WellPoint Reports 1998 Third Quarter Earnings of $2.16 Per Share; Net Income, Excluding a Favorable IRS Tax Ruling, Increased 20 Percent from 1997 Third Quarter

Business Wire, Oct 29, 1998

WOODLAND HILLS, Calif.--(BUSINESS WIRE)--Oct. 28, 1998--WellPoint Health Networks Inc. (NYSE: WLP) Wednesday announced that net income for the third quarter ended Sept. 30, 1998 was $152.2 million, or $2.16 per diluted share.

Excluding the impact of a favorable IRS tax ruling, third quarter net income increased 20 percent to $66.7 million, or $0.95 per diluted share, compared with $55.6 million, or $0.79 per diluted share, in the third quarter of 1997.

On Sept. 29, 1998, the company received a private letter ruling from the IRS regarding the deductibility of a cash payment made by WellPoint's former parent company at the time of WellPoint's recapitalization on May 20, 1996. As a result of the ruling, WellPoint's provision for income taxes in the third quarter included a benefit of $85.5 million, or $1.21 per diluted share.

Membership in WellPoint's medical plans totaled 6.8 million at the end of the 1998 third quarter compared with 6.5 million members at the end of the third quarter last year. In California, the company added 514,000 members for the 12 months ended Sept. 30, 1998, for a growth rate of 12.6 percent.

Outside California, WellPoint's increased individual and small group membership was more than offset by anticipated attrition in previously acquired large group businesses.

"Our ability to significantly increase our membership by offering a full portfolio of products to our customers in a cost effective manner is reflected in WellPoint's third quarter results," said Leonard D. Schaeffer, WellPoint's chairman and chief executive officer.

"In California, we are the plan of choice for the growing portion of the population looking for open access, less restrictive managed care products."

WellPoint also controlled costs during the 1998 third quarter. "Our medical loss ratio was 80.5 percent in the third quarter, 180 basis points lower than last year's third quarter and essentially flat compared with the 80.6 percent ratio reported in the second quarter of 1998," said David C. Colby, WellPoint's chief financial officer.

"The company's selling, general and administrative expense ratio for the third quarter was 19.6 percent, a decline from 19.7 percent in last year's third quarter and 19.9 percent in the 1998 second quarter." -0-

                                WellPoint Membership by Geography
                                          As of Sept. 30,
                            1998                1997        % Increase
Medical Membership
 California
  Group Services          2,484,056          2,244,177         10.7%
  (Large employers)

  Consumer Services       1,666,629          1,572,581          6.0%
  (Small employers,
   Individuals & Seniors)

  Medi-Cal                  444,403            264,218         68.2%

  Total California        4,595,088          4,080,976         12.6%

  Texas
   Group Services           160,295            170,727         -6.1%
   Consumer Services         97,951             62,914         55.7%

  Georgia
   Group Services            91,607             92,651         -1.1%
   Consumer Services         13,863              7,177         93.2%

  Other States
   Group Services         1,850,303          2,054,217         -9.9%
   Consumer Services         19,405              4,805        303.9%

  Total National          2,233,424          2,392,491         -6.6%

Total Medical Membership  6,828,512          6,473,467          5.5%

WellPoint Health Networks Inc. (NYSE: WLP) is one of the nation's largest publicly traded managed care companies. The company serves the health care needs of more than 6.8 million medical and over 24 million specialty members nationally through Blue Cross of California in California and UNICARE throughout other parts of the country.

WellPoint offers a broad spectrum of quality network-based health products, including HMO, PPO, POS, hybrid and specialty managed care products which include pharmacy benefit management, dental, utilization management, vision, mental health, life and disability insurance, flexible spending accounts, COBRA administration and Medicare supplements.

