Bear Stearns 20th Annual Healthcare Conference
Wayne DeVeydtExecutive Vice President & Chief Financial OfficerSeptember 11, 2007
2Slide
Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995
The statements made during this presentation that are not historical facts are forward-looking statements within the meaning for the Federal securities laws, and may involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risks discussed in the Company’s most recent filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2006, and its Quarterly Reports on Form 10-Q for the reporting periods of 2007.
3Slide
Agenda
WellPoint Profile & Superior Value Proposition
15%+ Earnings Per Share Growth Model
Investment Considerations
4Slide
WellPoint: A Health Benefits Leader
Medical Members~ 35 million
Market Capitalization~ $48 billion
2007E*:Operating Revenues~ $60.5 billion
Pre-Tax Margin~ 8.8%
Operating Cash Flow~ $4.4 billion
Note: Membership as of 6/30/07 and market capitalization as of 9/06/07.* Estimated based on projections as of 7/25/07.
5Slide
Diverse Medical Membership Base
BC or BCBS licensed plans
UniCare > 100K members
UniCare < 100K members
BlueCard13%
Self-Funded50%
Fully Insured50%
State Sponsored
6%
Senior4%
Individual 7%
National Accounts
18%Local Group48%
FEP4%
Note: Membership data as of 6/30/07.
6Slide
Brand Name Leader
42%
8% 9% 9%
3%
46%
9% 8% 8%
3%
BCBS in WLP's14 states
Aetna Kaiser UnitedHealthGroup
CIGNA
2005 2006
“When you think of health insurers, which one health
insurance company comes to mind first?”
Source: 2005/2006 WellPoint Consumer Image Studies conducted in WLP’s 14 Blue States.
carry a Blue Cross and Blue Shield ID card
1in3A M E R I C A N S
7Slide
Strong Local Presence
0%
10%
20%
30%
40%
50%
Wel
lPoi
nt M
arke
t Sh
ares
CT NH ME VA IN MO KY GA CA OH NY CO WI NV
Local MarketAdvantages
Provider network advantage
Actionable data advantage
Actuarial precisionCommunity involvement
Source: Company estimates as of 9/30/06.
8Slide
Extensive and Cost-Effective Provider Networks
BCBS National Provider Network*:
928,000 physicians, more than 85% of nation’s total
6,100 hospitals, more than 95% of nation’s total
Deep network discounts
* Sources: Blue Cross Blue Shield Association, Company estimates, 2006.
9Slide
360° Health®: A Fully IntegratedCare Management Platform
10Slide
Consumer Tools Are A Differentiator
CDHP membership has grown by 60% over past 12 months, exceeding 1.2 million at 6/30/07
11Slide
Agenda
WellPoint Profile & Superior Value Proposition
15%+ Earnings Per Share Growth Model
Investment Considerations
12Slide
WellPoint Growth Model
EPS Growth15%+
Profitable Enrollment Growth
Disciplined Focus on Underwriting
Effective Use of Cash Flow
SG&A Ratio Reduction
Specialty Penetration
13Slide
Strong Enrollment Growth
0
10
20
30
40
1999 2000 2001 2002 2003 2004 2005 2006 2007E*
Year
-End
Med
ical
Mem
bers
hip
(in
mill
ions
)
"Same-Store" Membership Acquired Membership
6.3
* Estimated based on projections as of 7/25/07.
7.3 7.911.1 11.9
27.7
33.9 34.1 35.1Expecting growth of 1 million members, or 3%, in 2007*
14Slide
National Accounts: A Growth Opportunity
Proven Results & Room for Continued Success
WLP National Accounts Business Growth
0
2
4
6
8
10
12
12/31/05 12/31/06 12/31/07 **
Mem
bers
hip
* (in
mill
ions
)
Control Accounts BlueCard Membership
National Control Accounts Opportunity
0
5
10
15
20
25
30
Penetration @ 6/30/07 Potential Market ***M
embe
rshi
p (in
mill
ions
)9.510.4
6.4
23.7
44% of Fortune 1000 is headquartered in WLP “Blue” service areas ****
11.0
* Data has been reclassified to conform to current period presentation and includes WellPoint, Inc. and the former WellChoice, Inc. for all periods.** Estimated based on projections as of 7/25/07.*** Represents accounts with 5,000+ employees in WLP “Blue” branded service areas. Source: Company estimates.**** Source: Fortune Magazine, April 17, 2006.
