Larry Glasscock, Chairman, President and Chief Executive Officer
Mike Smith, Chief Financial Officer
Leonard Schaeffer, Chairman and Chief Executive Officer
David Colby, Chief Financial Officer
October 27, 2003
SM
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
On October 27, 2003, Anthem, Inc. gave a presentation using the document set forth below. The merger agreement for
Anthem’s merger with WellPoint Health Networks Inc.
will be filed by Anthem, Inc. under cover of Form 8-K today and is
incorporated by reference to this filing.
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,
to be filed with the SEC on October 27, 2003, will
contain 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 to be filed with the SEC.
Transaction Summary
Offer Per WellPoint Share:
Offer Price1:
Consideration:
Pro Forma Fully-Diluted Ownership:
Expected Closing:
Required Approvals:
Anthem and WellPoint
shareholders
State Departments of Insurance
and Other Regulators
Blue Cross Blue Shield Association
Hart-Scott-Rodino
1 Based on Anthem closing price as of October 24, 2003
$101.06 per WellPoint share
$23.80 cash and
1 Anthem share
76% stock, 24% cash
47% Anthem, 53% WellPoint
Mid-2004
Transaction Summary
Name:
Headquarters:
Board Representation:
Chairman:
President and CEO:
Chief Financial Officer:
Co-Heads of Integration:
WellPoint, Inc.
WellPoint, Inc.
Indiana
60% Anthem, 40% WellPoint
IndianaLeonard Schaeffer
Larry Glasscock
David Colby
Mike Smith, Alice Rosenblatt
Nation’s Leading Health Benefits Company
Combined size and scale creates leadership position in industry
Geographic diversification with local focus and national reach
Growth opportunities in regional and national markets
Building on combined strength to create operating synergies
Operational excellence with strong, consistent performance
Collaborative relationships with key constituents
Excellent track record of integration
Superior financial strength to invest in the future
Complementary cultures and customer-focused management team
Industry Leading Size and Scale
Source: Latest company filings as of 9/30/03 or 6/30/03.
(a) Excludes BlueCard host membership for WellPoint.
(b) Latest 12 months(LTM) revenues as of 9/30/03 for Anthem, WellPoint and UnitedHealth. LTM as of 6/30/03 for CIGNA and Aetna.
(in millions)
($ in billions)
Membership(a)
Latest 12 Months Revenues(b)
Geographic
Diversification
Anthem
WellPoint
CO
CT
ME
KY
IN
GA
WI
MO
CA
NV
OH
VA
TX
NH
IL
UNICARE and HealthLink >100K members
MA
Geographic Diversification
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-Branded
12%
Combined Membership at 9/30/2003 = 26 million
(Excludes BlueCard Host Members for WellPoint)
Growth Opportunities
Utilize strong local presence to add members in all segments
Introduce new products to under-served markets
Offer an enhanced Specialty product portfolio
Penetrate fragmented markets
Complement portfolio with disciplined acquisitions
Implement best practices across the enterprise
Use technology to support information-based consumer decisions
Creating 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
Targets consistent with accomplishments in prior transactions
Synergies represent approximately 4% to 5% of combined
administrative expenses
1 After-tax margin is calculated by dividing net income by total revenue.
Anthem
WellPoint
~$16.7
Mid-4%
Operational Excellence
~$20.4
Mid-4%
Revenue CAGR 24%
Revenue CAGR 30%
4.1%
$17.3
$12.4
$9.2
$13.3
$10.4
$8.8
4.1%
3.3%
2.6%
3.3%
3.7%
Financial Strength and Flexibility
Operating Cash Flow
Debt-to-Capital Ratio(a)
Anthem stand-alone
WellPoint stand-alone
($ in billions)
(a)As of September 30, 2003
Financing Plan
Financing Sources
Interim
Permanent
Available cash
$3.0 billion bridge facility
$1.0 billion revolving credit
$2.0 billion note offering
$2.5 billion credit facility
($ in billions)
Available cash (interim)
$ 0.7
New debt issuance (interim)
$ 3.2
Equity issuance
$12.5
Total
$ 16.4
% Change
Anthem Consolidated Results: 3Q03 vs. 3Q02
3Q03
Revenue
Pre-tax income
Diluted EPS
Pre-tax margin
Membership
3Q02
(a) Includes $0.04 per diluted share for realized gains and a $0.20 per share benefit for a tax valuation allowance.
$4.3 billion
$3.6 billion
19%
$310 million
$229 million
35%
7.3%
6.4%
90 bp
$1.38
$1.29(a)
7%
11.8 million
11.0 million
8%
Membership
Growth
Anthem Reportable Segments: 3Q03 vs. 3Q02
Operating
Revenue
Midwest
East
Southeast
Growth
West
Specialty
Operating
Gain
Growth
Other
($ in millions)
($ in millions)
$1,694
11%
$109
62% 8%
$1,161
8%
$75
22%
9%
$267
18%
$33
3%
13%
$950
-
$82
-
-
5%
$194
43%
$19
40%
$(80)
-
$(39)
-
-
Anthem 2003 Full Year Guidance
7% – 8%
Membership Growth
100 – 150 bp Improvement
Benefit Expense Ratio
50 – 100 bp Improvement
Admin. Expense Ratio
$(135) - $(145)
Other
$60 - $65
Specialty
$100 - $105
West
$330 - $340
Southeast
$295 - $305
East
$425 - $435
Midwest
Operating Gain:
Approximately $16.7 billion
Revenue
$5.30 - $5.35
Diluted EPS
($ in millions)
Anthem 2004 Full Year Guidance
4% – 6%
Membership Growth
82% – 83%
Benefit Expense Ratio
17.8% – 18.3%
Admin. Expense Ratio
15%+ growth
Pre-tax income
Low double-digit growth
Revenue
$6.05 - $6.15
Diluted EPS
WellPoint 3Q03 vs 3Q02 Results & Outlook
14.0M, up 8%
3Q03 Membership
$6.00, up 37%
Full Year 2003 EPS(c)(d)
$430M, up 31%
3Q03 Operating Income(b)
$5.0B, up 12%
3Q03 Revenue
$1.63, up 42%
3Q03 EPS(a)
$6.90 - $7.00, up 15 -17%
Full Year 2004 EPS(c)
(a) Excludes net realized gains of $0.00 and $0.20 per diluted share for 3Q03 and 3Q02, respectively.
(b) Excludes net realized gains of $1.6 million and $50.6 million for 3Q03 and 3Q02, respectively.
(c) Estimate
(d) The increase of 37% is based on an adjusted EPS before an
extraordinary gain of $4.39 per diluted share, which
excludes net realized gains of $0.22 per diluted share, for the year ended December 31, 2002.
Summary of Key Points
Strong competitive position as a leading health benefits company
Complementary cultures focused on customer needs and quality service
Geographically diverse with strong local focus and national reach
Significant operational synergies
Well positioned for future growth
Larry Glasscock, Chairman, President and Chief Executive Officer
Mike Smith, Chief Financial Officer
Leonard Schaeffer, Chairman and Chief Executive Officer
David Colby, Chief Financial Officer
October 27, 2003
SM