Cautionary Statement:

Certain statements contained in this press release are forward-looking statements. Actual results could differ materially due to, among other things, operational and other difficulties associated with integrating acquired businesses, nonacceptance of managed care coverage, business conditions and competition among managed care companies, rising health care costs, trends in medical loss ratios, health care reform, delays in receipt of regulatory approvals for pending transactions and other regulatory issues. Additional risk factors are listed from time to time in the company's various SEC reports, including, but not limited to, the company's Annual Report on Form 10-K for the year ended Dec. 31, 1997. -0-

                      WellPoint Health Networks
                    Consolidated Income Statements
                             (Unaudited)
              (In thousands, except earnings per share)

                         Quarter Ended          Nine Months Ended
                           Sept. 30,                Sept. 30,
                        1998       1997         1998        1997

Revenues:
Premium revenue    $ 1,480,058  $ 1,310,323  $ 4,375,261  $ 3,730,064
Management services
 revenue               109,587      108,311      329,002      274,730
Investment income       39,094       47,287       70,511      123,463
                     1,628,739    1,465,921    4,774,774    4,128,257
Operating  Expenses:
Health care services
 and other benefits  1,191,848    1,078,158    3,518,793    3,003,254
Selling expense         71,255       64,745      207,039      183,886
General and
 administrative
 expense               240,985      214,994      729,831      619,198
Nonrecurring costs          --           --           --       14,535
                     1,504,088    1,357,897    4,455,663    3,820,873

Operating Income       124,651      108,024      319,111      307,384

Interest expense         5,817        8,144       20,425       28,757
Other expense, net       6,530        6,169       19,971       17,834

Income before Provision
 for Income Taxes      112,304       93,711      278,715      260,793

Provision (benefit)
 for income taxes      (39,904)      38,029       26,563      106,544

Income from Continuing
 Operations            152,208       55,682      252,152      154,249

Income (loss) from Workers'
 Compensation Segment,
 net of  tax                --         (114)     (12,592)       1,337

Loss on disposal of Workers'
 Compensation Segment,
 net of  tax                --           --      (75,676)          --

Income (loss) from
 Discontinued Operations    --         (114)     (88,268)       1,337

Net Income (Loss)  $   152,208  $    55,568  $   163,884  $   155,586

Earnings Per Share:
Income from Continuing
 Operations        $      2.20  $      0.80  $      3.61  $      2.25
Income (loss) from
 Discontinued Operations    --           --        (1.26)        0.02
Income (loss) Per
 Share             $      2.20  $      0.80  $      2.35  $      2.27

Earnings Per Share
 Assuming Full Dilution:
Income from Continuing
 Operations        $      2.16  $       0.79 $       3.56 $      2.23
Income (loss) from
 Discontinued Operations    --            --        (1.25)       0.02
Income (loss) Per
 Share             $      2.16  $       0.79 $       2.31 $      2.25

Results Excluding Nonrecurring
 Costs, Charge for FPA Holdings
 and BCC Tax Benefit:
Income from Continuing
 Operations        $    66,747  $     55,682 $    195,641 $   162,897
Income (loss) from
 Discontinued Operations    --          (114)     (88,268)      1,337
Net Income (loss)  $    66,747  $     55,568 $    107,373 $   164,234

Earnings Per Share
 Excluding Nonrecurring Costs,
 Charge for FPA Holdings and
 BCC Tax Benefit Assuming Full
 Dilution:
Income from Continuing
 Operations        $      0.95  $       0.79 $       2.76 $      2.36
Income (loss) from
 Discontinued Operations    --            --        (1.25)       0.02
Income (loss) Per
 Share             $      0.95  $       0.79 $       1.51 $      2.38

Weighted Average
 Number of Shares
 Outstanding            69,328        69,666       69,778      68,507
Weighted Average
 Number of Shares
 Outstanding Incl.
 CSEs                   70,321        70,747       70,889      69,099


                        Condensed Consolidated
                            Balance Sheets
                            (In thousands)

                               Sept. 30,      Dec. 31,
                                 1998          1997
ASSETS                        (Unaudited)

    Cash and investments       $2,601,281   $2,560,537
    Other assets                1,584,818    1,464,364
    Net assets of
      discontinued operation            0      209,223

    Total Assets               $4,186,099   $4,234,124

LIABILITIES AND STOCKHOLDERS' EQUITY

    Medical claims payable
      and reserves for
      future policy benefits   $1,338,219   $1,305,880
    Unearned premiums             198,625      196,205
    Experience rated and
      other refunds               258,836      255,495
    Long-term debt                253,000      388,000
    Other liabilities             863,417      865,375
    Total Liabilities           2,912,097    3,010,955

    Stockholders' Equity        1,274,002    1,223,169

    Total Liabilities and
       Stockholders' Equity    $4,186,099   $4,234,124