Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | 1842.2 | 2183.9 |
Investments available-for-sale, at fair value: | ||
Fixed maturity securities (amortized cost of $14,792.4 and $1,538.6) | 15334.5 | 1564.8 |
Equity securities (cost of $829.9 and $1,293.0) | 1025.3 | 1,088 |
Other invested assets, current | 18.7 | 23.6 |
Accrued investment income | 168.4 | 172.8 |
Premium and self-funded receivables | 3276.3 | 3042.9 |
Other receivables | 505 | 597.5 |
Income tax receivable | 0 | 159.9 |
Securities lending collateral | 383.9 | 529 |
Deferred tax assets, net | 361.1 | 766.6 |
Other current assets | 1,154 | 1,141 |
Current assets held for sale | 1293.1 | 1193.3 |
Total current assets | 25362.5 | 12463.3 |
Long-term investments available-for-sale, at fair value: | ||
Fixed maturity securities (amortized cost of $230.8 and $12,401.3) | 239.8 | 11808.4 |
Equity securities (cost of $33.0 and $34.7) | 31.1 | 30.7 |
Other invested assets, long-term | 771.4 | 703.2 |
Property and equipment, net | 1067.6 | 1016.5 |
Goodwill | 13307.6 | 13296.2 |
Other intangible assets | 8341.4 | 8697.6 |
Other noncurrent assets | 376.1 | 387.3 |
Total assets | 49497.5 | 48403.2 |
Policy liabilities: | ||
Medical claims payable | 5763.2 | 6184.7 |
Reserves for future policy benefits | 61.4 | 64.5 |
Other policyholder liabilities | 1566.2 | 1626.8 |
Total policy liabilities | 7390.8 | 7,876 |
Unearned income | 1089.1 | 1080.8 |
Accounts payable and accrued expenses | 2761.8 | 2856.5 |
Income taxes payable | 96.5 | 0 |
Security trades pending payable | 33.6 | 5.8 |
Securities lending payable | 386.7 | 529 |
Short-term borrowings | 100 | 98 |
Current portion of long-term debt | 377.8 | 909.7 |
Other current liabilities | 1580.9 | 1340.3 |
Current liabilities held for sale | 309.2 | 374.4 |
Total current liabilities | 14126.4 | 15070.5 |
Long-term debt, less current portion | 8384.4 | 7833.9 |
Reserves for future policy benefits, noncurrent | 660 | 664.7 |
Deferred tax liabilities, net | 2229.8 | 2051.3 |
Other noncurrent liabilities | 1229.5 | 1351.1 |
Total liabilities | 26630.1 | 26971.5 |
Shareholders' equity | ||
Preferred stock, without par value, shares authorized - 100,000,000; shares issued and outstanding - none | 0 | 0 |
Common stock, par value $0.01, shares authorized - 900,000,000; shares issued and outstanding: 465,023,897 and 503,230,575 | 4.6 | 5 |
Additional paid-in capital | 15663.5 | 16,843 |
Retained earnings | 7126.8 | 5479.4 |
Accumulated other comprehensive income (loss) | 72.5 | -895.7 |
Total shareholders' equity | 22867.4 | 21431.7 |
Total liabilities and shareholders' equity | 49497.5 | 48403.2 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
In Millions, except Share data | Sep. 30, 2009
| Dec. 31, 2008
|
Fixed maturity securities, amortized cost | 14792.4 | 1538.6 |
Equity securities, cost | 829.9 | 1,293 |
Fixed maturity securities, amortized cost | 230.8 | 12401.3 |
Equity securities, cost | $33 | 34.7 |
Preferred stock, par value | $0 | $0 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 900,000,000 | 900,000,000 |
Common stock, shares issued | 465,023,897 | 503,230,575 |
Common stock, shares outstanding | 465,023,897 | 503,230,575 |
Statement Of Income Insurance B
Statement Of Income Insurance Based Revenue (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Revenues | ||||
Premiums | 14070.7 | 14230.7 | 42397.2 | $42,810 |
Administrative fees | 969.1 | 925.6 | 2887.4 | 2861.2 |
Other revenue | 167.2 | 153.1 | 486.9 | 481.8 |
Total operating revenue | 15,207 | 15309.4 | 45771.5 | 46,153 |
Net investment income | 196.6 | 214.2 | 599.4 | 664.5 |
Net realized gains on investments | 52.2 | 1.8 | 20.4 | 126.3 |
Other-than-temporary impairment losses on investments: | ||||
Total other-than-temporary impairment losses on investments | -69.1 | -564.4 | -481.9 | -762.3 |
Portion of other-than-temporary impairment losses recognized in other comprehensive income | 38.4 | 0 | 72.2 | 0 |
Other-than-temporary impairment losses recognized in income | -30.7 | -564.4 | -409.7 | -762.3 |
Total revenues | 15425.1 | 14,961 | 45981.6 | 46181.5 |
Expenses | ||||
Benefit expense | 11416.2 | 11745.6 | 34716.7 | 35817.7 |
Selling, general and administrative expense: | ||||
Selling expense | 420.6 | 448.2 | 1273.8 | 1337.6 |
General and administrative expense | 1976.3 | 1,772 | 5831.7 | 5349.8 |
Total selling, general and administrative expense | 2396.9 | 2220.2 | 7105.5 | 6687.4 |
Cost of drugs | 112.7 | 114.1 | 346.4 | 351.5 |
Interest expense | 110.6 | 118.4 | 343.7 | 353.9 |
Amortization of other intangible assets | 66 | 71.9 | 200.5 | 215 |
Impairment of intangible assets | 205.5 | 141.4 | 205.5 | 141.4 |
Total expenses | 14307.9 | 14411.6 | 42918.3 | 43566.9 |
Income before income tax expense | 1117.2 | 549.4 | 3063.3 | 2614.6 |
Income tax expense (benefit) | 387 | -271.3 | 1059.2 | 455.3 |
