Slide 1: Discipline equals performance
discipline + product value = performance discipline + distinctive service = performance discipline + eBusiness = performance discipline + technology = performance discipline + future growth = performance discipline + national accounts = performance discipline + integration = performance discipline +
Slide 2: Strategic Overview: Discipline Equals Performance
Larry Glasscock Chairman, President and CEO Strategic Overview Discipline Equals Performance
Slide 3: Meeting Objectives
3 Meeting Objectives • Meet senior management team • Enhance knowledge of Anthem - Strategy - Competitive advantages - Growth drivers • Enhance knowledge of industry and Blues
Slide 4: What You Will Hear Today
4 What You Will Hear Today Delivering Product Value to Our Customers Marjorie Dorr Easier to do Business With—Distinctive Service Caz Matthews Easier to do Business With—eBusiness Mark Boxer Migrating Systems & Positioning for the Future Jane Niederberger Defining Competitive Landscape & Future Grow
Slide 5: Experienced Management Team
5 Experienced Management Team Industry Expertise Integrity Execution-Oriented
Slide 6: Executing a Simple Strategy
6 Executing a Simple Strategy Grow Profitable Enrollment Drivers to Success: Customers Are First Regional Model Disciplined Focus Reduce Administrative Costs Optimize the Cost of Healthcare, While Improving the Health of Our Members Provide Distinctive Service Strong Cash Management
Slide 7: Anthem: Past, Present and Future
7 East Connecticut (1997) New Hampshire (1999) Maine (2000) Anthem: Past, Present and Future Mergers & Acquisitions Integration & Rationalization National Business Formation Specialty Business Formation IPO Trigon Acquisition Best Practices Integration Midwest Indiana (1944) Kentucky (1993) Ohio (19
Slide 8: Strategic Background
8 Strategic Background 2004 – 2006+ Theme Strategic Focus 1991 – 1994 1995 – 2003 Position & Expansion Performance & Growth Market Leadership Industry Distinction Increasing size & scale, while positioning a national presence Optimizing assets & growth Meeting or exceeding competitor performance Exi
Slide 9: Transforming the Company
9 Transforming the Company From… State-Centric Models • Systems of choice • Integrated Specialty product offerings • Standardization and simplification • “Best for Anthem…” • Multiple systems • Specialty products… a nice add • Work done in silos—multiple processes • “Best for my state” To… Regional
Slide 10: Anthem's Keys to Execution
10 Anthem’s Keys to Execution 1. Local management…close to customers 2. Disciplined focus on details 3. Clear objectives and goals 4. Every associate incented to achieve company-wide and work-group goals
Slide 11: Medical Membership Growth
11 1999 2000 2001 2002 2003E 2004E Acquisition-Related Membership in the Applicable Year Medical Membership Growth 6.3 11.1 7.9 7.3 12.5+ 9% Same-Store CAGR, ‘99—‘04F (In Millions) 11.9—12.0
Slide 12: Long Term Earnings Growth of 15%+
12 ??Enrollment growth in every region ??Expand market share ??Specialty penetration Long Term Earnings Growth of 15%+ Profitable Membership Growth Continuous Administrative Expense Ratio Improvement Stable Benefit Expense Ratio ??Systems consolidation ??Contain costs in non-customer touch point are
Slide 13: Anthem, Inc.—EPS
13 Anthem, Inc.—EPS • 2003 will be another great year: EPS growth of 18% to 19% • Beyond 2004: 15%+ growth • Each business segment continues to improve operational and financial performance $3.30 $4.51 $5.30—$5.35 2001 2002 2003E 2004E 23% CAGR $6.05—$6.15
Slide 14: Midwest Segment Overview
14 Midwest Segment Overview • Anthem’s largest segment with 5.6 million members • Midwest would represent the nation’s 6th largest publicly-traded managed care company on a stand-alone basis • #1 market share in all three states (region share of 30%) • Systems consolidation completed in 2003
Slide 15: Midwest Segment Overview
15 Midwest Segment Overview $5.1 $6.1 ~$6.6 2001 2002 2003E Operating Revenue (in Billions) Operating Gain (in Millions) $162 $272 $425—$435 2001 2002 2003E
Slide 16: East Segment Overview
16 East Segment Overview • 2.6 million members • #1 market share in all three states (region share of 50%) • National business growth accelerating • Efficiencies from integrating into one region vs. three states • Systems consolidation to be essentially complete at year-end 2003
