Mike Smith, Executive Vice President, Chief Financial Officer
David Colby, Executive Vice President, Chief Financial Officer
November 2003
SM
Investor Presentation
Filed by: Anthem, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to
Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: WellPoint Health Networks Inc.
Commission File Number: 1-13083
SAFE HARBOR STATEMENT
UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This presentation contains certain forward-looking information about Anthem, Inc. (“Anthem”), WellPoint
Health Networks Inc. (“WellPoint”) and the combined
company after completion of the 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 Annual Reports on Form 10-K for
the year ended December 31, 2002 and Quarterly Reports on Form 10-Q for the reporting periods of 2003.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This presentation may be deemed to be solicitation material in respect of the proposed merger
of Anthem and WellPoint. In connection with the proposed transaction, a
registration statement
on Form S-4 will be filed 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. Anthem’s Current Report on Form 8-K, which was filed
with the SEC on October 27, 2003, contains information regarding Anthem’s participants and
their interests in the
solicitation. Information concerning WellPoint’s participants is set forth in
the proxy statement, dated March 31, 2003, for Wellpoint’s 2003 annual meeting of stockholders
as filed with the SEC on Schedule
14A. 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.
Anthem Profile
WellPoint Profile
Merger Summary
Agenda
Nevada
Colorado
Ohio
Indiana
Connecticut
New Hampshire
Maine
Anthem Profile
Full range of healthcare and
specialty
products
Fastest growing public
healthcare company
11.8 million medical members
Regional business model
National capabilities
BCBS licenses in 9 states
#1 market share in 8 of 9 states
Anthem
BCBS Coverage
Executing a Simple Strategy
Customers Are First
Regional Model
Disciplined Focus
Drivers to Success
Grow Profitable Enrollment
Reduce Administrative Costs
Optimize the Cost of
Healthcare, While Improving
the Health of Our Members
Provide Distinctive
Service
Strong Cash Management
Profitable Enrollment Growth
Medical Membership
8
7
11
2000
2001
2002
2003(E)
(millions)
+7-8%
3Q03 = 11.8 million
3Q03 vs 3Q02 Growth by
Customer Segment
6%
1%
17%
Sm.
Group
Gov’t
Indiv.
Nat’l
2%
12%
Lg.
Group
National Accounts
Gaining Strength in the Market Place
Strong retention of existing accounts
24 new account wins for 2004
Value Proposition
Blue Cross Blue Shield Brand
Access to BlueCard networks nationwide
Demonstrated evidence of provider
discounts
(ClaimsQuest)
Interactive Realtime Information System (IRIS)
Dedicated Business Unit Model
Specialty Product Opportunities
Cross Selling to Existing Customers
Membership (mm)
Pharmacy
5.3
Dental
2.4
Life
0.9
Behavioral Health
3.2
Vision
0.4
New Specialty Products
Specialty membership as of September 30, 2003
Total Benefit Solutions for Customers
24.2%
21.2%
19.6%
19.3%
1999
2000
2001
2002
Systems
consolidation
Shared service
platform
Investments in
technology
Process
improvements
Administrative Expense Discipline
Strategies For
Improvement
1998
26.3%
3Q03 = 18.7%
Asthma
Diabetes
Coronary disease
Heart failure
High risk pregnancy
Renal disease
Quality Care Through Physician Collaboration
Diabetes
Coronary Disease
General Population
Program Members
PMPM Cost Savings
Optimize the Cost of Care
Disease Management
Programs
Priorities for Cash Flow
1. Invest in businesses
2. Acquisitions
3. Share repurchase
4. Debt reduction
Net Income
Cash Flow
Operating Cash Flow
($ in millions)
2000
2001
2002
$226
$685
$342
$655
$549
$991
Strong Cash Management
Long Term Earnings Growth
Profitable
Membership
Growth
Continuous
Administrative
Expense Ratio
Improvement
Stable Benefit
Expense Ratio
Enrollment growth
in every region
Expand
market share
Specialty
penetration
Systems
consolidation
Contain costs in
non-customer
touch point areas
Disciplined
underwriting and
pricing
Medical
management
initiatives
15% + Earnings Growth Model
($ in billions)
Operating Revenue
Diluted EPS
Strong Financial Momentum
$5.30-$5.35
$4.51
$3.30
$2.18
2001
2002
2003(E)
2000
3Q03 = $1.38
$10.1
$13.0
~$16.5
$8.5
2001
2002
2003(E)
2000
3Q03 = $4.2 billion
Anthem Profile
WellPoint Profile
Merger Summary
Agenda
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
Non-Blue
Brands
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
CHOICE = VALUE
Pharmacy
Dental
Behavioral Health
Life/Long Term Care
Disability
Medical Management
Network Access
Broad Product Choice
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
Organized by
Customer Segment . . .
