INDIANAPOLIS, April 23 /PRNewswire-FirstCall/ -- WellPoint, Inc. ( NYSE:WLP ) today announced that first quarter 2008 net income was $588.1 million, or $1.07 per share, which included net realized investment losses of $0.06 per share. Net income in the first quarter of 2007 was $783.1 million, or $1.26 per share.

   "While the first quarter was challenging for WellPoint, since our March announcement we have further reduced claims inventories and achieved greater visibility into medical costs," said Angela F. Braly, president and chief executive officer of WellPoint, Inc. "Consequently, we have refined our earnings forecast to reflect higher medical costs and a lower level of favorable prior year reserve development."

   "Our overall enrollment growth remains strong and we are now serving 35.4 million medical members, more than ever before. We offer access to the largest provider network in the industry, with competitive pricing, distinctive care management and wellness programs, and innovative medical cost transparency tools. We will continue to enhance this superior value proposition with new product offerings in order to drive future membership gains and long-term earnings growth," added Braly.

   "Operating cash flow was strong in the first quarter, at $1.0 billion, or 1.8 times net income, and our medical claims payable increased by $610 million, or 10.5 percent, while claims inventories declined. We believe that our reserves are appropriately stated," said Wayne S. DeVeydt, executive vice president and chief financial officer of WellPoint, Inc.

CONSOLIDATED HIGHLIGHTS

   Membership: Medical enrollment totaled approximately 35.4 million members at March 31, 2008, an increase of 498,000 members, or 1.4 percent, from 34.9 million at March 31, 2007. The increase was driven by National business, which added 468,000 members over the past twelve months. The Company's State Sponsored and Senior businesses grew by 66,000 and 63,000 members, respectively, during this period, while Individual enrollment declined by 104,000 members.

   During the first quarter of 2008, medical enrollment increased sequentially by 564,000 members, or 1.6 percent, driven by continued membership gains in the National business. Enrollment in the National business increased by 517,000, including 354,000 National Account lives and 163,000 BlueCard members.

   As of March 31, 2008, self-funded membership comprised approximately 52 percent of the Company's medical enrollment base, compared with 51 percent as of December 31, 2007, and 50 percent as of March 31, 2007.

   Operating Revenue: Operating revenue was $15.4 billion in the first quarter of 2008, an increase of 3.5 percent from $14.8 billion in the first quarter of 2007. The increase was driven primarily by enrollment growth in the Senior business and price increases in Local Group, partially offset by the loss of the New York State prescription drug contract.

   Benefit Expense Ratio: The benefit expense ratio was 85.1 percent in the first quarter of 2008, an increase of 200 basis points from 83.1 percent in the prior year quarter. While the Company experienced significant favorable prior period reserve development in the first quarter of 2008, the level of development was approximately $120 million less favorable than in the first quarter of 2007. The Company also incurred higher claims experience in the Senior business during the first quarter of 2008, as a result of benefit design changes in certain product categories.

   The increase in the benefit expense ratio was almost entirely attributable to the Consumer Business segment. Approximately 160 basis points of the increase resulted from the Senior business. Benefit designs of certain Medicare Advantage products have resulted in adverse selection and negatively impacted 2008 financial results. The Company has implemented medical management initiatives to address the high claims experience in its Medicare Advantage products and is in the process of adjusting benefits and pricing for 2009. The Company also experienced an increase in the benefit expense ratio for its Medicare Prescription Drug Plan ("PDP") offerings due to a change in benefit design that resulted in the recognition of medical costs earlier in 2008 as compared to 2007. The seasonality of this benefit design change is expected to result in an improving benefit expense ratio for PDP products during the balance of 2008.

   Approximately 30 basis points of the increase in the consolidated benefit expense ratio were due to the Company's Individual business. The Company is adjusting pricing and plan designs in certain markets, rolling out new product offerings and enhancing customer retention efforts to improve Individual results.

   The remaining 10 basis points of increase in the consolidated benefit expense ratio represented the net impact of changes in all other lines of business.

