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| WellPoint Reports 2003 Fourth Quarter Earnings of $1.73 Per Diluted Share |
THOUSAND OAKS, Calif.--(BUSINESS WIRE)--Jan. 28, 2004--WellPoint Health Networks Inc. (NYSE:WLP) today announced that net income for the quarter ended December 31, 2003 was $271.5 million, or $1.73 per diluted share. Net income for the fourth quarter of 2002 was $180.0 million, or $1.18 per diluted share. Net income for the year ended December 31, 2003 was $935.2 million, or $6.16 per diluted share. Net income for the year ended December 31, 2002 was $703.1 million, or $4.67 per diluted share. Net income for 2002 included extraordinary gains of $8.9 million, or $0.06 per diluted share, which were previously discussed in WellPoint's 2002 second and third quarter earnings releases. Medical membership was 15.0 million at the end of 2003 compared with 13.8 million at the end of 2002. The increase in membership was the result of the acquisition of Cobalt Corporation on September 24, 2003, strong sales in WellPoint's key geographies, primarily California and Georgia, and growth in "host" members served through BlueCard -- the Blue Cross Blue Shield Association national program. WellPoint has revised its counting methodology for medical membership to now include such "host" members in its membership totals. The medical membership table attached to this press release shows the effect of this change in methodology on each quarterly period during 2002 and 2003. Specialty membership was 45.6 million at the end of 2003 reflecting strong growth during the fourth quarter in WellPoint's pharmacy benefit management company. Year over year, other specialty membership increased by 1.3 million members resulting from two acquisitions -- Golden West Dental & Vision in June 2003 and Cobalt Corporation in September 2003.
Highlights from the fourth quarter of 2003 include:
-- Revenues exceeded $5.5 billion, up 21 percent from the fourth
quarter of 2002
-- Operating cash flow of $674 million significantly exceeded net
income
-- WellPoint and Anthem, Inc. signed a definitive agreement to
merge on October 26, 2003
"WellPoint's continued success is driven by our ability to offer a broad array of innovative, choice-based products that are priced right," said Leonard D. Schaeffer, WellPoint's chairman and chief executive officer. "We are also using technology to enhance our products, customer service and relationships with physicians and hospitals. We recently announced a technology initiative that will provide about 19,000 contracted network physicians with new technologies designed to enhance patient care, reduce administrative costs and improve physician communications with patients, pharmacists and health plans." "WellPoint's continued focus on its business process resulted in another strong quarter," said David C. Colby, WellPoint's chief financial officer. "WellPoint's strong operating cash flow of $674 million during the fourth quarter allowed us to reduce the Company's debt-to-total capital ratio from 20.4 percent at the end of the third quarter 2003 to 18.6 percent at year-end. This strong cash flow well positions the Company for the proposed merger with Anthem, Inc., which is expected to close in mid-2004." A live web cast of WellPoint's earnings conference call, which is scheduled to begin at noon Eastern time on Thursday, January 29, 2004, can be accessed on the Internet at www.wellpoint.com. The conference call can be accessed by dialing 888-285-8004 and referencing "WellPoint's Earnings Call" approximately 10 minutes prior to the start of the call. International participants can access the call by dialing 706-643-1656 and referencing "WellPoint's Earnings Call." A replay of the call will be available after 2:30 p.m. Eastern time on January 29, 2004, until the end of the day on February 5, 2004. To access the replay, dial 800-642-1687 (International: 706-645-9291), and enter pass code 4816338. Information required to be presented with respect to non-GAAP financial measures as defined in the SEC rules will be available at least 10 minutes prior to the start of the call on the Company's website by clicking first on "Investor Info" and then on "Supplementary Financial Info." WellPoint Health Networks Inc. serves the health care needs of more than 15 million medical members and approximately 46 million specialty members nationwide through Blue Cross of California, Blue Cross and Blue Shield of Georgia, Blue Cross and Blue Shield of Missouri, Blue Cross and Blue Shield of Wisconsin, HealthLink and UNICARE. Visit WellPoint on the web at www.wellpoint.com. Blue Cross of California, Blue Cross and Blue Shield of Georgia, Blue Cross and Blue Shield of Missouri, and Blue Cross Blue Shield of Wisconsin are independent licensees of the Blue Cross and Blue Shield Association. Cautionary Statement: Certain statements contained in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results could differ materially due to, among other things, operational and other difficulties associated with integrating acquired business, general business conditions, competition among managed care companies, rising health care costs, trends in medical care ratios, health care reform, delay in receipt of regulatory and other approvals for pending transactions and other regulatory issues. Additional risk factors are listed from time to time in WellPoint's various SEC reports, including but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2002.
