Wellchoice (NYSE:WC)
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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.
Conference Call and Webcast
The Company will host a conference call and webcast today at 5:30
PM (EST) to review these results, as well as to discuss the outlook
for the fourth quarter 2005. Financial, statistical and other
information, including non-GAAP reconciliations, related to the
conference call will be available under the "Quarterly Financial
Reporting and Supplemental Data" section of the Financial Reporting
tab at www.wellchoice.com/investors.
The conference call can be accessed domestically by dialing (800)
784-3697. International participants dial (706) 643-1656. Please ask
for reference number 1145004 ten minutes prior to the start of the
call. An audio replay of the call will be available for seven days
following the conference call. To access the replay, please dial (800)
642-1687 and enter reference number 1145004. International callers can
access the replay by dialing (706) 645-9291 and enter reference number
1145004. Investors, analysts and the general public are also invited
to listen to the conference call over the Internet by visiting
WellChoice's web site at www.wellchoice.com. Financial, statistical
and other information related to the conference call will also be
available on the site.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
This press release contains certain forward-looking information
about WellPoint, Inc. ("WellPoint"), WellChoice, Inc. ("WellChoice")
and the combined company after completion of the transactions that are
intended to be covered by the safe harbor for "forward-looking
statements" provided by the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are statements that are not
historical facts. Words such as "expect(s)", "feel(s)", "believe(s)",
"will", "may", "anticipate(s)" and similar expressions are intended to
identify forward-looking statements. These statements include, but are
not limited to, financial projections and estimates and their
underlying assumptions; statements regarding plans, objectives and
expectations with respect to future operations, products and services;
and statements regarding future performance. Such statements are
subject to certain risks and uncertainties, many of which are
difficult to predict and generally beyond the control of WellPoint and
WellChoice, that could cause actual results to differ materially from
those expressed in, or implied or projected by, the forward-looking
information and statements. These risks and uncertainties include:
those discussed and identified in public filings with the U.S.
Securities and Exchange Commission ("SEC") made by WellPoint (formerly
Anthem, Inc.), WellPoint Health Networks Inc. ("WellPoint Health") and
WellChoice; trends in health care costs and utilization rates; our
ability to secure sufficient premium rate increases; competitor
pricing below market trends of increasing costs; increased government
regulation of health benefits and managed care; significant
acquisitions or divestitures by major competitors; introduction and
utilization of new prescription drugs and technology; a downgrade in
our financial strength ratings; litigation targeted at health benefits
companies; our ability to contract with providers consistent with past
practice; other potential uses of cash in the future that present
attractive alternatives to share repurchases; our ability to achieve
expected synergies and operating efficiencies in the WellPoint Health
merger within the expected time-frames or at all and to successfully
integrate our operations; such integration may be more difficult,
time-consuming or costly than expected; revenues following the
transaction may be lower than expected; operating costs, customer loss
and business disruption, including, without limitation, difficulties
in maintaining relationships with employees, customers, clients or
suppliers, may be greater than expected following the transaction; our
ability to consummate WellPoint's merger with WellChoice, to achieve
expected synergies and operating efficiencies in the merger within the
expected time-frames or at all; to meet expectations regarding
repurchases of shares of our common stock and to successfully
integrate our operations; such integration may be more difficult,
time-consuming or costly than expected; revenues following the
transaction may be lower than expected; operating costs, customer loss
and business disruption, including, without limitation, difficulties
in maintaining relationships with employees, customers, clients or
suppliers, may be greater than expected following the transaction; the
regulatory approvals required for the transaction may not be obtained
on the terms expected or on the anticipated schedule; our ability to
meet expectations regarding the timing, completion and accounting and
tax treatments of the transaction and the value of the transaction
consideration; future bio-terrorist activity or other potential public
health epidemics; and general economic downturns. Readers are
cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof. Neither WellPoint
nor WellChoice undertakes any obligation to republish revised
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various
disclosures in WellPoint's and WellChoice's various SEC reports,
including but not limited to Annual Reports on Form 10-K for the year
ended December 31, 2004 and Quarterly Reports on Form 10-Q for the
reporting periods of 2005.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is being made in respect of the proposed merger
transaction involving WellPoint and WellChoice. In connection with the
proposed transaction, WellPoint and WellChoice will prepare a
registration statement on Form S-4, containing a proxy
statement/prospectus for the stockholders of WellChoice to be filed
with the SEC and each will be filing other documents regarding the
proposed transaction with the SEC as well. BEFORE MAKING ANY VOTING OR
INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER
RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. The final proxy statement/prospectus will be
mailed to WellChoice's stockholders. Investors and security holders
will be able to receive the registration statement containing the
proxy statement/prospectus and other documents free of charge at the
SEC's web site, www.sec.gov, from WellPoint Investor Relations at 120
Monument Circle, Indianapolis, Indiana 46204, or from WellChoice
Investor Relations at 11 West 42nd Street, New York, New York 10036.
