Elevance Health, Inc. · NYSE:ELV
Elevance Health — Anthem — Merger or Acquisition (January 2004)
45 slides from Elevance Health's merger presentation, Jan 13, 2004
Slide 1: Leonard Schaeffer and Larry Glasscock presentation, January 12, 2004
SM Leonard Schaeffer, Chairman and Chief Executive Officer January 12, 2004 Larry Glasscock, Chairman, President and Chief Executive Officer 01/12/2004 4:20 PM 1
Slide 2: Forward-looking statements
Words Such Forward-looking statements are statements that are not historical facts. These statements include, but are not limited to, financial projections These risks and filings with the U.S. Securities and Exchange at health benefits companies; our ability to limitation, difficulties in maintaini
Slide 3: Additional information and where to find it
ANY and 120 1 their filed and of at AND PROXY STATEMENT, Anthem at of was interests JOINT of Relations Relations members which participants the STATEMENT THE solicitation of proxies in 8-K, Investor Investor other Form Anthem’s regarding REGISTRATION shareholders and on INCLUDING to Anthem WellPoint
Slide 4: Agenda: WellPoint Profile
WellPoint Profile Anthem Profile Merger Summary ® Agenda • • • 01/12/2004 4:20 PM 4
Slide 5: WellPoint Profile: broad range of medical and specialty products
Broad range of medical and specialty products Non-Blue Brands WellPoint Profile Second largest health plan in U.S. Organized by customer segment with a diverse customer base Regional geographic focus One Company, multiple brands • •• •• 01/12/2004 4:20 PM 5
Slide 6: Broad product choice
VALUE Pharmacy Dental Behavioral Health Life/Long Term Care Disability Medical Management Network Access = Broad Product Choice CHOICE 01/12/2004 4:20 PM 6
Slide 7: Organized by customer segment
50 250 2,000 Size 1 1 2 – 51 – 251 – 2,001+ varies varies unique needs of these customers Segment Special Accounts Employees of schools, municipalities, Federal Employees Program Beneficiaries of Medicaid, State Children Health Insurance Program and similar programs … to better understand and meet t
Slide 8: Diverse customer base
Medi-Cal Other State Sponsored Programs 1,471,000 Individual Small Group 840,000 713,000 1,396,000 Seniors 461,000 Large Group ASO* Large Group Insured Diverse Customer Base September 30, 2003 Enrollment 5,020,000 4,132,000 * Includes 1.4 million network access members 01/12/2004 4:20 PM 8
Slide 9: Regional concentration
Blue Cross license service areas UNICARE regions HealthLink states (also includes Missouri, Indiana & Illinois) Health care is locally delivered and locally consumed Better network leverage Greater actuarial precision More efficient marketing/operations Regional Concentration • • • • 01/12/2004 4:20
Slide 10: Membership growth
14,033 3Q03 3%* 13,223 2002 11% 10,528 2001 6% 8,201 2000 8% 7,515 1999 15% (in thousands) 6,892 1998 7% 6,638 1997 17% Total Medical Membership 4,485 1996 27% 2,797 1995 7% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Membership *Reflects growth from September 30, 2002 Membership Growth Ca
Slide 11: Big plans will get larger
2003* Medical Members Total Insured 245.4 Million Top 10 = 100.4 Million Top Ten Health Plans* 1995 Medical Members Total Insured 223.7 Million Top 10 = 61.1 Million * Top 10 Health Plans as of 6/30/03: UNH, WLP, AET,CI, ATH, Kaiser Foundation, Health Care Services Corp., HUM, HNT, WC Bear Stearns,
Slide 12: Health plan partners and networks
PPO Rockford Health Plans The Preferred Plan, Inc. Trinity PHO, Ltd. Union Health Service, 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 Managemen
Slide 13: Uninsured opportunity
Existing commercial programs Existing Medicaid and SCHIP Programs Expanded government programs ? Potential Solutions • • • Based on 2001 data. Demonstrate value Potential tax subsidies Enrollment programs Education Community outreach Increased State funding ? Federal assistance? • • • • • • • Uninsu
Slide 14: HealthyCheck program in California
Program in California HealthyCheck 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 Agent support Community programs Media relations
Slide 15: Targeted medical management
WellPoint Medical Costs 70% 23% 7% WellPoint Membership 8% 24% 68% Depression Oncology High risk pregnancy Etc. Members with chronic conditions • • • • Asthma Congestive Heart Failure ESRD Diabetes • • •• Targeted Medical Management WellPoint Membership 20% 80% 01/12/2004 4:20 PM 15