* 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
September 30, 2003 Enrollment
461,000 Seniors
1,471,000
Individual
1,396,000 Small Group
4,132,000 Large Group Insured
5,020,000 Large Group ASO*
713,000 Other State
Sponsored Programs
840,000
Medi-Cal
* Includes 1.4 million network access members
Regional Concentration
Health care is locally delivered
and locally consumed
Better network leverage
Greater actuarial precision
More efficient marketing/operations
UNICARE regions
HealthLink states (also includes
Missouri, Indiana &
Illinois)
Blue Cross license service areas
Membership Growth
10,528
2,797
4,485
6,638
6,892
7,515
8,201
California
Membership
Growth:
17%
7%
15%
8%
27%
6%
7%
Total Medical Membership
(in thousands)
13,223
11%
14,033
3%*
*Reflects growth from September 30, 2002
Top Ten Health Plans*
1995
Source: Bear Stearns, Centers for Medicare & Medicaid Services, Office of Actuary, U.S.
Census Bureau, and SEC filings of
publicly traded companies
Total Insured 223.7 Million
Top 10 = 61.1 Million
Top 10 = 100.4 Million
2003*
Total Insured 245.4 Million
Medical Members
Medical Members
* Top 10 Health Plans as of 6/30/03: UNH, WLP, AET,CI, ATH, Kaiser Foundation, Health Care Services Corp., HUM, HNT, WC
Big Plans Will Get Larger
Fragmented Industry
Many smaller, regional players in key geographies
Georgia
Missouri
Texas
Illinois
Alameda Alliance for Health
Care 1st Health Plan
Chinese Community Health Plan
Community Health Group
Community Health Plan
Contra Costa Health Plan
Health Plan of San Joaquin
Inland Empire Health Plan
Interplan Corp
One Health Plan of CA
Primecare Medical Network
ProMed Health Care Administrators
Safeguard Health Plans
San Francisco Health Plan
Santa Clara Family Health Plan
Scripps Clinic Health Plan
Sharp Health Plan
Sistemas Medicos Nacionales
Universal Care
Western Health Advantage
Athens Area Health Plan
Columbus Physician Organization
Healthcare, Inc.
HealthOne
Medical Resource Network
One Health Plan of GA
Phoebe Health Partners, Inc.
Represents more than 18 million lives in these states
California
Harmony Health Plan of Ill.
Health Alliance Medical Plans, Inc.
Health Marketing, Inc.
Healthcare’s Finest Network
One Health Plan of Ill., Inc.
OSF HealthPlans, Inc.
Quincy Health Care Management
RCare PPO
Rockford Health Plans
The Preferred Plan, Inc.
Trinity PHO, Ltd.
Union Health Service, Inc.
Community Care Plus
Community Health Plan
Cox Health System, Inc.
Family Health Partners
FirstGuard Health Plan
Group Health Plan
Health Care USA, Missouri, LLC
Mercy Health Plans of Mo. Inc.
One Health Plan of
Kansas/Missouri, Inc.
Access Direct-A preferred Provider Network
Advantage Care Network, Inc.
Alliance Regional Health Network
Brazos Valley Health Network
Galaxy Health Network
IntegraHome
Preferred Care
ProAmerica
SETON Healthcare Network
TexCare Partnership
The MEGS Life & Health Ins. Co.
USA Managed Care Organization
Sources: InterStudy PPO Directory and Performance Report 3.0;
The InterStudy Competitive Edge, Part I: HMO Directory, July 1, 2002
Source: NIHCM Foundation, 2002, RWJF-sponsored project. Based on 2001 data.
Uninsured Opportunity
14 million
9 million
18 million
Eligible for public
programs but not
enrolled
Earn <100% FPL
Low income, not eligible
for public programs
Earn 100-199% FPL
Moderate to high income
11.4 million earn >300%
FPL
6.4 million earn
200–299% FPL
Uninsured
Existing Medicaid
and SCHIP
Programs
Expanded
government
programs ?