PARTICIPANTS IN SOLICITATION
WellPoint, WellChoice and their directors and executive officers
and other members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the proposed
transaction. Information regarding WellPoint' s directors and
executive officers is available in WellPoint's proxy statement for its
2005 annual meeting of shareholders, which was filed with the SEC on
April 8, 2005, and information regarding WellChoice's directors and
executive officers is available in WellChoice's proxy statement for
its 2005 annual meeting of stockholders, which was filed with SEC on
March 28, 2005. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of
WellChoice stockholders in connection with the proposed transaction
will be set forth in the proxy statement/prospectus when it is filed
with the SEC.
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EXHIBIT A
WellChoice, Inc.
Membership
September 30, June 30, December 31,
(In thousands) 2005 2004 2005 2004
---------------------------------------
Products and services:
-----------------------
Commercial managed care:
Group PPO, HMO, EPO and
other (1)(2) 2,657 2,539 2,631 2,558
New York City and New York
State PPO 1,828 1,816 1,824 1,823
-------- ------- -------- --------
Total commercial
managed care 4,485 4,355 4,455 4,381
Other insurance products and
services:
Indemnity 336 365 366 364
Individual 203 211 204 210
-------- ------- -------- --------
Total other insurance
products and services 539 576 570 574
-------- ------- -------- --------
Overall total 5,024 4,931 5,025 4,955
======== ======= ======== ========
Customers:
------------
Large group 2,991 2,975 3,002 2,986
Small group and middle
market 499 463 490 472
Individual 263 266 264 266
National accounts 1,271 1,227 1,269 1,231
-------- ------- -------- --------
Overall total 5,024 4,931 5,025 4,955
======== ======= ======== ========
Funding type:
---------------
Commercial managed care:
Insured 2,730 2,659 2,705 2,678
Self-funded 1,755 1,696 1,750 1,703
-------- ------- -------- --------
Total commercial
managed care 4,485 4,355 4,455 4,381
======== ======= ======== ========
Other insurance products and
services:
Insured 306 330 318 327
Self-funded 233 246 252 247
-------- ------- -------- --------
Total other insurance
products and services 539 576 570 574
-------- ------- -------- --------
Overall total 5,024 4,931 5,025 4,955
======== ======= ======== ========
(1) Our HMO product includes Medicare+Choice (Medicare Advantage HMO).
As of September 30, 2005, September 30, 2004, June 30,2005 and
December 31, 2004, we had approximately 60,000 members, 56,000
members, 60,000 members and 56,000 members, respectively, enrolled in
Medicare+Choice.
(2) "Other" principally consists of our members enrolled in dental
only coverage and includes POS members.
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EXHIBIT B
WellChoice, Inc.
