Fitch Affirms WellPoint Following Completion of WellChoice Acquisition

Business Wire, Dec 29, 2005

CHICAGO -- Fitch Ratings has removed from Negative Rating Watch and affirmed the ratings of WellPoint, Inc. (WellPoint) and its subsidiaries following the announcement that the company has completed its acquisition of WellChoice, Inc. (WellChoice) for approximately $6.5 billion. The Rating Outlook is Stable. The rating action affects approximately $4.38 billion of outstanding long-term debt and commercial paper on the company's balance sheet at Sept. 30, 2005, plus the additional commercial paper issued as part of the funding of this transaction. A list of the company's ratings can be found below.

Subsequent to the initial announcement of WellPoint's agreement to acquire WellChoice, Fitch met with management and evaluated progress of the ongoing integration activities related to the November 2004 merger of WellPoint (formerly Anthem, Inc.) and Anthem Holding Corp. (formerly WellPoint Health Networks Inc.). As a result of this evaluation, Fitch is cautiously optimistic with regards to the successful completion of the integration of both Anthem Holding Corp. and WellChoice. In addition, Fitch remains concerned with the level of debt on WellPoint's balance sheet relative to the company's cash flow from operations. Despite these concerns, Fitch considers the longer term benefits of the company's recent acquisition activity to outweigh shorter term integration and leverage concerns.

Consideration for the acquisition is structured 50% in cash and 50% in shares of WellPoint common stock. The funding of the cash portion of the purchase price was accomplished with $1.7 billion from the company's bridge facility, $1 billion of commercial paper and $500 million of cash on hand. Fitch expects WellPoint to term out this short-term debt in the first quarter of 2006.

The incremental debt placed on the company's balance sheet as a result of the transaction will likely drive the company's debt to EBITDA ratio to a level of approximately 1.4 times (x), which Fitch considers to be high for its current rating category. Fitch expects WellPoint to achieve a debt/EBITDA ratio of approximately 1.1x at year-end 2006 and ultimately expects WellPoint to work this ratio down to a level below 1.0x.

Fitch's ratings on WellPoint and its subsidiaries are supported by excellent operating performance, solid combined capitalization of its operating subsidiaries, strong management team, and improved diversification of earnings, revenues, and total enrollment. WellPoint has a very strong provider network and has a leading market share in nearly every market in which it uses the Blue Cross and/or Blue Shield brand.

The ratings also continue to reflect the competitive pressures in several of the company's markets, driven by price competition, increasing medical cost trends, and the evolving regulatory and political environment affecting the health insurance and managed care industry.

Fitch anticipates continued strong operating performance from the company for the foreseeable future and expects management to focus on debt reduction over the near term to restore the company's leverage measures to a more conservative level.

Fitch expects the company's book debt-to-total capital to remain below 25%. Over the next 12 months, Fitch expects the company to reduce leverage substantially and is anticipating a ratio of debt-to-EBITDA of 1.1x or below by year-end 2006.

WellChoice provides health benefits primarily in the state of New York. It has exclusive rights to use the Blue Cross and Blue Shield names and marks in 10 counties in and around the New York City metropolitan area, as well as 6 counties in upstate New York. In addition, the company is licensed to use the Blue Cross and/or the Blue Shield names and marks, with varying levels of exclusivity, in several additional counties in upstate New York. The company completed its initial public offering of common stock in November 2002 and had been operating as Empire Blue Cross and Blue Shield for many years prior.

WellPoint is the result of the Nov. 30, 2004 acquisition of WellPoint Health Networks Inc. (WHN) by Anthem, Inc., which created the nation's largest health insurer based on medical enrollment. Anthem, Inc. changed its name to WellPoint, Inc. immediately following the completion of the transaction. The company now provides health benefits under the Blue Cross and/or Blue Shield names and marks in 14 states.

With approximately 34 million medical members, Indianapolis-based WellPoint is the nation's largest publicly traded health insurance and managed care company. The company reported net income of $1.8 billion in the first three quarters of 2005 on total revenues of $33.7 billion.

The following ratings are removed from Negative Rating Watch and affirmed:

WellPoint, Inc.

-- Long-term issuer affirmed at 'A-';

-- 3.750% senior notes due 2007 at 'A-';

-- 4.250% senior notes due 2009 at 'A-';

-- 5.000% senior notes due 2014 at 'A-';

-- 5.950% senior notes due 2034 at 'A-';

-- 6.800% senior notes due 2012 at 'A-';

-- 3.500% senior notes due 2007 at 'A-';