|WellPoint Responds to California State Treasurer|
THOUSAND OAKS, Calif.--(BUSINESS WIRE)--June 14, 2004--WellPoint Health Networks (NYSE:WLP) today released the following letter to the California State Treasurer regarding the WellPoint/Anthem merger.
WellPoint Health Networks Inc. serves the health care needs of more than 15.3 million medical members and approximately 46 million specialty members nationwide through Blue Cross of California, Blue Cross Blue Shield of Georgia, Blue Cross Blue Shield of Missouri, Blue Cross Blue Shield of Wisconsin, HealthLink and UNICARE. Visit WellPoint on the web at www.wellpoint.com. Blue Cross of California, Blue Cross Blue Shield of Georgia, Blue Cross Blue Shield of Missouri and Blue Cross Blue Shield of Wisconsin are independent licensees of the Blue Cross and Blue Shield Association.
June 14, 2004 Philip Angelides California State Treasurer 915 Capitol Mall, Room 110 Sacramento, CA 95814 Dear Mr. Angelides: We would like to add some clarity to the discussion of the WellPoint/Anthem merger and correct significant misinformation surrounding executive compensation related to the merger. -- Anthem, not California health insurance customers, will fund any payouts to WellPoint executives as a result of the merger. Therefore, as you correctly state, this is a shareholder issue and shareholders will vote whether to approve the merger on June 28. -- WellPoint's executive compensation program, including change-in-control severance benefit and stay bonuses, that was adopted by the Board of Directors based on independent expert advice, has been in place for years, has been fully disclosed and is consistent with market practice. -- Anthem has testified that it expects to retain most of the WellPoint executives so that actual costs are estimated to be about $200 million of the $300 million in total estimated closing costs. Only if every executive left the Company, would maximum aggregate severance costs be $356 million. -- These transaction costs, low in percentage terms versus other mergers, will be paid by Anthem and will be more than offset by annual savings of $250 million (after two years) in reduced administrative expenses and corporate duplication. To put this in perspective, 10 years after the merger closes, over $2.0 billion will be achieved in savings, versus the one-time severance costs of $200 million. -- The $251 million in unvested options is not new money related to the merger - it has been earned by WellPoint executives through years of meeting customer needs and the resulting appreciation in the Company's stock price. These options only become exercisable on an accelerated schedule if an executive is terminated. -- Since 1993 when WellPoint went public, the Company has created approximately $20 billion in shareholder returns from stock price growth and a dividend. These returns funded charitable foundations in California with $4.1 billion in current assets and five other foundations outside California with an additional $3 billion in current assets. -- Since the IPO in 1993, WellPoint has competed successfully in the Calfornia marketplace, growing its membership internally from 2.3 million members to over 7 million today. This reflects the Company's ability to provide innovative products and services that customers want. -- WellPoint's success has allowed the Company to create over 5,700 new jobs in California and many more nationally. -- California consumers will benefit from the WellPoint/Anthem merger in many ways; including: -- Blue Cross of California, WellPoint's operating unit in the state, will remain financially strong and able to finance member care. -- By spreading administrative costs over a wider base, the Company will be more efficient and better able to keep premiums affordable. -- Through significant investments in information technology, consumers and physicians will have better information to make health care decisions to improve outcomes. -- The new entity will be better positioned to control pharmaceutical costs. -- We have worked with California regulators in good faith and believe they have strong powers to enforce any promises made to California consumers regarding this merger. -- The stock market in aggregate has evaluated the benefits of this merger to customers and shareholders have significantly bid up the prices of both WellPoint and Anthem shares since the merger was announced in October 2003. We welcome the opportunity to discuss these issues further. Sincerely, David C. Colby Executive Vice President Chief Financial Officer WellPoint
CONTACT: WellPoint Health Networks Ken Ferber, 805-557-6794 (Media) John Cygul, 805-557-6789 (Investors) SOURCE: WellPoint Health Networks