and manageable chronic diseases
– Limited access to health care services
– Affordable and convenient preventive health screenings
– Partner with hospitals
Targeted Medical Management
WellPoint Membership
20%
80%
Members with chronic conditions
• Asthma • Depression
• Congestive • Oncology Heart Failure • High risk
• ESRD pregnancy
• Diabetes • Etc.
WellPoint Membership
24%
68%
WellPoint Medical Costs
70%
23%
7%
Cost Variations
September 19, 2000
The operation you get often depends
on where you live.
Total Abdominal Total Knee
Hysterectomy Cholecystectomy Replacement
CA Hospital A $ 25,100 $ 27,000 $ 28,700
CA Hospital B $ 2,200 $ 1,700 $ 3,000
GA Hospital A $ 11,400 $ 12,500 $ 21,100
GA Hospital B $ 2,800 $ 2,800 $ 8,700
MO Hospital A $ 26,200 $ 18,200 $ 119,400
MO Hospital B $ 3,100 $ 9,600 $ 24,900
TX Hospital A $ 37,700 $ 18,600 $ 41,000
TX Hospital B $ 14,700 $ 2,100 $ 24,700
Managing Rx Costs
Claritin OTC Conversion
$3.00 per day $.90 per day $.50 per day $.10 per day
Health Coaching Model
Physician Centric
RN Directed
Multi Disciplinary Health Coaching
Constraints on physician time and resources do not allow for the in-depth—counseling and assistance necessary for the effective treatment of chronic illnesses
RN gives didactic telephonic education without assessing member motivation or underlying barriers to change
Health Coaching is a multi- a -disciplinary, facilitative approach to enhance members’ ability to self—manage conditions
WellPoint Pharmacy Management
• Fourth largest PBM with more than 31 million members
• Offers full spectrum of PBM services
Clinical / Medical Management
Clinical Business Plan Intervention Programs Therapy Management Disease Management
ReViewPoint® Patients-At-Risk Consultative
Online Reporting
Services
Incentive Programs Formulary Benefit Designs Management Interventions Treatment Guidelines Pharmacy Care Account Management P&T Committees Sales Support Manufacturer Discounts Management Business Strategies Preferred Rx Programs Prior Auth Center Claims Processing Claims Keying
PrecisionRx Online DUR
Integrated Mail Service Pharmacy Network Management Specialty Pharmacy National Network Customized Local Networks MAC Programs
• Provide innovative programs to manage drug trend
• Clinical programs are outcomes-focused and patient-centric
Other Specialty Products
Dental PPO, DHMO & FFS
Life Basic & supplemental group term, dependent coverage, AD&D
Disability Group STD & LTD
Behavioral Full range of Behavioral Health
Health services, including EAP plans
WC MCS Network management, bill review, medical management and case management, all on non-risk basis
Specialty Products Contribute to WellPoint’s Profitability
WellPoint Profitability*
Quarter Ended March 31, 2004
Specialty Segment
12%
88%
Health Care Segment
*Excludes Corporate and Other segment
Leveraging Technology Improve Margins
G & A Expense Ratio Trends*
278 bp improvement
* General and administrative expense ratio is calculated as a percentage of premium revenue and management services and other revenue combined
Operational Improvements
Medical Care Ratio (a) SG & A Ratio (b)
80.2% 79.7% 20.2%
80 20
18 17.0%
70
16
60 14
50 12
40 10 8 30 6 20 4
10 2
0 0
1Q98 1Q04 1Q98 1Q04
Investment Income/Pre-tax Income(c) Pre-Tax Margin (d)
40 35.2% 10 8.8%
35
8 7.3%
30
25 6
20 17.0%
15 4 10 2 5
0 0
1Q98 1Q04 1Q98 1Q04
(a) The medical care ratio represents health care services and other benefits as a percentage of premium revenue.
(b) The SG&A ratio represents selling expense and general and administrative expense combined as a percentage of premium revenue and management services and other revenue combined.
(c) Pre-tax income for the quarter ended March 31, 1998 is income from continuing operations before provision for income taxes and cumulative effect of accounting change. Pre-tax income for the quarter ended March 31, 2004 is income before provision for income taxes.
(d) Pre-tax margin represents pre-tax income (see footnote (c) above) as a percentage of premium revenue and management services and other revenue combined.