15Slide
The Uninsured: A Growth Opportunity
Low income but not
eligible for current
programs (55%)
Income above 300%
of FPL (20%)
Already eligible for
public programs
(25%)
•Tonik(SM)
•Blue Access Economy
•BeneFits
•Pathways
•Enrollment Vans
•Community Resource Centers
Outreach Efforts:
Need Assistance:
Innovative & Flexible Products:
•Expansion of state health care programs
•Tax credits
•Premium assistance programs
•High risk pools
~ 47 Million Uninsured Americans
In 2006, approximately 380,000 new WLP enrollees were previously uninsured and approximately 187,000 more have been enrolled in 2007
Sources: Company estimates; L. Dubay, J. Holahan, A. Cook, “The Uninsured And The Affordability Of Health Insurance Coverage,” Health Affairs, November 2006; U.S. Census Bureau, August 2007.
16Slide
Medicaid Managed Care:A Growth Opportunity
WellPoint Has Nation’s Largest Medicaid Managed Care Operation
Medicaid ABD & LTC Populations: Significant Growth Opportunities
WellPoint Medicaid Operations
Total Medicaid Enrollees (52M)*
Total Estimated Medicaid Spending
($252B)*
Total Medicaid Estimated Medicaid Spending
75%
19%
6%
31%
36%
33%
TANF ABD LTC
* Sources: Centers for Medicare & Medicaid Services, 2004; Kaiser Commission on Medicaid and the Uninsured, 2004; U.S. Department of Health and Human Services, April 2005.
17Slide
Senior Business:A Growth Opportunity
0
150
300
450
Mem
bers
hip
(in t
hous
ands
)
2006 2007E*0
400
800
1,200
Mem
bers
hip
(in t
hous
ands
)
2006 2007E*
0
500
1,000
1,500
2,000
2006 2007E*
Mem
bers
hip
(in t
hous
ands
)
Medicare Advantage
Medicare Part D **
Medicare Supplement
Additional Opportunities:
Increased options for employer retiree care
Medicare Medical Savings Account (MSA)
* Estimated based on projections as of 7/25/07.** Includes auto-assigned, stand-alone, Medicare Advantage, Group waiver, and external Prescription Benefit Management (PBM) members with the PDP benefit.
18Slide
WellPoint Growth Model
EPS Growth15%+
Profitable Enrollment Growth
Disciplined Focus on Underwriting
Effective Use of Cash Flow
SG&A Ratio Reduction
Specialty Penetration
19Slide
Stable Benefit Expense Ratio
0%
20%
40%
60%
80%
100%
Bene
fit E
xpen
se /
Pre
miu
ms
2000 2001 2002 2003 2004 2005 2006 2007E*
Standard Deviation of Benefit Expense Ratios**
(2000 – 2006)
AET
CI
UNH
WLP
4.1%
3.1%
2.1%
1.5%
* Estimated based on projections as of 7/25/07.
** Company estimates based on peer public documents. UNH includes all segments. AET includes Health Care and Group Insurance segments only. CI includes Health Care, Disability & Life segments only.
20Slide
Pricing Flexibility
33%
7%
22%
11%
27%
0%
10%
20%
30%
40%
Q1 Q2 Q3 Q4 Flexible*
*“Flexible” renewals include individual and small group products in certain states where rates can generally be changed with 30-60 days notice.
Fully Insured Membership Renewal Patterns
Note: Patterns calculated as of 3/31/07.
21Slide
WellPoint Growth Model
EPS Growth15%+
Profitable Enrollment Growth
Disciplined Focus on Underwriting
Effective Use of Cash Flow
SG&A Ratio Reduction
Specialty Penetration
22Slide
SG&A Expense Ratio Reduction
21.4%19.7% 19.4% 18.9%
17.1% 16.6%15.7%
14.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2000 2001 2002 2003 2004 2005 2006 2007E*
SG&
A Ex
pens
e /
Tota
l Ope
ratin
g Re
venu
e
660 basis point reduction
* Estimated based on projections as of 7/25/07.
