WellChoice, Inc. Reports Second Quarter 2005 Results

Business Wire, August 3, 2005

NEW YORK -- WellChoice, Inc. (NYSE: WC):

--Second quarter 2005 net income of $74.6 million, or $0.88 per diluted share

--Commercial managed care membership, excluding NYC and NYS PPO, increased by 152,000, or 6.1%, over the second quarter 2004 and 2.9% since year-end 2004

--Full-year 2005 earnings guidance raised to a range of $3.37 to $3.43 per diluted share, from a range of $3.35 to $3.41 per diluted share

WellChoice, Inc. (NYSE: WC) today reported results for the second quarter ended June 30, 2005.

WellChoice reported net income for the second quarter 2005 of $74.6 million, or $0.88 per diluted share, and for the six months ended June 30, 2005 of $145.5 million, or $1.72 per diluted share.

"WellChoice once again delivered strong financial performance this quarter," said Michael A. Stocker, M.D., President and Chief Executive Officer of WellChoice. "We continue to experience solid growth in our managed care products and also benefit from our continued focus on achieving administrative expense efficiencies."

"Our second quarter 2005 results reflect pricing discipline, expense control and membership growth," said John W. Remshard, Senior Vice President and Chief Financial Officer. "We expect to see solid earnings growth in 2005."

Compared to December 31, 2004, enrollment in the Commercial Managed Care segment, excluding New York State and New York City PPO membership, increased by 2.9% as of June 30, 2005. Membership in the entire Commercial Managed Care segment increased by 1.7% to 4,455,000 since December 31, 2004. Membership in the Other Insurance Products and Services segment, which includes indemnity and individual products, declined by 0.7% since December 31, 2004. Total membership at June 30, 2005 was 5,025,000, an increase of 1.4% since December 31, 2004. Self-funded membership grew 2.7% since December 31, 2004 to 2,002,000 as of June 30, 2005, and now accounts for 39.8% of overall membership, an increase of 40 basis points over the prior year-end.

Total revenues for the six months ended June 30, 2005 were $3.2 billion compared to $2.9 billion for the six months ended June 30, 2004. Administrative service fees increased $35.9 million to $281.1 million. Insured premiums were $2.88 billion for the six months ended June 30, 2005, compared to $2.61 billion in the first half of last year. The overall medical loss ratio was 86.2% for the six months ended June 30, 2005, flat compared to the six months ended June 30, 2004. Compared to the six months ended June 30, 2004, administrative expenses increased by $36.8 million to $485.0 million in the six months ended June 30, 2005.

Total revenues for the second quarter 2005 were $1.65 billion compared to $1.50 billion for the second quarter last year. Insured premiums were $1.49 billion compared to $1.36 billion in the second quarter last year. Administrative service fees increased $15.9 million to $139.8 million. The overall medical loss ratio was 86.1% in the second quarter 2005, a 90 basis point improvement compared to the second quarter last year. Administrative expenses increased by $28.2 million to $251.9 million in the second quarter 2005 compared to the prior year second quarter.

On June 29, 2005, the company entered into a final settlement agreement with the New York State Insurance Department for contributions and distributions related to its participation in Non-Medicare Supplemental Regulation 146 pools. The results of this agreement and a litigation reserve adjustment led to a net income benefit of $1.7 million, or $0.02 per diluted share for both the quarter and the six months.

Cash flow from operating activities was $241.7 million for the six months ending June 30, 2005. The Company experienced net positive prior period reserve development of $2.2 million for the second quarter 2005 for its prospectively rated business, excluding the impact of the Regulation 146 settlement agreement and the litigation reserve adjustment referenced above.

Days claims payable was 53.6 days for the quarter ended June 30, 2005, unchanged from the quarter ended March 31, 2005.

EARNINGS OUTLOOK

WellChoice is increasing its earnings guidance for 2005 to be in the range of $3.37 to $3.43 per diluted share, based on 85 million weighted average shares outstanding. For the third quarter 2005, WellChoice expects earnings to be in the range of $0.84 to $0.88 per diluted share.

About WellChoice

WellChoice, Inc. is the parent company of the largest health insurer in the State of New York based on PPO and HMO membership. WellChoice, through its Empire Blue Cross Blue Shield subsidiaries, has the exclusive right to use the Blue Cross and Blue Shield names and marks in 10 downstate New York counties and one or both of these names and marks in selected counties in upstate New York. WellChoice offers a broad portfolio of products, including managed care and traditional indemnity products, and has a broad customer base including large group, middle-market and small group, individual, and national accounts. Additional information on WellChoice can be found at www.wellchoice.com.