Consolidated Statements of Income
Three Months Ended
September 30,
2005 2004
----------- -----------
($ in millions, except share and per share data)
Revenues:
Premium earned $1,505.7 $1,305.9
Administrative service fees 140.7 128.4
Investment income, net 23.1 16.7
Other income, net 0.1 -
----------- -----------
Total revenue 1,669.6 1,451.0
Expenses:
Cost of benefits provided 1,314.5 1,122.6
Administrative expenses 234.2 228.6
----------- -----------
Total expenses 1,548.7 1,351.2
Income before income taxes 120.9 99.8
Income tax expense 45.2 37.9
----------- -----------
Net income $ 75.7 $ 61.9
=========== ===========
Basic net income per common share $ 0.90 $ 0.74
Diluted net income per common share $ 0.89 $ 0.74
Shares used to compute basic net income per
common share, based on weighted average
shares outstanding 83,812,475 83,559,141
Shares used to compute diluted net income per
common share based on weighted average
shares outstanding 84,993,537 83,908,346
Additional data:
-----------------
Medical loss ratio (1) 87.3% 86.0%
Administrative expense ratio (2) 14.2% 15.9%
(1) Medical loss ratio represents cost of benefits provided as a
percentage of premiums earned.
(2) Administrative expense ratio represents administrative expense
as a percentage of premiums earned and administrative service
fees. As presented, our administrative expense ratio does not
take into account a significant portion of our activity
generated by self-funded, or ASO, business, which, at
September 30, 2005, represented approximately 39.6% of total
membership. Therefore, in the following table, we provide the
information regarding premium equivalents and the
administrative expense ratio on a "premium equivalent" basis
because that ratio measures administrative expenses relative
to the entire volume of insured and self-funded business
serviced by us and is commonly used in the health insurance
industry to compare operating efficiency among companies.
Administrative expense ratio on a premium equivalent basis is
calculated by dividing administrative expenses by "premium
equivalents" for the relevant periods. Premium equivalents is
the sum of premium earned, administrative service fees and the
amount of paid claims attributable to our self-funded business
pursuant to which we provide a range of customer services,
including claims administration, billing and membership
services. Claims paid for our self-funded health business is
not our revenue.
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EXHIBIT B (continued)
The premium equivalents for the years indicated were as follows:
Three Months Ended
September 30,
2005 2004
--------- ---------
Revenue:
Premiums earned $1,505.7 $1,305.9
Administrative service fees 140.7 128.4
Claims paid for our self-funded health business 1,087.1 971.1
-------- --------
Premium equivalents $2,733.5 $2,405.4
======== ========
Administrative expense ratio,
premium equivalent basis 8.6% 9.5%
======== ========
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EXHIBIT C
WellChoice, Inc.
Consolidated Statements of Income
Nine Months Ended
September 30,
2005 2004
----------- -----------
($ in millions, except share and per share data)
Revenue:
Premiums earned $4,381.8 $3,915.1
Administrative service fees 421.8 373.5
Investment income, net 64.6 50.8
Other (expense) income, net (0.1) 0.2
----------- -----------
Total revenue 4,868.1 4,339.6
Expenses:
Cost of benefits provided 3,794.9 3,371.7
Administrative expenses 719.2 676.7
----------- -----------
Total expenses 4,514.1 4,048.4
Income before income taxes 354.0 291.2
Income tax expense 132.8 104.6
----------- -----------
Net income $ 221.2 $ 186.6
=========== ===========
Basic net income per common share $2.64 $2.23
Diluted net income per common share $2.61 $2.23
Shares used to compute basic net income per
common share, based on weighted average
shares outstanding 83,735,354 83,514,673
Shares used to compute diluted net income per
common share, based on weighted average
shares outstanding 84,734,569 83,832,419
Additional data:
-----------------
Medical loss ratio (1) 86.6% 86.1%
Administrative expense ratio (2) 15.0% 15.8%
(1) Medical loss ratio represents cost of benefits provided as a
percentage of premiums earned.
(2) Administrative expense ratio represents administrative expense
as a percentage of premiums earned and administrative service
fees. As presented, our administrative expense ratio does not
take into account a significant portion of our activity
generated by self-funded, or ASO, business, which, at
September 30, 2005, represented approximately 39.6% of total
membership. Therefore, in the following table, we provide the
information needed to calculate the administrative expense
ratio on a "premium equivalent" basis because that ratio
measures administrative expenses relative to the entire volume
of insured and self-funded business serviced by us and is
commonly used in the health insurance industry to compare
operating efficiency among companies. Administrative expense
ratio on a premium equivalent basis is calculated by dividing
administrative expenses by "premium equivalents" for the
relevant periods. Premium equivalents is the sum of premium
earned, administrative service fees and the amount of paid
claims attributable to our self-funded business pursuant to
which we provide a range of customer services, including
claims administration, billing and membership services. Claims
paid for our self-funded health business is not our revenue.