WELLPOINT
======================================================================
Medical Membership (a)(b)(c)(d)
December 31, September 30,
----------------------- Percent Increase/
2003 (e) 2002 (f) Change (Decrease) 2003 (e)
----------- ----------- ------- ---------- -----------
California
Large Group 4,839,435 4,715,458 2.6% 123,977 4,782,677
Individual
and Small
Group 1,638,189 1,617,776 1.3% 20,413 1,613,065
Senior 250,026 244,790 2.1% 5,236 250,760
----------- ----------- ---------- -----------
Total
California 6,727,650 6,578,024 2.3% 149,626 6,646,502
----------- ----------- ---------- -----------
Georgia
Large Group 1,614,427 1,605,267 0.6% 9,160 1,620,886
Individual
and Small
Group 497,233 425,953 16.7% 71,280 480,572
Senior 68,525 69,250 -1.0% (725) 69,205
----------- ----------- ---------- -----------
Total
Georgia 2,180,185 2,100,470 3.8% 79,715 2,170,663
----------- ----------- ---------- -----------
Central Region (g)
Missouri
Large Group 1,128,246 1,241,317 -9.1% (113,071) 1,244,375
Individual
and Small
Group 242,259 229,365 5.6% 12,894 242,888
Senior 40,804 42,256 -3.4% (1,452) 41,080
----------- ----------- ---------- -----------
Total
Missouri 1,411,309 1,512,938 -6.7% (101,629) 1,528,343
----------- ----------- ---------- -----------
Illinois
Large Group 577,768 629,118 -8.2% (51,350) 608,459
Individual
and Small
Group 123,956 120,114 3.2% 3,842 119,298
Senior 13,308 12,499 6.5% 809 12,936
----------- ----------- ---------- -----------
Total
Illinois 715,032 761,731 -6.1% (46,699) 740,693
----------- ----------- ---------- -----------
Texas
Large Group 293,570 359,599 -18.4% (66,029) 288,259
Individual
and Small
Group 199,786 188,874 5.8% 10,912 199,994
Senior 6,843 520 N/A 6,323 4,733
----------- ----------- ---------- -----------
Total Texas 500,199 548,993 -8.9% (48,794) 492,986
----------- ----------- ---------- -----------
Other States
Large Group 1,749,853 1,579,216 10.8% 170,637 1,729,667
Individual
and Small
Group 104,102 95,814 8.7% 8,288 103,226
Senior 30,937 24,054 28.6% 6,883 29,536
----------- ----------- ---------- -----------
Total Other
States 1,884,892 1,699,084 10.9% 185,808 1,862,429
----------- ----------- ---------- -----------
Wisconsin
Large Group 429,309 21,114 N/A 408,195 429,806
Individual
and Small
Group 106,837 919 N/A 105,918 108,194
Senior 53,736 66 N/A 53,670 53,048
----------- ----------- ---------- -----------
Total
Wisconsin 589,882 22,099 N/A 567,783 591,048
----------- ----------- ---------- -----------
Total Medical
Members
Excluding
BlueCard Host
Members 14,009,149 13,223,339 5.9% 785,810 14,032,664
Total BlueCard
Host Members
(h) 1,002,113 587,272 70.6% 414,841 1,009,900
----------- ----------- ---------- -----------
Total Medical
Membership 15,011,262 13,810,611 8.7% 1,200,651 15,042,564
=========== =========== ========== ===========
December 31, September 30,
----------------------- Percent Increase/
2003 (e) 2002 (f) Change (Decrease) 2003 (e)
----------- ----------- ------- ---------- -----------
ASO Membership (i)
California 1,642,354 1,517,382 8.2% 124,972 1,614,235
Georgia 833,409 865,723 -3.7% (32,314) 831,464
Central
Region (g) 2,578,564 2,653,762 -2.8% (75,198) 2,705,333
Wisconsin 167,612 13,004 N/A 154,608 165,249
BlueCard Host
Members 1,002,113 587,272 70.6% 414,841 1,009,900
----------- ----------- ---------- -----------
Total ASO
Membership 6,224,052 5,637,143 10.4% 586,909 6,326,181
----------- ----------- ---------- -----------
Risk Membership
California 5,085,296 5,060,642 0.5% 24,654 5,032,267
Georgia 1,346,776 1,234,747 9.1% 112,029 1,339,199
Central
Region 1,932,868 1,868,984 3.4% 63,884 1,919,118
Wisconsin 422,270 9,095 N/A 413,175 425,799
----------- ----------- ---------- -----------
Total Risk
Membership 8,787,210 8,173,468 7.5% 613,742 8,716,383
----------- ----------- ---------- -----------
Total Medical
Membership 15,011,262 13,810,611 8.7% 1,200,651 15,042,564
=========== =========== ========== ===========
State-Sponsored Programs (j)
December 31, September 30,
----------------------- Percent Increase/
2003 2002 Change (Decrease) 2003
