WellChoice, Inc. Reports Third Quarter 2005 Results

Business Wire, Oct 26, 2005

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

--Third quarter 2005 net income of $75.7 million, or $0.89 per diluted share

--Commercial managed care membership, excluding NYC and NYS PPO, increased by 118,000, or 4.6%, over the third quarter 2004 and 99,000, or 3.9%, since year-end 2004

--Full-year 2005 earnings guidance raised to a range of $3.41 to $3.45 per diluted share, from a range of $3.37 to $3.43 per diluted share

--Core commercial managed care membership growth guidance reaffirmed to be in the range of 5% to 6% for 2005

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

WellChoice reported net income for the third quarter 2005 of $75.7 million, or $0.89 per diluted share, and net income for the nine months ended September 30, 2005 of $221.2 million, or $2.61 per diluted share.

"WellChoice continues to deliver strong financial performance," said Michael A. Stocker, M.D., President and Chief Executive Officer of WellChoice. "Our consistent focus on improving administrative expense ratios once again provides the impetus for our positive financial results."

"Our third quarter 2005 results reflect our continuing focus on delivering solid earnings growth," said John W. Remshard, Senior Vice President and Chief Financial Officer. "We expect to see this level of performance continue through the end of the year."

Compared to December 31, 2004, enrollment in the Commercial Managed Care segment, excluding New York State and New York City PPO membership, increased by 99,000, or 3.9%, as of September 30, 2005. Membership in the entire Commercial Managed Care segment increased by 104,000, or 2.4%, to 4,485,000 since December 31, 2004. Membership in the Other Insurance Products and Services segment, which includes indemnity and individual products, declined by 35,000, 6.1%, since December 31, 2004. Total membership at September 30, 2005 was 5,024,000, an increase of 69,000, or 1.4%, since December 31, 2004. Self-funded membership grew 38,000, or 1.9%, since December 31, 2004 to 1,988,000 as of September 30, 2005, and now accounts for 39.6% of overall membership, an increase of 20 basis points over the prior year-end.

Total revenues for the third quarter 2005 were $1.67 billion compared to $1.45 billion for the third quarter last year. Insured premiums were $1.51 billion compared to $1.31 billion in the third quarter last year. Administrative service fees increased $12.3 million to $140.7 million. The overall medical loss ratio was 87.3% in the third quarter 2005, a 130 basis point increase compared to the third quarter last year. Administrative expenses increased by $5.6 million to $234.2 million in the third quarter 2005 compared to the prior year third quarter.

Total revenues for the nine months ended September 30, 2005 were $4.9 billion compared to $4.3 billion for the nine months ended September 30, 2004. Administrative service fees increased $48.3 million to $421.8 million. Insured premiums were $4.38 billion for the nine months ended September 30, 2005, compared to $3.92 billion in the nine months of last year. The overall medical loss ratio was 86.6% for the nine months ended September 30, 2005, an increase of 50 basis points compared to the nine months ended September 30, 2004. Compared to the nine months ended September 30, 2004, administrative expenses increased by $42.5 million to $719.2 million in the nine months ended September 30, 2005.

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 during the second quarter of 2005.

Cash flow from operating activities was $482.5 million for the nine months ending September 30, 2005. The Company experienced net positive prior period reserve development of $0.6 million for the third quarter 2005 for its prospectively rated business. Days in claims payable was 55.2 days for the quarter ended September 30, 2005, an increase of 1.6 days from the quarter ended June 30, 2005.

EARNINGS OUTLOOK

WellChoice is increasing its earnings guidance for 2005 to be in the range of $3.41 to $3.45 per diluted share, based on 85 million weighted average shares outstanding. For the fourth quarter 2005, WellChoice expects earnings to be in the range of $0.80 to $0.84 per diluted share. In addition, the Company continues to anticipate core commercial managed care membership growth to be in the range of 5% to 6% for the full year 2005.

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.