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 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 10-K/A and Anthem’s and WellPoint’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2004.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Anthem has filed on May 11, 2004 Amendment No. 1 to its registration statement on Form S-4, including the joint proxy statement/prospectus constituting a part thereof, with the SEC in connection with Anthem’s proposed merger with WellPoint. 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 IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The definitive 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.
Larry Glasscock, Chairman, President & Chief Executive Officer
David Colby, Executive Vice President & Chief Financial Officer
Banc of America Securities Health Care Conference May 21, 2004
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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 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 10-K/A and Anthem’s and WellPoint’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2004.
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ADDITIONAL INFORMATION AND WHERE TO FIND IT
Anthem has filed on May 11, 2004 Amendment No. 1 to its registration statement on Form S-4, including the joint proxy statement/prospectus constituting a part thereof, with the SEC in connection with Anthem’s proposed merger with WellPoint. SHAREHOLDERS OF ANTHEM AND STOCKHOLDERS OF WELLPOINT ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, NCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The definitive 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.
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Agenda
| Anthem |
|
Profile |
| WellPoint |
|
Profile |
| Merger |
|
Summary |
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Anthem Profile
Maine
New Hampshire
Connecticut
Nevada
Colorado
Ohio
Indiana
Virginia
Kentucky
Anthem
BCBS Coverage
BCBS licenses in 9 states
#1 market share in 8 of 9 states
Regional business model
National capabilities
Full range of healthcare and
specialty products
Among the fastest growing
healthcare companies
12.5 million medical members
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Profitable Enrollment Growth
9% Same Store CAGR, 1999—2004E
(In Millions)
6.3
7.3
7.9
11.1
11.9
12.5+
1999
2000
2001
2002
2003
2004E
Acquisition-related membership in the applicable year
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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
Dedicated Business Unit Model
ClaimsQuest
Interactive Realtime Information System (IRIS)
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Line of Business Growth
Membership Growth
(3/31/2003—3/31/2004)
17%
1%
8%
1%
10%
National Accounts Large Group Small Group Government - Individual
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Strong Financial Momentum
Diluted EPS
$3.30
$4.51
$5.45
$6.90—$7.00
2001
2002
2003
2004E
Operating Revenue
($ in billions)
$10.1
$13.0
$16.5
$18.3+
2001
2002
2003
2004E
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Long Term Earnings Growth
15% + Earnings Growth Model
Profitable Membership Growth
Continuous Administrative Expense Ratio Improvement
Maintain Gross Margins
Enrollment growth in every region
Maintain strong retention rates
Specialty penetration
Systems consolidation
Contain costs in non-customer touch point areas
Enhance efficiency
Disciplined underwriting and pricing
Medical management initiatives
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Agenda
Anthem Profile
WellPoint 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.
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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
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Membership Growth
Total Medical Membership
(in thousands)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2,797
4,485
6,638
6,892
7,515
8,201
10,908
13,811
15,011
15,377
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
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Membership Growth
(in thousands)
BCC
8000
7000
6000
5000
4000
1999
2000
2001
2002
2003
1Q04
BCBSGA
3000
2500
2000
2001
2002
2003
1Q04
BCBSMO
950
900
2002
2003
1Q04
Same store growth:(1)
21% medical membership growth since 1999
20% growth in ISG business since 1999
121% growth in BlueCard Program “home” membership since 2001
Note: Membership numbers exclude BlueCard “host” members. (1) Same store growth excludes members gained through acquisitions
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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
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Fragmented Industry
Many smaller, regional players in key geographies
California
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
Missouri
| 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.
Georgia
Athens Area Health Plan
Columbus Physician Organization
Healthcare, Inc.
HealthOne
Medical Resource Network
One Health Plan of GA
Phoebe Health Partners, Inc.
Illinois
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.
Texas
| 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 |
•
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
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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.
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WellPoint Pharmacy Management
Fourth largest PBM with more than 31 million members
Offers full spectrum of PBM services
Pharmacy Care Management
Clinical / Medical Management
Clinical Business Plan Intervention Programs Therapy Management Disease Management Patients-At-Risk
ReViewPoint®
Online Reporting
Formulary Management
Treatment Guidelines P&T Committees Manufacturer Discounts Preferred Rx Programs Prior Auth Center
PrecisionRx
Integrated Mail Service Pharmacy Specialty Pharmacy
Network Management
National Network
Customized Local Networks MAC Programs
Claims Processing
Claims Keying Online DUR
Consultative Services
Incentive Programs Benefit Designs Interventions Account Management Sales Support Business Strategies
Provide innovative programs to manage drug trend
Clinical programs are outcomes-focused and patient-
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Other Specialty Products
Dental PPO, DHMO & FFS
Life Basic & supplemental group term, dependent coverage, AD&D
Disability Group STD & LTD Behavioral
Health Full range of Behavioral Health services, including EAP plans
WC MCS Network management, bill review, medical management and case management, all on non-risk basis
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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
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Operational Improvements
Medical Care Ratio (a)
80.2% 79.7%
80 70 60 50
40 30
20 10 0
1Q98 1Q04
SG & A Ratio (b)
20.2% 17.0%
20 18 16 14 12 10 8 6 4 2 0
1Q98 1Q04
Investment Income/Pre-tax Income (c)
35.2% 17.0%
40 35 30 25 20 15 10 5
0
1Q98 1Q04
Pre-Tax Margin (d)
7.3% 8.8%
10 8 6 4 2 0
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.
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WLP Financial Highlights
Total Revenue
(in billions)
CAGR = 26%*
$6.5 $5.6 $4.0
$12.4 $9.2 $7.5
$17.3
$20.4
$ 24
20 16 12 8 4 0
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.
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WLP Financial Highlights
Income from Continuing Operations(a)
(in millions)
CAGR = 25%(f)
$198.5 (b) $224.9 (c) $263.0 (d) $299.1 $342.3 $414.7 (d) (e) $935.2 $660.9
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.
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Agenda
Anthem Profile
WellPoint Profile
Merger Summary
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Leading Market Positions
NV
CA
CO
TX
WI
MO
IL
IN
KY
OH
GA
VA
ME
NH
MA
CT
Anthem WellPoint
UNICARE and HealthLink >100K members
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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
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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.) |
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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
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Merger Update
Registration statement declared effective on May 13, 2004 “No-review” by SEC
Hart Scott Rodino clearance BCBSA approval Approved in 9 of 11 states
Shareholder meetings scheduled for June 28, 2004
Anticipate mid-year 2004 closing
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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
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Questions?
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