Slide 16: Cost variations
28,700 3,000 21,100 8,700 $119,400 24,900 41,000 24,700 Total Knee Replacement $ $ $ $ $ $ $ . 1,700 2,800 $18,200 9,600 2,100 September 19, 2000 The operation you get often depends on where you live Cholecystectomy $27,000 $ $12,500 $ $ $18,600 $ 2,200 $11,400 2,800 $26,200 3,100 Total Abdominal Hy
Slide 17: Health coaching model
Multi Disciplinary Health Coaching Health Coaching is a multi- disciplinary, facilitative approach to enhance members’ ability to self-manage conditions RN Directed RN gives didactic telephonic education without assessing member motivation or underlying barriers to change Health Coaching Model Physi
Slide 18: WellPoint pharmacy management
Consultative Services Incentive Programs Benefit Designs Interventions Account Management Sales Support Business Strategies Claims Processing Claims Keying Online DUR Intervention Programs Disease Management Network Management National Network Customized Local Networks MAC Programs Clinical / Medica
Slide 19: Other specialty products
PPO, DHMO & FFS Basic & supplemental group term, dependent coverage, AD&D Group STD & LTD Full range of Behavioral Health services, including EAP plans Network management, bill review, medical management and case management, all on non-risk basis Other Specialty Products Dental Life Disability Behav
Slide 20: Specialty products contribute to profitability
87% Nine months ended September 30, 2003 13% Health Care Segment Specialty Segment Growth** 35% 56% September 30, 2003 Total WellPoint Profitability* 88% Health Care Segment Specialty Segment Specialty Products Contributeto WellPoint’s Profitability Nine months ended September 30, 2002 Specialty Seg
Slide 21: Leveraging technology to improve margins
Sep- 03 Jun- 03 Mar- 03 Dec- 02 Sep- 02 Jun- 02 Mar- 02 Dec- 01 Sep- 01 Jun- 01 Mar- 01 Dec- 00 Sep- 00 Jun- 00 330 bp improvement Mar- 00 Dec- 99 Sep- 99 Jun- 99 Mar- 99 Dec- 98 Sep- 98 Jun- 98 Mar- 98 General and administrative expense ratio is calculated as a percentage of premium revenue and man
Slide 22: WLP financial highlights: total revenue
$14.8 YTD 3Q03 $17.3 2002 4 . 2001 $12 (in billions) $9.2 2000 Total Revenue $7.5 1999 –1, where FV is the future value, PV is the present value, CAGR = 28%* 1998 1/n $6.5 CAGR = (FV/PV) $5.6 1997 $4.0 1996 WLP Financial Highlights $ 20 18 16 14 12 10 8 6 4 2 0 *As of December 31, 2002. and n is the
Slide 23: Income from continuing operations
$18 $663.7 YTD 3Q03 $4.5 million (d) $660.9 2002 (a) $414.7 2001 $9.0 million of nonrecurring costs, net of tax, related of $694.1 million excludes $33.2 million of net realized $342.3 2000 distribution channels outside of California, and iii) (e) $297.2 1999 management operations, discontinuance of
Slide 24: Agenda: Anthem Profile
WellPoint Profile Anthem Profile Merger Summary ® Agenda • • • 01/12/2004 4:20 PM 24
Slide 25: Anthem Profile
® New Hampshire Connecticut Maine a i i n i g i r i i V y k c Ohio u t n Indiana Ke Regional business model National capabilities BCBS licenses in 9 states #1 market share in 8 of 9 states • • • • Colorado Nevada Anthem Profile Anthem BCBS Coverage Full range of healthcare and specialty products Amo
Slide 26: Executing a simple strategy
® Success to Customers Are First Regional Model Disciplined Focus Drivers Grow Profitable Enrollment Reduce Administrative Costs Optimize the Cost of Healthcare, While Improving the Health of Our Members Provide Distinctive Service Strong Cash Management Executing a Simple Strategy 01/12/2004 4:20 P
Slide 27: Profitable enrollment growth
® 12.5+ 2004E 2004E 12.0 2003E 11.9 - 11.1 2002 (In Millions) 7.9 2001 9% Same Store CAGR, 1999—7.3 2000 Acquisition-related membership in the applicable year Profitable Enrollment Growth 6.3 1999 01/12/2004 4:20 PM 27
Slide 28: National accounts gaining strength
® Place Market the networks nationwide Information System (IRIS) in Strength Proposition Strong retention of existing accounts 30 new account wins for 1Q04 Blue Cross Blue Shield Brand Access to BlueCard ClaimsQuest Interactive Realtime Dedicated Business Unit Model National Accounts Gaining • • Val
Slide 29: Specialty product opportunities
® 3.2 0.4 New Specialty Products Behavioral Health Vision Cross Selling to Existing Customers Membership (mm) 5.3 2.4 0.9 Total Benefit Solutions for Customers Specialty Product Opportunities Pharmacy Dental Life Specialty membership as of September 30, 2003 01/12/2004 4:20 PM 29