The premium equivalents for the years indicated were as
follows:
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Premium Equivalents Table:
Nine Months Ended
September 30,
2005 2004
--------- ---------
Revenue:
Premiums earned $4,381.8 $3,915.1
Administrative service fees 421.8 373.5
Claims paid for our self-funded health business 3,165.0 2,683.6
-------- --------
Premium equivalents $7,968.6 $6,972.2
======== ========
Administrative expense ratio,
premium equivalent basis 9.0% 9.7%
======= ========
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EXHIBIT C
WellChoice, Inc.
Consolidated Balance Sheets
September 30, December 31,
2005 2004
---------------------------
(In millions, except share and per share data)
Assets
Investments:
Fixed maturities, at fair value
(amortized cost: $1,718.2 and $1,374.6) $1,688.0 $1,361.9
Marketable equity securities, at fair value
(cost: $44.7 and $43.8) 58.4 53.4
Short-term investments 231.6 170.6
Other long-term equity investments 19.4 18.6
---------------------
Total investments 1,997.4 1,604.5
Cash and cash equivalents 824.2 758.5
---------------------
Total investments and cash and cash equivalents 2,821.6 2,363.0
Receivables:
Billed premiums, net 93.2 107.6
Accrued premiums 348.2 340.8
Other amounts due from customers, net 125.7 125.8
Notes receivable, net 13.3 12.7
Accrued investment income 14.9 10.7
Miscellaneous, net 115.1 73.2
---------------------
Total receivables 710.4 670.8
Property, equipment and information systems, net
of accumulated depreciation 103.5 107.1
Prepaid pension expense 63.8 60.7
Deferred taxes, net 115.2 157.7
Other 30.5 30.8
---------------------
Total assets $3,845.0 $3,390.1
=====================
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EXHIBIT C (continued)
WellChoice, Inc.
Consolidated Balance Sheets (Continued)
September 30, December 31,
2005 2004
--------------------------
(In millions, except share and per share data)
Liabilities and stockholders' equity
Liabilities:
Unpaid claims and claims adjustment expense $ 789.2 $ 678.8
Unearned premium income 145.4 138.7
Managed cash overdrafts 201.3 215.4
Accounts payable and accrued expenses 88.1 67.4
Advance deposits 245.5 160.6
Group and other contract liabilities 90.0 99.3
Postretirement benefits other than pensions 144.0 144.6
Obligations under capital lease 40.2 44.0
Other 189.7 159.0
---------------------
Total liabilities 1,933.4 1,707.8
Stockholders' equity:
Common stock, $0.01 par value, 225,000,000 shares
authorized; shares issued and outstanding:
2005--84,248,179; 2004--84,047,152 0.8 0.8
Class B common stock, $0.01 par value, one share
authorized, issued and outstanding - -
Preferred stock, $0.01 per share value, 25,000,000
shares authorized; none issued and outstanding - -
Additional paid-in capital 1,286.4 1,275.2
Retained earnings 629.9 408.7
Unearned restricted stock compensation (4.4) (9.9)
Accumulated other comprehensive (loss) income (1.1) 7.5
---------------------
Total stockholders' equity 1,911.6 1,682.3
---------------------
Total liabilities and stockholders' equity $3,845.0 $3,390.1
=====================
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EXHIBIT D
WellChoice, Inc.