Net income | 730.2 | 820.7 | 2004.1 | 2159.3 |
Net income per share | ||||
Basic | 1.55 | 1.61 | 4.15 | 4.12 |
Diluted | 1.53 | 1.6 | 4.12 | 4.09 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect Investment Based Operations (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Operating activities | ||
Net income | 2004.1 | 2159.3 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Net realized gains on investments | -20.4 | -126.3 |
Other-than-temporary impairment losses recognized in income | 409.7 | 762.3 |
Loss on disposal of assets | 9 | 6 |
Deferred income taxes | -7.7 | -322.2 |
Amortization, net of accretion | 337.7 | 358.2 |
Depreciation expense | 78.7 | 78.7 |
Impairment of intangible assets | 205.5 | 141.4 |
Share-based compensation | 115.7 | 129.3 |
Excess tax benefits from share-based compensation | -5.3 | -14.9 |
Changes in operating assets and liabilities, net of effect of business combinations: | ||
Receivables, net | -127.4 | -739.5 |
Other invested assets | (39) | 29.1 |
Other assets | 9.4 | -89.8 |
Policy liabilities | -492.7 | 270.5 |
Unearned income | 10.3 | -63.8 |
Accounts payable and accrued expenses | 243.6 | -137.7 |
Other liabilities | 18 | -446.4 |
Income taxes | 255.7 | 43.9 |
Other, net | 4.3 | 19.8 |
Net cash provided by operating activities | 3009.2 | 2057.9 |
Investing activities | ||
Purchases of fixed maturity securities | -5331.1 | -5007.9 |
Proceeds from fixed maturity securities: | ||
Sales | 2967.2 | 4611.8 |
Maturities, calls and redemptions | 1178.7 | 1429.3 |
Purchases of equity securities | (195) | -1237.8 |
Proceeds from sales of equity securities | 453.3 | 935 |
Purchases of other invested assets | -36.9 | -122.9 |
Proceeds from sales of other invested assets | 2.4 | 32.4 |
Changes in securities lending collateral | 142.3 | 221.1 |
Purchases of subsidiaries, net of cash acquired | -66.3 | -197.7 |
Proceeds from sales of subsidiaries, net of cash sold | 0 | 5 |
Purchases of property and equipment | -272.3 | -235.9 |
Proceeds from sales of property and equipment | 0.4 | 11.3 |
Other, net | -3.2 | 0 |
Net cash (used in) provided by investing activities | -1160.5 | 443.7 |
Financing activities | ||
Net repayments of commercial paper borrowings | -356.6 | -474.9 |
Repayment of long-term borrowings | -602.9 | -9.2 |
Proceeds from long-term borrowings | 990.3 | 525 |
Net proceeds from short-term borrowings | 2 | 100 |
Changes in securities lending payable | -142.3 | -221.1 |
Changes in bank overdrafts | -354.6 | 9.5 |
Repurchase and retirement of common stock | -1811.4 | (3,047) |
Proceeds from exercise of employee stock options and employee stock purchase plan | 77.6 | 103.9 |
Excess tax benefits from share-based compensation | 5.3 | 14.9 |
Net cash used in financing activities | -2192.6 | -2998.9 |
Effect of foreign exchange rates on cash and cash equivalents | 2.2 | 0 |
Change in cash and cash equivalents | -341.7 | -497.3 |
Cash and cash equivalents at beginning of period | 2183.9 | 2767.9 |
Cash and cash equivalents at end of period | 1842.2 | 2270.6 |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | ||||||
In Millions | Common Stock Par Value
| Additional Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive (Loss) Income
| Total
| |
Beginning Balance at Dec. 31, 2007 | 5.6 | 18441.1 | 4387.6 | 156.1 | 22990.4 | |
Beginning Balance at Dec. 31, 2007 | 556.2 | |||||
Net income | 2159.3 | 2159.3 | ||||
Change in net unrealized gains on investments | -668.3 | -668.3 | ||||
Change in net unrealized losses on cash flow hedges | -0.4 | -0.4 | ||||
Change in net periodic pension and postretirement costs | -2.4 | -2.4 | ||||
Repurchase and retirement of common stock | -50.1 | |||||
Repurchase and retirement of common stock | -0.5 | -1668.1 | -1378.4 | (3,047) | ||
Issuance of common stock under employee stock plans, net of related tax benefits | 2.9 | |||||
Issuance of common stock under employee stock plans, net of related tax benefits | 243 | 243 | ||||
Adoption of FASB retirement benefits guidance | -1.3 | -1.3 | ||||
Ending Balance at Sep. 30, 2008 | 509 | |||||
Ending Balance at Sep. 30, 2008 | 5.1 | 17,016 | 5167.2 | (515) | 21673.3 | |
Beginning Balance at Dec. 31, 2008 | 5 | 16,843 | 5479.4 | -895.7 | 21431.7 | |
Beginning Balance at Dec. 31, 2008 | 503.2 | |||||
Cumulative effect of adoption of FASB OTTI guidance, net of taxes | 88.9 | -88.9 | 0 | |||
Net income | 2004.1 | 2004.1 | ||||
Change in net unrealized gains on investments | 1,073 | 1,073 | ||||
Non-credit component of other-than-temporary impairment losses on investments, net of taxes | -18.6 | -18.6 | ||||
Change in net unrealized losses on cash flow hedges | -2.2 | -2.2 | ||||
Change in net periodic pension and postretirement costs | 1.4 | 1.4 | ||||
Foreign currency translation adjustments | 3.5 | 3.5 | ||||
Repurchase and retirement of common stock | -40.8 | |||||