----------- ----------- ------- ---------- -----------
Medi-
Cal/Medicaid
California 844,540 836,065 1.0% 8,475 839,674
Virginia 49,358 38,552 28.0% 10,806 46,336
Puerto Rico 265,541 288,151 -7.8% (22,610) 265,614
Other 104,541 69,719 49.9% 34,822 101,567
----------- ----------- ---------- -----------
Total 1,263,980 1,232,487 2.6% 31,493 1,253,191
Healthy
Families 279,572 255,211 9.5% 24,361 271,095
MRMIP / AIM /
IHRP 12,817 17,833 -28.1% (5,016) 12,094
California
Kids 14,598 18,567 -21.4% (3,969) 16,373
----------- ----------- ---------- -----------
Total 1,570,967 1,524,098 3.1% 46,869 1,552,753
=========== =========== ========== ===========
(a) Membership numbers are approximate and include some estimates
based upon the number of contracts at the relevant date and an
actuarial estimate of the number of members represented by the
contract.
(b) Classification between states for employer groups is determined by
the zip code of the subscriber.
(c) Medical membership includes management services and network
services members, which are primarily included in the Large Group
for each respective state.
(d) Senior membership includes members covered under both Medicare
risk and Medicare supplement products.
(e) Medical members as of December 31, 2003 and September 30, 2003,
excluding BlueCard Host members, include 682,613 and 675,048
medical members, respectively, from the Cobalt acquisition.
(f) Membership numbers as of December 31, 2002 have been reclassified
to reflect the zip code of the subscriber of HealthLink's
commercial insurer accounts. These members were previously
included in the commercial insurers' state of domicile. As of
December 31, 2002, Missouri and Illinois members would have been
higher by 111,239 and 23,246, respectively, while California,
Georgia, Texas and Other States would have been lower by 1,450,
420, 8,728, and 123,887, respectively.
(g) Central Region - Large Group membership includes network access
services members, primarily from HealthLink, of 1,246,775,
1,471,639 and 1,395,231 as of December 31, 2003, December 31, 2002
and September 30, 2003, respectively. As of December 31, 2003, the
Company revised its methodology of calculating the number of
medical members represented by each subscriber contract within the
Company's rental networks and a Missouri joint venture. The
weighted average factor changed from approximately 2.4 members to
2.1 members per subscriber. The impact of this change as of
quarter end for the years ended December 31, 2002 and 2003 is to
reduce membership as follows:
As of Illinois Missouri Other States Total
-------------------- ------------ ------------ ------------- --------
March 31, 2002 39,207 122,833 16,680 178,720
June 30, 2002 38,659 120,425 16,446 175,530
September 30, 2002 38,217 120,492 16,258 174,967
December 31, 2002 38,312 119,827 16,298 174,437
March 31, 2003 35,999 111,008 15,314 162,321
June 30, 2003 35,083 108,097 14,925 158,105
September 30, 2003 34,990 104,614 14,885 154,489
December 31, 2003 34,377 103,013 14,624 152,014
(h) The Company has revised its medical membership counting
methodology to include estimated "host" members using the national
BlueCard program. Host members are generally members who reside in
a state in which a WellPoint subsidiary is the Blue Cross and/or
Blue Shield licensee and who are covered under an
employer-sponsored health plan issued by a non-WellPoint
controlled Blue Cross Blue Shield licensee. Host members are
computed using, among other things, an estimate of the average
number of BlueCard claims received per member per month. Total
BlueCard host members as of quarter end for the years ended
December 31, 2002 and 2003 were as follows:
As of BlueCard
-------------------------- --------------
March 31, 2002 567,695
June 30, 2002 539,970
September 30, 2002 589,188
December 31, 2002 587,272
March 31, 2003 748,490
June 30, 2003 743,897
September 30, 2003 1,009,900
December 31, 2003 1,002,113
(i) ASO membership represents members for which the Company provides
administrative services only and does not assume full insurance
risk.