   The Company expects the full year 2008 benefit expense ratio to be in the range of 83.3 to 83.6 percent, a decline from the first quarter of 2008 due to expected premium rate increases, enhanced medical management initiatives, a more normal pattern of prior period reserve adjustments and membership mix changes.

   Premium and Cost Trends: Trends include Local Group and Individual fully-insured businesses.

F   or the rolling twelve month period ended March 31, 2008, unit cost increases continue to be the primary drivers of medical cost trends. Medical cost trends are expected to be in the range of 8.0 percent, plus or minus 50 basis points for the full year of 2008, and the Company continues to price its business so that expected premium yield exceeds total cost trend, where total cost trend includes medical costs and selling, general and administrative ("SG&A") expense.

   SG&A Expense Ratio: The SG&A expense ratio was 14.6 percent in the first quarter of 2008, an increase of 20 basis points from 14.4 percent in the first quarter of 2007. The increase was expected and due to higher compensation, outside services and marketing and advertising costs.

   Operating Cash Flow: Operating cash flow was $1.0 billion in the first quarter of 2008, or approximately 1.8 times net income. The Company expects operating cash flow of at least $3.3 billion for the full year of 2008.

   Days in Claims Payable: Days in Claims Payable ("DCP") as of March 31, 2008, was 48.1 days, an increase of 3.1 days from 45.0 days as of December 31, 2007. The increase reflects the Company's strengthened reserves for medical claims and was attributable primarily to prior period reserve adjustments, an increase in the length of time between the date of service and claim payment, and changes in the timing of payments in the Company's Pharmacy Benefit Management ("PBM") operation.

   Share Repurchase Program: During the first quarter of 2008, the Company repurchased 29.7 million shares of its common stock for $2.0 billion. As of March 31, 2008, the remaining Board-approved share repurchase authorization was approximately $2.3 billion, and cash and investments held at the parent company and available for general corporate use totaled $1.2 billion.

REPORTABLE SEGMENTS

   In 2008, WellPoint, Inc. now has the following reportable segments: Commercial Business, which includes the Local Group, National, UniCare, and Specialty Products lines of business; Consumer Business, which includes the Individual, Senior, and State Sponsored lines of business; and Other, which includes Comprehensive Health Solutions (including the Company's PBM and Behavioral Health operations), FEP business, National Government Services, inter-segment sales and expense eliminations, and corporate expenses not allocated to the other reportable segments. These revised segments are consistent with the Company's new organizational structure.

   Operating revenue and operating gain are the key measures used by management to evaluate performance in each segment.

                             WellPoint, Inc.
                      Reportable Segment Highlights
                               (Unaudited)

   (In millions)                             Three Months Ended March 31
                                            2008        2007        Change
   Operating Revenue
       Commercial Business                $9,488.2    $9,455.6        0.3%
       Consumer Business                   4,100.0     3,726.4       10.0%
       Other Business:
         External Customers                1,778.4     1,659.2        7.2%
         Intersegment Revenue                665.3       508.7       30.8%
         Intersegment Eliminations          (665.3)     (508.7)     (30.8%)
       Other                               1,778.4     1,659.2        7.2%
   Total Operating Revenue                15,366.6    14,841.2        3.5%

   Operating Gain (Loss)
       Commercial Business                  $883.7      $915.1       (3.4%)
       Consumer Business                    (124.2)      144.0       NM (1)
       Other                                 123.1       114.2        7.8%

   Operating Margin
       Commercial Business                    9.3%        9.7%     (40) bp
       Consumer Business                     (3.0%)       3.9%    (690) bp

   (1) "NM" = not meaningful

   Commercial Business: Operating gain for the Commercial Business segment was $883.7 million in the first quarter of 2008, a decrease of 3.4 percent compared with $915.1 million in the first quarter of 2007. The decline principally resulted from lower prior year favorable reserve development in 2008.