Consolidated Statements of Cash Flows
Nine Months Ended
September 30,
--------------------
2005 2004
--------------------
($ in millions)
Cash flows from operating activities
Net income $221.2 $186.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28.1 29.1
Net realized gain on sales of investments (4.1) (7.6)
Provision (credit) for doubtful accounts 1.9 (3.9)
Accretion of discount, net 1.0 1.6
Equity in earnings of other long-term equity
investments (0.2) (2.4)
Deferred income tax expense 47.1 47.8
Other (3.1) (10.4)
Changes in assets and liabilities:
Billed and accrued premiums receivables 5.3 (42.6)
Other customer receivable (9.0) (0.5)
Notes receivable (0.6) 0.3
Accrued investment income (4.1) (1.7)
Miscellaneous receivables (42.0) (4.3)
Other assets 8.9 (1.3)
Unpaid claims and claims adjustment expenses 110.4 72.1
Unearned premium income 6.7 (35.8)
Managed cash overdrafts (14.1) (23.8)
Accounts payable and accrued expenses 25.0 (23.1)
Advance deposits 84.9 43.2
Group and other contract liabilities (9.4) (10.4)
Postretirement benefits other than pensions (0.5) 3.3
Other liabilities 29.1 (2.1)
-------------------
Net cash provided by operating activities 482.5 214.0
-------------------
Cash flows from investing activities
Purchases of property, equipment and information
systems (19.0) (25.2)
Purchases of available for sale investments (942.9) (1,086.7)
Proceeds from sales and maturities of available
for sale investments 541.9 900.5
-------------------
Net cash used in investing activities (420.0) (211.4)
-------------------
Cash flows from financing activities
Decrease in capital lease obligations (3.8) (3.2)
Proceeds from the exercise of stock options and
employee stock purchase plan, net of treasury
stock repurchases 5.9 -
Excess tax benefits on stock compensation 1.1 -
-------------------
Net cash provided by (used in) financing activities 3.2 (3.2)
-------------------
Net change in cash and cash equivalents 65.7 (0.6)
Cash and cash equivalents at beginning of period 758.5 697.5
-------------------
Cash and cash equivalents at end of period 824.2 696.9
===================
Supplemental disclosure:
Income taxes paid 80.2 60.9
===================
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EXHIBIT E
WellChoice, Inc.
Segment Operating Results
Three Months Ended
September 30,
2005 2004
---------------------
($ in millions)
Commercial Managed Care:
Total revenue $1,449.4 $1,226.1
Income before income taxes 110.5 87.7
Medical loss ratio (1):
Commercial managed care total 87.4% 86.1%
Commercial managed care, excluding New York City
and New York State PPO (2) 83.8% 82.3%
Administrative expense ratio (3) 12.1% 13.7%
Other Insurance Products and Services:
Total revenue $ 220.2 $ 224.9
Income before income taxes 10.4 12.1
Medical loss ratio (1) 86.6% 84.9%
Administrative expense ratio (3) 28.4% 28.2%
(1) Medical loss ratio represents cost of benefits provided as a
percentage of premiums earned.
(2) We present commercial managed care medical loss ratio,
excluding New York City and New York State PPO, because these
accounts differ from our standard PPO product in that they are
hospital-only accounts which have lower premiums relative to
claim expense than accounts with full medical and hospital
coverage. The lower premiums and the size of these accounts
distort our performance when the total medical loss ratio is
presented.
(3) Administrative expense ratio represents administrative
expenses as a percentage of premiums earned and administrative
service fees.
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EXHIBIT F
WellChoice, Inc.
Segment Operating Results
Nine Months Ended
September 30
2005 2004
----------------------
($ in millions, except earnings per share)
Commercial Managed Care:
Total revenue $4,187.0 $3,666.2
Income before income taxes 291.6 253.1
Medical loss ratio (1):
Commercial managed care total 87.4% 86.5%
Commercial managed care, excluding New York City
and New York State PPO (2) 84.0% 82.7%
Administrative expense ratio (3) 12.9% 13.4%
Other Insurance Products and Services:
Total revenue $ 681.1 $ 673.4
Income before income taxes 62.4 38.1
Medical loss ratio (1) 81.0% 83.7%
Administrative expense ratio (3) 27.9% 28.6%
(1) Medical loss ratio represents cost of benefits provided as a
percentage of premiums earned.
(2) We present commercial managed care medical loss ratio,
excluding New York City and New York State PPO, because these
accounts differ from our standard PPO product in that they are
hospital-only accounts which have lower premiums relative to
claim expense than accounts with full medical and hospital
coverage. The lower premiums and the size of these accounts
distort our performance when the total medical loss ratio is
presented.
(3) Administrative expense ratio represents administrative
expenses as a percentage of premiums earned and administrative
service fees.
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