Existing
commercial
programs
Potential Solutions
Enrollment programs
Education
Community outreach
Demonstrate value
Potential tax subsidies
Increased State
funding ?
Federal assistance?
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
Ethnic Outreach Programs
WellPoint
Membership
Asthma
Congestive
Heart Failure
ESRD
Diabetes
Depression
Oncology
High risk
pregnancy
Etc.
20%
80%
Members with
chronic conditions
WellPoint
Membership
WellPoint
Medical Costs
8%
24%
68%
7%
23%
70%
Targeted Medical Management
Cost Variations
September 19, 2000
The operation you get often depends
on where you live.
Total Abdominal
Hysterectomy
Cholecystectomy
Total Knee
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
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 Directed
RN gives didactic
telephonic education
without assessing
member motivation or
underlying barriers to
change
Multi Disciplinary
Health Coaching
Health Coaching is a multi-
disciplinary, facilitative
approach to enhance
members’ ability to self-
manage conditions
Physician Centric
Health Coaching Model
Fourth largest PBM with approximately 31 million members
Offers full spectrum of PBM services
WellPoint Pharmacy Management
Provide innovative programs to manage drug trend
Clinical programs are outcomes-focused and patient-centric
Clinical / Medical Management
Clinical Business Plan Intervention Programs
Therapy Management Disease Management
Patients-At-Risk
Formulary
Management
Treatment Guidelines
P&T Committees
Manufacturer Discounts
Preferred Rx Programs
Prior Auth Center
ReViewPoint®
Online Reporting
Claims Processing
Claims Keying
Online DUR
Network Management
National Network
Customized Local Networks
MAC Programs
Consultative
Services
Incentive Programs
Benefit Designs
Interventions
Account Management
Sales Support
Business Strategies
Pharmacy Care
Management
PrecisionRx
Integrated Mail Service Pharmacy
Specialty Pharmacy
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
Other Specialty Products
Health Care Segment
Specialty Segment
87%
13%
Total WellPoint Profitability*
**Represents growth in segment net income for the 9 months ended
September 30, 2003
versus the comparable prior-year period
*Excluding corporate and other segment
Specialty Products Contribute
to WellPoint’s Profitability
Nine months ended
September 30, 2003
Health Care Segment
Specialty Segment
88%
12%
Nine months ended
September 30, 2002
Health Care Segment
35%
Specialty Segment
56%
Growth**
G & A Expense Ratio Trends*
(%)
* General and administrative expense ratio is calculated as a percentage of premium revenue and management
services
and other revenue combined
Leveraging Technology to
Improve Margins
330 bp improvement
WLP Financial Highlights
$9.2
Total Revenue
(in billions)
$7.5
$4.0
$5.6
$6.5
$17.3
$12.4
$14.8
$
CAGR = 28%*
*As of December 31, 2002. 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
$297.2
$198.5
$224.9
$263.0
(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)
2002 income from continuing operations before extraordinary
item of $694.1 million excludes $33.2 million of net realized
investment gains, net of tax
As of December 31, 2002. CAGR = (FV/PV)1/n–1, where FV is the future value, PV is the present value, and
n is the number of years.
Income from Continuing Operations
(in millions)
$342.3
$660.9
$414.7
$663.7
CAGR = 22%
(b)
(a)
(c)
(d)
(e)
Anthem Profile
WellPoint Profile
Merger Summary
Agenda
Transaction Summary
Consideration Per WLP Share:
Transaction Price1:
Form of Consideration:
Pro Forma Fully-Diluted
Ownership:
Expected Closing:
Required Approvals:
1 Based on Anthem closing price as of October 24, 2003
$23.80 cash and
1 ATH share
$101.06 per WLP share
76% stock, 24% cash
Mid-2004
ATH and WLP shareholders
DOIs, CA Dept. of Managed
Health Care and other regulators
BCBSA
Hart-Scott-Rodino
47% Anthem,
53% WellPoint
Name:
WellPoint, Inc.