WLP Financial Highlights
Total Revenue
$ (in billions)
24 $20.4
20 CAGR = 26%* $17.3
16 $12.4
12 $9.2 $7.5
8$ 6.5 $5.6 $4.0
40
1996 1997 1998 1999 2000 2001 2002 2003
*As of December 31, 2003. CAGR = (FV/PV)1/n –1, where FV is the future value, PV is the present value, and n is the number of years.
WLP Financial Highlights
Income from Continuing Operations(a)
(in millions)
1000 $935.2
900
CAGR = 25%(f)
800
(d) (e)
700 $660.9
600 500 $414.7 400 (d) $342.3
(c)
(b) $299.1 300 $224.9 $263.0 $198.5
200 100 0
1996 1997 1998 1999 2000 2001 2002 2003
(a) Before extraordinary items and cumulative effect of accounting change, if applicable
(b) 1997 income from continuing operations of $229.4 million excludes: i) $9.0 million of nonrecurring costs, net of tax, related to write-down of the Company’s dental practice management operations, discontinuance of certain medical practice management operations, and severance and retention payments associated with the GBO acquisition, ii) $4.5 million charge, net of tax, associated with prior investments in certain distribution channels outside of California, and iii) $18 million of investment gains in HPI, net of tax
(c) 1998 income from continuing operations of $319.5 million excludes a charge of $29.0 million, net of tax, related to WellPoint’s previous holdings in FPA Medical Management, Inc. and the impact of favorable IRS tax ruling of $85.5 million
(d) Due to issuance of FASB no.145, WellPoint reclassified the extraordinary gains and losses from the extinguishment of debt to interest expense. For the year ended December 31, 1999, WellPoint reclassified an extraordinary gain of $3.1 million (which included a tax expense of $1.2 million) to interest expense. For the year ended December 31, 2002, WellPoint reclassified an extraordinary loss of $6.3 million (which included a tax benefit of $2.5 million) to interest expense.
(e) 2002 income from continuing operations before extraordinary item of $694.1 million excludes $33.2 million of net realized investment gains, net of tax.
(f) As of December 31, 2003. CAGR = (FV/PV)1/n–1, where FV is the future value, PV is the present value, and n is the number of years.
Agenda
• WellPoint Profile
• Anthem Profile
• Merger Summary
Anthem Profile
Maine
New Hampshire Connecticut Nevada Ohio Indiana Colorado
Viirgiiniia Kentucky
• Anthem BCBS Coverage
Full range of healthcare and • Regional business model specialty products • National capabilities
• Among the fastest growing • BCBS licenses in 9 states healthcare companies
• #1 market share in 8 of 9 states
• 12.5 million medical members
Executing a Simple Strategy
Grow Profitable Enrollment
Reduce Administrative Costs
Optimize the Cost of Healthcare, While Improving the Health of Our Members
Provide Distinctive Service
Strong Cash Management
Drivers to Success
Customers Are First Disciplined Focus Regional Model
Profitable Enrollment Growth
9% Same Store CAGR, 1999—2004E
(In Millions)
12.5+ 11.9 11.1
7.3 7.9 6.3
1999 2000 2001 2002 2003 2004E
Acquisition-related membership in the applicable year
National Accounts
Gaining Strength in the Market Place
• Strong retention of existing accounts
• 30 new account wins for 1Q04
Value Proposition
• Blue Cross Blue Shield Brand
• Access to BlueCard networks nationwide
• ClaimsQuest
• Interactive Realtime Information System (IRIS)
• Dedicated Business Unit Model
Specialty Product Opportunities
Cross Selling to Existing Customers
Membership (mm) New Specialty Products
Pharmacy 7.1 Behavioral Health 3.4 Dental 2.3 Vision 0.6 Life 0.9
Total Benefit Solutions for Customers
Specialty membership as of March 31, 2004
Administrative Expense Discipline
21.2%
19.6% 19.3% 18.9% 17.4%
2000 2001 2002 2003 1Q04
Strategies For Improvement
• Systems consolidation
• Shared service platform
• Investments in technology
• Process improvements
Managing Overall Health Status
Strategies All Healthy Members
• Advanced Care
Management At Risk Behaviors
• Disease Waiting to Happen
Management, identification Most of at-risk Complexly ill members Members
• Prevention and member education
• Wellness and product strategies
Optimizing the Cost of Care
Distribution of Medical Costs
25%
28%
4%
1%
Membership Medical Costs
Optimizing the Cost of Care
MyHealth@Anthem
Disease and Hospital Quality Advanced Care Programs Programs
Improving the IRIS Patient
Incentive Safety Reimbursement Health of our Program to Providers Members Health Advisor Physician Tools Collaboration Programs Addressing Rx Integration Variations in Patient Care
Excellent Customer Service
82
Best in Customer
Service 40
% of responses 30
24
5
Blues Company A Company B Company C Company D
74
Best in Claims
34
Processing 22 20
% of responses 2
Blues Company A Company B Company C Company D
Source: Smith Barney Health Benefit Survey, Sept. 29, 2003.