(j) Medi-Cal (the California Medicaid program) membership is included
in California - Large Group. Medicaid membership for Virginia,
Puerto Rico and Other are included in Other States - Large Group.
Healthy Families, MRMIP (Major Risk Medical Insurance Program) /
AIM (Access for Infants and Mothers) / IHRP (Interim High Risk
Program) and California Kids membership are included in California
- Large Group.
Specialty December 31, September 30,
Membership ------------------------ Percent Increase/
2003 (A) 2002 Change (Decrease) 2003 (A)
------------ ----------- ------- ----------- ------------
Pharmacy
Benefits
Management 31,152,732 34,983,224 -10.9% (3,830,492) 30,634,905
Dental 3,282,492 2,704,535 21.4% 577,957 3,249,312
Life 3,122,734 2,579,487 21.1% 543,247 3,039,852
Disability 603,409 513,520 17.5% 89,889 609,587
Behavioral
Health 7,404,030 7,315,491 1.2% 88,539 7,206,763
------------ ----------- ----------- ------------
Total 45,565,397 48,096,257 -5.3% (2,530,860) 44,740,419
============ =========== =========== ============
(A) Specialty membership as of December 31, 2003 and September 30,
2003 includes 712,861 and 724,782 specialty members, respectively,
from the Cobalt acquisition.
WELLPOINT Consolidated Income Statements
(Unaudited)
======================================================================
(In thousands, Quarter Ended December 31, Year Ended December 31,
except earnings
per share) ----------------------------------------------------
2003(A) 2002 2003(A) 2002(B)
----------------------------------------------------
Revenues:
Premium revenue $5,189,693 $4,298,459 $19,156,711 $16,206,161
Management
services and
other revenue 277,454 212,700 944,786 818,375
Investment
income 62,387 70,173 258,194 314,004
----------------------------------------------------
5,529,534 4,581,332 20,359,691 17,338,540
Operating
Expenses:
Health care
services and
other benefits 4,149,491 3,526,155 15,428,763 13,211,090
Selling expense 213,879 183,000 807,675 681,802
General and
administrative
expense 685,765 546,119 2,477,692 2,166,744
----------------------------------------------------
5,049,135 4,255,274 18,714,130 16,059,636
----------------------------------------------------
Operating Income 480,399 326,058 1,645,561 1,278,904
Interest
expense(C) 12,524 10,966 50,632 66,752
Other expense, net 15,395 15,113 36,119 55,086
----------------------------------------------------
Income before
Provision for
Income Taxes and
Extraordinary
Item 452,480 299,979 1,558,810 1,157,066
Provision for
income taxes 180,992 120,003 623,581 462,937
----------------------------------------------------
Income before
Extraordinary
Item 271,488 179,976 935,229 694,129
Extraordinary
Item:
Gain from
negative
goodwill on
acquisition - - - 8,950
----------------------------------------------------
Net Income $271,488 $179,976 $935,229 $703,079
====================================================
Earnings Per Share
Income before
Extraordinary
Item $1.79 $1.22 $6.34 $4.81
Extraordinary
gain from
negative
goodwill on
acquisition - - - 0.06
----------------------------------------------------
Net Income $1.79 $1.22 $6.34 $4.87
====================================================
Earnings Per Share
Assuming Full
Dilution
Income before
Extraordinary
Item $1.73 $1.18 $6.16 $4.61
Extraordinary
gain from
negative
goodwill on
acquisition - - - 0.06
----------------------------------------------------
Net Income $1.73 $1.18 $6.16 $4.67
====================================================
Weighted Average
Number of Shares
Outstanding 151,990 147,308 147,500 144,219
====================================================
Weighted Average
Number of Shares
Outstanding
Including Common
Stock Equivalents 156,785 152,123 151,773 150,850
====================================================
(A) Results of operations for the quarter and year ended December 31,
2003 include three months of Cobalt premium revenue of $358.5
million, management services revenue of $47.6 million, investment
income of $4.0 million, health care services and other benefits
expense of $299.0 million, selling, general and administrative
expense of $82.1 million, interest expense of $0.4 million, other
expense of $4.4 million and net income of $14.5 million. The
Company acquired Cobalt on September 24, 2003. The transaction was
effective as of September 30, 2003 for accounting purposes.