Headquarters:
Indiana
Board Representation:
60% Anthem, 40% WellPoint
Chairman:
Leonard Schaeffer
President and CEO:
Larry Glasscock
Chief Financial Officer:
David Colby
Co-Heads of Integration:
Mike Smith, Alice Rosenblatt
Transaction Summary
Geographic Concentration
Anthem
WellPoint
UNICARE and HealthLink >100K members
CO
CT
NH
MA
GA
MO
CA
WI
TX
IL
ME
KY
IN
OH
NV
VA
Combined Membership at 9/30/2003 = 26 million
(Excludes BlueCard Host Members for WellPoint)
Colorado 3%
Wisconsin 2%
New Hampshire 2%
Maine 2%
Nevada 1%
California 26%
Virginia 10%
Ohio 10%
Georgia 8%
Indiana 7%
Missouri 6%
Connecticut 6%
Kentucky 5%
Non-Blue
Branded
12%
Geographic Diversification
Frequently Asked Questions
Why now?
Why not structure as merger of equals vs.
paying a
premium to WLP shareholders?
What are the
returns for Anthem
shareholders?
Is
this a defensive move because you are
worried about something?
What are the benefits of this merger?
Why Now?
Many expected the merger in the future, why NOT now?
Blue conversions may slow down in short term, but will
likely continue
over time
With
effective integration, combined company will be ready for
further consolidation
2000
2001
2002
2003
Demutualization and IPO
Trigon
Acquisition
ATH/WLP
Merger
announcement
BCBSGA acquisition
CBZ
Acquisition
2000
2001
2002
2003
RIT Acquisition
CareFirst acquisition activities
BCBSME
Acquisition
BCBS Kansas acquisition activities
Why Not Structure As
Merger of Equals vs.
Paying a Premium to WLP Shareholders?
Indiana is an attractive state of domicile
Mergers of equals have challenging track
records
Clear leadership and governance is
necessary for successful execution
Valuation is reasonable relative to
comparable
transactions
Why Not Structure As
Merger of Equals vs.
Paying a Premium to WLP Shareholders?
Acquiror
Target
Tribune Co.
Times Mirror Co.
Starwood Hotels
& Resorts
ITT Corp.
Valero
Energy
Ultramar
Diamond
Dominion
Resources
Consolidated
Natural Gas
First Energy
GPU
Walt Disney
Capital Cities
Undisturbed Premium1
98.2%
87.4%
34.1%
30.7%
30.1%
27.4%
1. Represents the premium calculated using transaction price at announcement and target closing price prior to equity market trading or media
indication of a potential transaction. Source: Publicly available data
Other Cash and Stock Deals
Occurred since 1995
Greater than $5 billion
North American acquiror and target
CEO and HQ to acquiror
Acquiror <65% of pre-deal combined market cap
What Are the Returns for
ATH Shareholders?
Accretive in 2004 excluding
refinancing costs
4-6% accretion in 2005
15% EPS Growth
15% EPS Growth
Is This a Defensive Move
Because
You Are Worried About Something?
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
“Same Store” Membership Growth
(Since 12/31/99)
Organic growth is strong for both companies
ATH
2,700,000
WLP
1,238,000
Total
3,938,000
* Operating income less investment income divided by premium revenue
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
WellPoint (1)
Underwriting Results as % of Revenue*
’66 – ‘02
All Blue Plans
’66 – ‘02
WLP
Blue
Plans
Disappearance of the Underwriting Cycle ?
Source: BCBSA, 2002
Is This a Defensive Move Because
You Are Worried About Something?
Target individual products in ATH markets
“Young invincibles”
Early retirees
Other uninsured
Utilize ATH experience with national accounts
ATH national accounts same store growth
14% in 2002
16% YTD 9/2003
Multi-state employers focusing more on
medical costs in
addition to administration
expenses
Enhanced e-commerce capabilities provide
higher service levels
What Are the Benefits
of This Merger?
Growth Opportunities
Increase penetration of PBM services
Increased size enhances value proposition
WLP PBM experienced with carve-out and external sales
Cross-sell
other specialty product sales to
existing members
Dental, Life, Disability, Behavioral Health, Vision
Utilize best practices in medical management
and contracting to better manage medical cost
trends
Information-based decision making
Health improvement programs
National contracting (labs, DME, etc.)
What Are the Benefits
of This Merger?
Growth Opportunities
What Are the Benefits
of
This Merger?
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 Summary
1 + 1 = 3