Slide 30: Administrative expense discipline
® Improvement Systems consolidation Shared service platform Investments in technology Process improvements Strategies For • • • • 19.3% 2002 19.6% 2001 7% s p . b 18 0 0 21.2% 2000 = 7 3Q03 24.2% 1999 Administrative Expense Discipline 26.3% 1998 01/12/2004 4:20 PM 30
Slide 31: Disease management
® 1 % Savings 3 Coronary Disease Cost General Population Program Members 7 % PMPM 1 Diabetes Programs Asthma Diabetes Coronary disease Heart failure High risk pregnancy Renal disease Quality Care Through Physician Collaboration Optimize the Cost of Care Disease Management • • • • • • 01/12/2004 4:20
Slide 32: Improving the health of the people we serve
® Leading carrier in Colorado Funded purchase of 6,000 flu vaccines Placed ads to let high risk recipients know where to find the vaccine Improving the Health of the People We Serve • • • 01/12/2004 4:20 PM 32
Slide 33: Best in customer service
® 5 Company D 2 Company D 24 Company C 20 Company C 30 Company B 22 Company B 40 Company A 34 Company A Excellent Customer Service 82 Blues 74 Blues Smith Barney Health Benefit Survey, Sept. 29, 2003. Best in Customer Service % of responses Best in Claims Processing % of responses Source: 01/12/2004
Slide 34: Strong cash management
® $991 2002 $549 $655 Cash Flow ($ in millions) 2001 Operating Cash Flow $342 $685 Net Income 2000 Strong Cash Management $226 01/12/2004 4:20 PM 34
Slide 35: Earnings growth model
® and Maintain Gross Margins Disciplined underwriting Medical management initiatives pricing ? ? + Continuous Administrative Expense Ratio Improvement Systems consolidation Contain costs in non-customer touch point areas ? ? + Profitable Membership Growth Enrollment growth in every region Expand mar
Slide 36: Strong financial momentum
® ~$16.5 2003E billion Revenue 2002 2 $13.0 . 4 $ = ($ in billions) $10.1 2001 Operating $8.5 2000 3Q03 $5.30-$5.35 2003E 38 . EPS 2002 1 $4.51 $ = Diluted $3.30 2001 3Q03 Strong Financial Momentum $2.18 2000 01/12/2004 4:20 PM 36
Slide 37: Agenda: Merger Summary
WellPoint Profile Anthem Profile Merger Summary ® Agenda • • • 01/12/2004 4:20 PM 37
Slide 38: Transaction summary
1 ATH share + $23.80 cash WellPoint, Inc. Indiana 58% Anthem, 42% WellPoint Leonard Schaeffer Larry Glasscock David Colby Mike Smith, Alice Rosenblatt Transaction Summary Consideration Per WLP Share: ® Name: Headquarters: Board Representation: Chairman: President and CEO: Chief Financial Officer: Co
Slide 39: Leading market positions
MA NH ME CT VA GA OH KY IN IL WI MO TX CO ® NV Leading Market Positions CA Anthem WellPoint UNICARE and HealthLink >100K members 01/12/2004 4:20 PM 39
Slide 40: Merger implications
$250 million in annual pre-tax synergies by 2006 ® Significant opportunities for corporate cost reduction – Accretive in 2004, excluding refinancing costs 4% to 6% accretion in 2005 Building on combined strength in medical management Using technology to support information- based consumer decisions
Slide 41: Growth opportunities
Anthem experience with national accounts ® Growth Opportunities Strong track record of organic growth WellPoint expertise in individual and small group Increased value and penetration of PBM services Cross-sell other specialty products • • • • • 01/12/2004 4:20 PM 41
Slide 42: 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 Better prediction of medical costs ® The Underwriting Cycle Is Becoming a Myth • • • • • 01/12/2004 4:20 PM 42
Slide 43: Disappearance of the underwriting cycle
‘02 2002 ‘66 – 2000 1998 All Blue Plans 1994 1996 1992 1990 1988 1986 1984 1980 1982 1978 Underwriting Results as % of Revenue* 1976 1972 1974 ® 1970 1966 1968 Disappearance of the Underwriting Cycle 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Source: BCBSA, 2002 01/12/2004 4:20 PM
Slide 44: Merger update
“no-review” by SEC Merger Update S-4 filed 11/26/2003 – Form A’s being filed with state regulators HSR process proceeding on schedule BCBSA application submitted Anticipate mid-2004 closing ® • • • • • 01/12/2004 4:20 PM 44
Slide 45: Merger summary
Service enhancements Spread fixed administrative costs over larger membership base Competitive prices ® Solid operational and financial performance Increased scale benefits – – – Focus on customers Well-positioned for continued growth Merger Summary • • • • 01/12/2004 4:20 PM 45