   Consumer Business: The Company experienced an operating loss of $124.2 million in the Consumer Business segment during the first quarter of 2008, compared with an operating gain of $144.0 million in the first quarter of 2007. The decline in operating performance was driven by the Senior business, which incurred an operating loss of more than $200 million in the first quarter of 2008 due to high benefit expense ratios in Medicare Advantage and Medicare PDP products, as described in the "Benefit Expense Ratio" section.

   Other: Operating gain for the Other segment totaled $123.1 million in the first quarter of 2008, an increase of 7.8 percent compared with $114.2 million in the prior year quarter. The increase was driven by growth in the Company's Behavioral Health and PBM operations. Enrollment in Behavioral Health products increased by 6.3 million from the first quarter of 2007, and PBM prescription volume grew by 8.8 percent.

  OUTLOOK

  Full Year 2008:

  -- The Company now expects net income to be in the range of $5.42 to $5.67
     per share, including net realized investment losses of $0.06 per share.

  -- Year-end medical enrollment is expected to be approximately 35.3
     million members.

  -- Operating revenue is now expected to total approximately $62.3 billion.

  -- The benefit expense ratio is now expected to be in the range of 83.3 to
     83.6 percent.

  -- The SG&A expense ratio is now expected to be approximately 14.4
     percent.

  -- The Company now expects operating cash flow of at least $3.3 billion

  Basis of Presentation
  1. Operating gain is defined as operating revenue less benefit expense,
     selling expense, general and administrative expense, and cost of drugs.
     Operating gain is used to analyze profit or loss on a segment basis.
     Consolidated operating gain is a non-GAAP measure.

  2. Operating margin is defined as operating gain divided by operating
     revenue.

  3. Beginning January 1, 2008, the Company revised its reportable segments
     to reflect its new organizational structure, as described in
     "Reportable Segments."

  4. Certain prior period amounts have been reclassified to conform to the
     current period presentation.

About WellPoint, Inc.

WellPoint, Inc. is the largest health benefits company in terms of medical membership in the United States. WellPoint is an independent licensee of the Blue Cross and Blue Shield Association and serves its members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as the Blue Cross Blue Shield licensee in 10 New York City metropolitan and surrounding counties and as the Blue Cross or Blue Cross Blue Shield licensee in selected upstate counties only), Ohio, Virginia (excluding the northern Virginia suburbs of Washington, D.C.), Wisconsin; and through UniCare. Additional information about WellPoint is available at www.wellpoint.com .

                             WellPoint, Inc.
                 Membership & Prescription Volume Summary
                       (Unaudited and in Thousands)

                                                           Change from
                     March 31, December 31, March 31, December 31, March 31,
  Medical Membership   2008       2007        2007       2007        2007

  Customer Type
  Local Group         16,691     16,663      16,690      0.2%        0.0%

     National
      Accounts         6,743      6,389       6,479      5.5%        4.1%
     BlueCard          4,726      4,563       4,522      3.6%        4.5%
  Total National      11,469     10,952      11,001      4.7%        4.3%

  Individual           2,369      2,390       2,473     (0.9%)      (4.2%)
  Senior               1,301      1,250       1,238      4.1%        5.1%
  State Sponsored      2,157      2,174       2,091     (0.8%)       3.2%
  FEP                  1,386      1,380       1,382      0.4%        0.3%
  Total Medical
   Membership         35,373     34,809      34,875      1.6%        1.4%

  Funding Arrangement
  Self-Funded         18,354     17,737      17,483      3.5%        5.0%
  Fully-Insured       17,019     17,072      17,392     (0.3%)      (2.1%)
  Total Medical
   Membership         35,373     34,809      34,875      1.6%        1.4%

  Reportable Segment
  Commercial Business 28,421     27,886      27,986      1.9%        1.6%
  Consumer Business    5,566      5,543       5,507      0.4%        1.1%
  Other Business       1,386      1,380       1,382      0.4%        0.3%
  Total Medical
   Membership         35,373     34,809      34,875      1.6%        1.4%