23Slide
Operating Cost Reduction Initiatives
• Diligent management and prioritization of company projects
• Office space optimization
• Incremental WellChoice synergies ($25 million in 2007)
• Outsourcing relationships, including “basic” customer service calls:
Statement of WorkCost per Transaction Savings per
TransactionBefore After
Senior Front-End Claims
CO/NV Front-End Claims
$1.21
$1.78
$0.44
$0.58
64%
67%
Empire Front-End Claims $0.90 $0.53 41%
24Slide
Long-Term Strategy For OptimizingTechnology Spend
Production Support RegulatoryMandates
Integration
StrategicPlan*
Current ITSpend
RegulatoryMandates
Integration
EnhancementProjects
StrategicInnovation
Enhancement Projectsto Innovation
200615
82%
200712
99%Number of Medical Processing Platforms:
Percent of Membership on Top 6 Platforms:
Successfully shut down 33 legacy platforms, migrating 20 million members over 8 years
* Estimated based on projections as of 7/25/07.
25Slide
WellPoint Growth Model
EPS Growth15%+
Profitable Enrollment Growth
Disciplined Focus on Underwriting
Effective Use of Cash Flow
SG&A Ratio Reduction
Specialty Penetration
26Slide
Full Array of Specialty Products
PBM: Largest health plan-owned PBM in the nation, based on prescription volume, and 4th largest overall (393 million scripts in 2006)
Specialty Rx: Launched in 2005 and rapidly growing
Behavioral Health: 3rd largest health plan-owned behavioral health company, based on membership (20 million members at 2Q07)
Life: #1 in the <100-life group market, based on number of accounts, and 12th largest nationwide (6 million members at 2Q07)
Dental: 7th largest in nation, based on membership (5 million members at 2Q07)
Vision: More than 2.4 million members at 2Q07
Note: Company estimates, 2006.
27Slide
WellPoint Growth Model
EPS Growth15%+
Profitable Enrollment Growth
Disciplined Focus on Underwriting
Effective Use of Cash Flow
SG&A Ratio Reduction
Specialty Penetration
28Slide
Strong Cash Flow In Excess Of Net Income
$0.5
$1.0$0.8
$1.1$1.0$1.1
$2.5
$3.1 $3.1
$4.0
$3.4
$4.4
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
(In
billi
ons)
2002 2003 2004 2005 2006 2007E*
Net Income Operating Cash Flow
~
* Estimated based on projections as of 7/25/07.
~
29Slide
Capital StrategyNew Products &Enhanced Services
Reinvest In Our BusinessAcquisitions
Modest scheduled debt repaymentDebt Repayment
Return to Shareholders$3.0 billion assumed for 2007 share repurchases*
* Estimated based on projections as of 7/25/07.
30Slide
Agenda
WellPoint Profile & Superior Value Proposition
15%+ Earnings Per Share Growth Model
Investment Considerations
31Slide
Health Care is a Growing Industry
$1,988
$4,137
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Dol
lars
(in
bill
ions
)
2005 2016E
National Health Expenditures*
16.0%
19.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2005 2016E
National Health Expenditures as a % of GDP*
WellPoint is well-positioned to address the rising cost of health care through our overall value proposition
* Sources: Centers for Medicare & Medicaid Services, Office of the Actuary, 2006.
32Slide
Era of Consolidation inHealth Insurance
27%
73%
54%
46%
1995 2007
Proportion of U.S. Health Insurance Market
Ten largest health plans in each year
Sources: Company estimates, Bear Stearns, Centers for Medicare and Medicaid Services, Office of the Actuary, U.S. Census Bureau, and public company reports (2007 information as of 6/30/07 or the most recent information available).
33Slide
Strong Earnings Momentum
$1.65
$2.26$2.73
$3.05
$3.94
$4.82
$5.55
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
GAA
P D
ilute
d EP
S
2001 2002 2003 2004 2005 2006 2007E*
22% CAGR
* Estimated based on projections as of 7/25/07.
34Slide
A Compelling Valuation
Comparison to selected companies
WellPoint Wal-Mart 3M Company($ in millions) 2006 2007 2006
Cash flow from operations $4,044 $20,164 $3,839Capital expenditures & other operating investments (188) (15,666) (1,168)Interest expense, net of tax 254 1,016 85"Free cash flow" $4,110 $5,514 $2,756
Market capitalization as of 9/06/07 $47,870 $175,400 $64,870Long-term debt 6,493 27,222 1,047Market value as of 9/06/07 $54,363 $202,622 $65,917
Market value as a multiple of free cash flow 13.2x 36.7x 23.9x
35Slide