Slide 17: East Segment Overview
17 $129 $223 $295—$305 2001 2002 2003E East Segment Overview $3.7 $4.2 ~$4.5 2001 2002 2003E Operating Revenue (In Billions) Operating Gain (In Millions)
Slide 18: West Segment Overview
18 West Segment Overview • 931,000 members • Operationally and financially distressed plan prior to Anthem’s acquisition in 1999 • Regained #1 market share in Colorado post-acquisition and holds #2 market share in Nevada (region share of 17%)
Slide 19: West Segment Overview
19 West Segment Overview $20 $75 $100—$105 2001 2002 2003E $0.8 $0.9 ~$1.0 2001 2002 2003E Operating Revenue (In Billions) Operating Gain (In Millions)
Slide 20: Southeast Segment Overview
20 Southeast Segment Overview • Region formed with acquisition of Trigon in July 2002 • 2.7 million members • #1 market share in Virginia (43%) • Sustained high performance trends established by pre-merger Trigon • Integration and financial performance better than original plan
Slide 21: Southeast Segment Overview
21 Southeast Segment Overview* $116 $330—$340 2002 2003E $1.5 ~$3.8 2002 2003E Operating Revenue (In Billions) Operating Gain (In Millions) *Reflects results sine the acquisition of Trigon on July 31, 2002
Slide 22: Specialty Segment Overview
22 Specialty Segment Overview • Five separate businesses: PBM, Dental, Vision, Life, and Behavioral Health • Company-wide focus on Specialty products since 2000 • Penetrating existing medical membership • Performance primarily driven by our PBM • Building Vision from scratch
Slide 23: Specialty Segment Overview
23 Specialty Segment Overview $33 $51 $60—$65 2001 2002 2003E $0.4 $0.5 ~$0.7 2001 2002 2003E Operating Revenue (In Billions) Operating Gain (In Millions)
Slide 24: Anthem to Merge with WellPoint
Anthem To Merge With a WELLPOINT.
Slide 25: Transaction Summary
25 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 shar
Slide 26: Transaction Summary: WellPoint, Inc. governance
26 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
Slide 27: Geographic Diversification
27 Geographic Diversification Anthem WellPoint CO NM NJ CT PA NY VT NH ME MI IL OH KY VA 2 TN IN WI NC SC GA FL WV MS AL TX ND SD NE MN OK MO 3 LA IA KS AR WA OR MT CA NV UT ID WY AZ CO ME OH KY VA IN WI GA TX MO CA NV CT IL UNICARE and HealthLink >100K members NH MA
Slide 28: Frequently Asked Questions
28 ??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? Frequently Asked Questions
Slide 29: Why Now?
29 • Many expected the merger in the future, why NOT now? • Blue conversions may slow down in short term, likely to continue over time • With effective integration, combined company ready for further consolidation 2000 2001 2002 2003 Demutualization and IPO Trigon Acquisition ATH/WLP Merger announce
Slide 30: Why Not Structure as a Merger of Equals?
30 • 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 a Merger of Equals vs. Paying a Premium to WLP
Slide 31: Other Cash and Stock Deals
31 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 Acquiror Target Tribune Co. Times Mirror Co. Starwood Hotels & Resorts ITT Corp. Valero Energy Ultramar Diamond
Slide 32: What Are the Returns for ATH Shareholders?
32 • Accretive in 2004 excluding refinancing costs • 4-6% accretion in 2005 15% EPS Growth 15% EPS Growth What Are the Returns for ATH Shareholders? SM SM
Slide 33: Is This a Defensive Move?
33 • 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) ATH 2,700,000 WLP 1,238,000 T
Slide 34: What Are the Benefits of This Merger? Growth Opportunities
34 • 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 administr
Slide 35: What Are the Benefits of This Merger? Growth Opportunities
35 • 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 manag
Slide 36: What Are the Benefits of This Merger? Synergies
36 • 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 $
Slide 37: Strategic Drivers to Long Term Performance
37 Strategic Drivers to Long Term Performance Enhancing the Value of our Company Diversified and well-position businesses Disciplined: plan for tomorrow… execute today Size, scale, and flexibility to compete Customer-centric organizational structure Experienced management team
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