Strong Cash Management
Operating Cash Flow
($ in millions) $1,143 $991 $774 $655 $549 $342
2001 2002 2003
Net Income Cash Flow
Strong Financial Momentum
Diluted EPS
$6.90—$7.00 $5.45 $4.51
$3.30
2001 2002 2003 2004E
Operating Revenue
($ in billions)
$18.3+ $16.5
$13.0 $10.1
2001 2002 2003 2004E
Agenda
• WellPoint Profile
• Anthem Profile
• Merger Summary
Transaction Summary
Consideration Per WLP Share: 1 ATH share + $23.80 cash Name: WellPoint, Inc.
Headquarters: Indiana
Board Representation: 58% Anthem, 42% WellPoint Chairman: Leonard Schaeffer President and CEO: Larry Glasscock Chief Financial Officer: David Colby Co-Heads of Integration: Mike Smith, Alice Rosenblatt
Leading Market Positions
Anthem WellPoint
UNICARE and HealthLink >100K members
Merger Benefits
Growth Opportunities
• Target individual products in ATH markets
– “Young invincibles”
– Early retirees
– Other uninsured
• Utilize ATH experience with national accounts
– ATH national accounts same store growth 1Q04 12% over 4Q03 1Q04 17% over 1Q03
– Multi-state employers focusing more on medical costs in addition to administrative expenses
– Enhanced e-commerce capabilities provide higher service levels
Merger Benefits
Growth Opportunities
• Increase penetration of PBM services
– Increased size enhances value proposition
– WLP PBM experienced with external sales
• Cross-sell other specialty product sales to existing members
• Utilize best practices in health improvement programs and contracting to better manage medical cost trends
– Information-based decision making
– National contracting (labs, DME, etc.)
Merger Benefits
Operating Synergies
• Recognize at least $250 million in pre-tax synergies
– Information technology $75 million +
– Specialty businesses $75 million +
– Operations $50 million +
– Corporate & Shared Services $50 million +
• Positioned to implement over 18—24 months: $50 million in 2004, $175 million in 2005, and $250 million in 2006
• Synergies represent approximately 4% to 5% of combined administrative expenses—consistent with prior transactions
Merger Update
• S-4 filed 11/26/2003 – “no-review” by SEC
• Approved in 9 of 11 states
– Form A’s filed with state regulators
• Hart Scott Rodino clearance
• BCBSA approval
• Shareholder meetings scheduled for June 28, 2004
• Anticipate mid-2004 closing
The Underwriting Cycle Is Becoming a Myth
• Generally self-inflicted cycles in the past
• Track records of underwriting discipline
• Industry consolidation since mid-90’s mitigates risk
• Fewer, more disciplined Blues
• Better prediction of medical costs
• Premium refunds better than underpricing
Disappearance of the Underwriting Cycle
Underwriting Results as % of Revenue*
10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0%
-6.0%
All Blue Plans ‘66 – ‘02
-8.0%
-10.0%
1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Source: BCBSA, 2002
WellPoint + Anthem . .. .
. . . A Very Compelling Transaction . . .
• Geographic diversification with strong local focus and national reach
• Diversified membership base
• Realize significant growth potential in ISG, national accounts and specialty businesses
• Leverage technology
– Enhance product offerings, customer service and relationships with physicians and hospitals
– Better data management for clinical decision-making
– Improve productivity
• Identified synergies lower administrative expenses