  Other Membership
  Behavioral Health
   Membership         23,373     20,230      17,110     15.5%       36.6%
  Life and Disability
   Membership          5,594      5,598       5,916     (0.1%)      (5.4%)
  Dental Membership    4,805      5,014       5,196     (4.2%)      (7.5%)
  Vision Membership    2,542      2,401       2,277      5.9%       11.6%
  Medicare Part D
   Membership          1,836      1,614       1,590     13.8%       15.5%

  PBM Prescription
   Volume (Quarterly)
  Retail Scripts     102,941     91,393      93,277     12.6%       10.4%
  Mail Order Scripts   6,891      7,019       7,702     (1.8%)     (10.5%)
  Specialty Pharmacy
   Scripts               204        193         148      5.7%       37.8%
  Total Scripts      110,036     98,605     101,127     11.6%        8.8%



                             WellPoint, Inc.
                    Consolidated Statements of Income
                               (Unaudited)

                                           Three Months Ended
  (In millions, except per share data)          March 31
                                            2008        2007       Change
  Revenues
  Premiums                               $14,234.4   $13,757.4       3.5%
  Administrative fees                        969.6       924.5       4.9%
  Other revenue                              162.6       159.3       2.1%
      Total operating revenue             15,366.6    14,841.2       3.5%
  Net investment income                      232.7       246.6      (5.6%)
  Net realized (losses) gains on
   investments                               (45.6)        0.2      NM (1)
  Total revenues                          15,553.7    15,088.0       3.1%

  Expenses
  Benefit expense                         12,116.5    11,429.8       6.0%
  Selling, general and administrative
   expense
      Selling expense                        444.3       423.0       5.0%
      General and administrative
       expense                             1,804.3     1,708.6       5.6%
          Total selling, general and
           administrative expense          2,248.6     2,131.6       5.5%
  Cost of drugs                              118.9       106.5      11.6%
  Interest expense                           119.0       102.9      15.6%
  Amortization of other intangible
   assets                                     71.5        70.8       1.0%
  Total expenses                          14,674.5    13,841.6       6.0%

  Income before income tax expense           879.2     1,246.4     (29.5%)

  Income tax expense                         291.1       463.3     (37.2%)

  Net income                                $588.1      $783.1     (24.9%)

  Net income per diluted share               $1.07       $1.26     (15.1%)

  Diluted shares                             547.6       623.0     (12.1%)

  Benefit expense as a percentage of
   premiums                                  85.1%       83.1%    200  bp
  Selling, general and administrative
   expense as a percentage of total
   operating revenue                         14.6%       14.4%     20  bp
  Income before income tax expense as a
   percentage of total revenues               5.7%        8.3%   (260) bp

  (1) "NM" = not meaningful



                             WellPoint, Inc.
                       Consolidated Balance Sheets

                                               March 31,        December 31,
  (In millions)                                  2008              2007
                                              (Unaudited)
  Assets
  Current assets:
     Cash and cash equivalents                  $2,552.1          $2,767.9
     Investments available-for-sale, at
      fair value                                 3,809.8           3,726.3
     Other invested assets, current                 35.9              40.3
     Accrued investment income                     161.7             165.8
     Premium and self-funded
      receivables                                3,167.0           2,870.1
     Other receivables                           1,160.5             996.4
     Income taxes receivable                         -                 0.9
     Securities lending collateral                 756.6             854.1
     Deferred tax assets, net                      642.1             559.6
     Other current assets                        1,123.8           1,050.4
  Total current assets                          13,409.5          13,031.8

  Long-term investments available-for-
   sale, at fair value                          13,079.4          13,962.4
  Other invested assets, long-term                 771.2             752.9
  Property and equipment, net                    1,002.7             995.9
  Goodwill                                      13,429.4          13,435.4
  Other intangible assets                        9,149.7           9,220.8
  Other noncurrent assets                          713.8             660.8
  Total assets                                 $51,555.7         $52,060.0