Repurchase and retirement of common stock | -0.4 | -1365.4 | -445.6 | -1811.4 | ||
Issuance of common stock under employee stock plans, net of related tax benefits | 2.6 | |||||
Issuance of common stock under employee stock plans, net of related tax benefits | 185.9 | 185.9 | ||||
Ending Balance at Sep. 30, 2009 | 465 | |||||
Ending Balance at Sep. 30, 2009 | 4.6 | 15663.5 | 7126.8 | 72.5 | 22867.4 |
1. Organization
1. Organization | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
1. Organization | 1.Organization References to the terms we, our, us, WellPoint or the Company used throughout these Notes to Consolidated Financial Statements refer to WellPoint, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries. We are the largest health benefits company in terms of medical membership in the United States, serving 33.9 medical members as of September30, 2009. We offer a broad spectrum of network-based managed care plans to large and small employer, individual, Medicaid and senior markets. Our managed care plans include preferred provider organizations, or PPOs; health maintenance organizations, or HMOs; point-of-service, or POS, plans; traditional indemnity plans and other hybrid plans, including consumer-driven health plans, or CDHPs; hospital only and limited benefit products. In addition, we provide a broad array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. We also provide an array of specialty and other products and services such as life and disability insurance benefits, pharmacy benefit management, or PBM, specialty pharmacy, dental, vision, behavioral health benefit services, radiology benefit management, analytics-driven personal health care guidance, long-term care insurance and flexible spending accounts. We are licensed to conduct insurance operations in all 50 states through our subsidiaries. We are an independent licensee of the Blue Cross and Blue Shield Association, or BCBSA, an association of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield, or BCBS, licensee for: Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (as the BCBS licensee in 10 New York City metropolitan and surrounding counties, and as the Blue Cross or BCBS licensee in selected upstate counties only), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In a majority of these service areas we do business as Anthem Blue Cross, Anthem Blue Cross Blue Shield or Empire Blue Cross Blue Shield (in our New York service areas). We also serve customers throughout the country as UniCare. |
2. Basis of Presentation
2. Basis of Presentation | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
2. Basis of Presentation | 2.Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the consolidated financial statements as of and for the three and nine months ended September30, 2009 and 2008 have been recorded. The results of operations for the three and nine months ended September30, 2009 are not necessarily indicative of the results that may be expected for the full year ending December31, 2009. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December31, 2008 included in our Form 10-K. Certain of our subsidiaries operate outside of the United States and have functional currencies other than the U.S. dollar, or USD. We translate the assets and liabilities of those subsidiaries to USD using the exchange rate in effect at the end of the period. We translate the revenues and expenses of those subsidiaries to USD using the average exchange rates in effect during the period. The net effect of these translation adjustments is included in Foreign currency translation adjustments in our consolidated statements of shareholders equity. In June 2009, the Financial Accounting Standards Board, or FASB, established the FASB Accounting Standards Codification, or Codification, as the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements. Rules and interpretive releases of the U.S. Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification became effective for us on September30, 2009, and supersedes all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. The Codification does not change or alter existing GAAP and, therefore, the adoption of the Codification did not have a material impact on our consolidated financial position and results of operations. Certain prior year amounts have been reclassified to conform to the current year presentation. |
3. Investments
3. Investments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