(B) Results of operations for the year ended December 31, 2002 include
RightCHOICE operating results from February 1, 2002 to December
31, 2002. The Company acquired RightCHOICE on January 31, 2002.
(C) In April 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections
as of April 2002" ("SFAS No. 145"). With the rescission of FASB
Statement No. 4, gains and losses from the extinguishment of debt
should be classified as extraordinary items only if they meet the
criteria in APB Opinion No. 30. In applying the provisions of APB
Opinion No. 30, WellPoint had determined that the extinguishment
of debt under its Zero Coupon Convertible Subordinated Debentures
did not meet the requirements of unusual or infrequent and
therefore would not be included as an extraordinary item with the
rescission of FASB Statement No. 4. For the year ended December
31, 2002, WellPoint reclassified an extraordinary loss of $6.3
million, which includes a tax benefit of $2.5 million, to interest
expense.
WELLPOINT
======================================================================
Condensed Consolidated Balance Sheets
(In thousands) December 31, December 31,
2003 2002 (a)
------------ ------------
ASSETS
Current Assets:
Cash and Investments $8,671,302 $6,638,503
Receivables, net 1,356,107 1,223,232
Other current assets 613,698 518,956
------------ ------------
Total Current Assets 10,641,107 8,380,691
Property and equipment, net 441,936 346,351
Goodwill and intangible assets, net 3,272,162 2,429,232
Long-term investments, at market value 161,784 134,274
Other non-current assets 271,689 180,083
------------ ------------
Total Assets $14,788,678 $11,470,631
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Medical claims payable $2,747,074 $2,422,331
Reserves for future policy benefits 129,135 68,907
Unearned premiums 629,831 495,508
Accounts payable and accrued
expenses 1,411,391 1,144,662
Experience rated and other refunds 267,382 251,743
Income taxes payable 241,979 140,881
Security trades pending payable 27,456 428,851
Other current liabilities 1,626,446 798,966
------------ ------------
Total Current Liabilities 7,080,694 5,751,849
Reserves for future policy benefits,
non-current 288,197 214,328
Long-term debt 1,238,267 1,011,578
Other non-current Liabilities 751,571 516,179
------------ ------------
Total Liabilities 9,358,729 7,493,934
Total Stockholders' Equity 5,429,949 3,976,697
------------ ------------
Total Liabilities and
Stockholders' Equity $14,788,678 $11,470,631
============ ============
Days in Medical Claims Payable (b) (c)
2003
----------------------------------------------------------------------
December 31 September 30 June 30 March 31
----------------------------------------------------------------------
60.9 66.8 60.8 60.7
(a) Certain amounts as of December 31, 2002 have been reclassified to
conform to the current period presentation.
(b) Days in medical claims payable is a calculation of medical claims
payable at the end of the period divided by average health care
services and other benefits expense per calendar day for such
period.
(c) Excluding Cobalt's medical claims payable of $168.1 million and
health care services and other benefits of $299.0 million, days in
claims payable would have been 61.6 for the quarter ended December
31, 2003. Excluding Cobalt's medical claims payable of $244.2
million, days in medical claims payable would have been 60.9 for
the quarter ended September 30, 2003. Results of operations for
the year ended December 31, 2003 include Cobalt operating results
from October 1, 2003 to December 31, 2003.
WELLPOINT Medical Claims Payable Rollforward
======================================================================
Year Ended December 31,
-----------------------------------
(In thousands) 2003 2002 2001
----------- ----------- -----------
Medical claims payable as of
January 1 $2,422,331 $1,934,620 $1,566,569
Medical claims reserves from
businesses acquired during the
period 186,520 175,359 258,375
Health care claim expenses incurred
during period:
Related to current year 15,543,363 13,338,984 9,422,974
Related to prior years (429,166) (409,941) (276,531)
----------- ----------- -----------
Total Incurred 15,114,197 12,929,043 9,146,443
Health care services payments
during period:
Related to current year 13,370,309 11,426,772 8,061,957
Related to prior years 1,605,665 1,189,919 974,810
----------- ----------- -----------
Total Payments 14,975,974 12,616,691 9,036,767
----------- ----------- -----------
Medical claims payable as of
December 31 $2,747,074 $2,422,331 $1,934,620
=========== =========== ===========
CONTACT: WellPoint Health Networks Inc., Thousand Oaks
John Cygul, 805-557-6789 (Investors)
Ken Ferber, 805-557-6794 (Media)
SOURCE: WellPoint Health Networks Inc.
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