  Liabilities and shareholders' equity
  Liabilities
  Current liabilities:
     Policy liabilities:
       Medical claims payable                   $6,398.1          $5,788.0
       Reserves for future policy
        benefits                                    66.9              63.7
       Other policyholder liabilities            1,724.3           1,832.2
     Total policy liabilities                    8,189.3           7,683.9
     Unearned income                             1,151.0           1,114.6
     Accounts payable and accrued
      expenses                                   3,016.7           2,909.6
     Income taxes payable                          270.6               -
     Security trades pending payable                26.1              50.6
     Securities lending payable                    756.6             854.1
     Current portion of long-term debt              19.9              20.4
     Other current liabilities                   1,861.4           1,755.0
  Total current liabilities                     15,291.6          14,388.2

  Long-term debt, less current portion           9,266.5           9,023.5
  Reserves for future policy benefits,
   noncurrent                                      658.6             661.9
  Deferred tax liability, net                    2,983.4           3,004.4
  Other noncurrent liabilities                   1,851.5           1,991.6
  Total liabilities                             30,051.6          29,069.6

  Shareholders' equity
  Common stock                                       5.3               5.6
  Additional paid-in capital                    17,550.7          18,441.1
  Retained earnings                              3,954.2           4,387.6
  Accumulated other comprehensive
   income                                           (6.1)            156.1
  Total shareholders' equity                    21,504.1          22,990.4
  Total liabilities and shareholders'
   equity                                      $51,555.7         $52,060.0



                             WellPoint, Inc.
                  Consolidated Statements of Cash Flows
                               (Unaudited)

                                                Three Months Ended March 31
  (In millions)                                    2008              2007

  Operating activities
  Net income                                      $588.1            $783.1
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
     Net realized losses (gains)
      on investments                                45.6              (0.2)
     Loss on disposal of assets                      0.2               0.2
     Deferred income taxes                          (6.0)            (97.1)
     Amortization, net of
      accretion                                    118.9             112.4
     Depreciation expense                           25.8              31.7
     Share-based compensation                       37.0              40.3
     Excess tax benefits from
      share-based compensation                     (11.1)            (51.2)
     Changes in operating assets
      and liabilities, net of
      effect of business
      combinations:
        Receivables, net                          (454.0)           (209.0)
        Other invested
         assets, current                             4.5              23.4
        Other assets                              (135.8)            (36.7)
        Policy liabilities                         502.1             463.6
        Unearned income                             36.4             667.9
        Accounts payable and
         accrued expenses                          (48.3)           (319.0)
        Other liabilities                           23.6              74.6
        Income taxes                               289.0             500.2
        Other, net                                  17.8              (3.1)
  Net cash provided by operating
   activities                                    1,033.8           1,981.1

  Investing activities
  Purchases of fixed maturity
   securities                                   (1,742.9)         (2,417.9)
  Proceeds from sales and maturities of
   fixed maturity securities                     2,581.5           1,561.1
  Purchase of equity securities                   (744.9)           (375.1)
  Proceeds from sales of equity
   securities                                      377.4             484.3
  Changes in securities lending
   collateral                                       97.5             151.4
  Purchases of subsidiaries, net of
   cash acquired                                    (0.4)              -
  Purchases of property and equipment              (79.0)            (56.6)
  Proceeds from sales of property and
   equipment                                         4.5               -
  Other, net                                       (36.1)             (9.4)
  Net cash provided by (used in)
   investing activities                            457.6            (662.2)

  Financing activities
  Net proceeds from commercial paper
   borrowings                                      188.1              91.9
  Repayment of long-term borrowings                 (2.7)             (2.2)
  Changes in securities lending payable            (97.5)           (151.4)
  Changes in bank overdrafts                       144.7            (135.6)
  Repurchase and retirement of common
   stock                                        (2,008.6)           (634.9)
  Proceeds from exercise of employee
   stock options and employee stock
   purchase plan                                    57.7             262.0
  Excess tax benefits from share-based
   compensation                                     11.1              51.2
  Net cash used in financing activities         (1,707.2)           (519.0)

  Change in cash and cash equivalents             (215.8)            799.9
  Cash and cash equivalents at
   beginning of period                           2,767.9           2,602.1
  Cash and cash equivalents at end of
   period                                       $2,552.1          $3,402.0

Source: WellPoint, Inc.