3. Investments | 3.Investments In April 2009, the FASB issued guidance for recognition and presentation of other-than-temporary impairment, or FASB OTTI guidance. FASB OTTI guidance applies to fixed maturity securities only and provides new guidance on the recognition and presentation of other-than-temporary impairments. In addition, FASB OTTI guidance requires additional disclosures related to other-than-temporary impairments. Under this revised guidance, if a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to other-than-temporary impairment losses recognized in income in our consolidated income statements. For impaired fixed maturity securities that we do not intend to sell or it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in other-than-temporary impairment losses recognized in income in our consolidated income statements and the non-credit component of the other-than-temporary impairment is recognized in other comprehensive income. Furthermore, unrealized losses entirely caused by non-credit related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive income. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security at the date of acquisition. For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regarding the underlying collateral including prepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes in value. For all other debt securities, cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default. Upon adoption of the FASB OTTI guidance on April1, 2009, we recorded a cumulative-effect adjustment, net of taxes, of $88.9 as of the beginning of the period of adoption, April1, 2009, to reclassify the non-credit component of previously recognized other-than-temporary impairments from retained earnings to accumulated other comprehensive income. We classify the fixed maturity and equity securities in our investment portfolio as available-for-sale or trading and report those securities at fair value. Prior to the adoption of the FASB OTTI guidance, we classified our fixed maturity securities as current or noncurrent based on their contractual maturities. In |
4. Fair Value
4. Fair Value | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
4. Fair Value | 4.Fair Value Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by FASB guidance for fair value measurements and disclosures, are as follows: LevelInput: Input Definition: LevelI Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. LevelII Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date. LevelIII Unobservable inputs that reflect managements best estimate of what market participants would use in pricing the asset or liability at the measurement date. A summary of fair value measurements by level for assets and liabilities measured at fair value on a recurring basis is as follows: Level I Level II LevelIII Total September30, 2009: Assets: Cash equivalents $ 1,454.7 $ $ $ 1,454.7 Investments available-for-sale: Fixed maturity securities 621.1 14,640.1 313.1 15,574.3 Equity securities 995.2 56.2 5.0 1,056.4 Other invested assets, current 18.7 18.7 Securities lending collateral 247.0 136.9 383.9 Derivatives ($0.7 reported with other current assets and $92.5 reported with other noncurrent assets) 93.2 93.2 Total $ 3,336.7 $ 14,926.4 $ 318.1 $ 18,581.2 Liabilities: Derivatives (reported with other noncurrent liabilities) $ $ (0.3 ) $ $ (0.3 ) December31, 2008: Cash equivalents $ 1,544.0 $ $ $ 1,544.0 Investments available-for-sale: Fixed maturity securities 309.9 12,716.8 346.5 13,373.2 Equity securities 1,029.7 77.8 11.2 1,118.7 Other invested assets, current 23.6 23.6 Securities lending collateral 235.5 293.5 529.0 Derivatives (reported with other noncurrent assets) 122.1 122.1 Total $ 3,142.7 $ 13,210.2 $ 357.7 $ 16,710.6 A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level III inputs for the three months ended September30, 2009 and 2008 is as follows: LevelIIIFairValueMeasurements Fixed Maturity Securities Equity Securities Total Three Months Ended September30, 2009: Beginning balance at July1, 2009 $ 317.0 $ 5.5 $ 322.5 Total gains (losses): Recognized in net income (3.3 ) 0.1 (3.2 ) Recognized in accumulated other comprehensive income 20. |
5. Income Taxes
5. Income Taxes | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
5. Income Taxes | 5.Income Taxes As of September30, 2009, as further described below, certain of our tax years are being examined by the Internal Revenue Service, or IRS, and various state and local authorities. In addition, we continue to discuss certain industry issues with the IRS. As of September30, 2009, the examinations of our 2008, 2007, 2006, 2005 and 2004 tax years are nearing conclusion. In addition, there are several years with ongoing disputes related to pre-acquisition companies that are nearing conclusion. Many of the issues in open tax years have been resolved; however, several of the examinations still require approval from the Joint Committee on Taxation before they can be finalized. During the third quarter of 2008, we settled disputes with the IRS relating to certain tax years and involving industry issues which we had been discussing with the IRS for several years. The industry issues were primarily regarding the deduction of intangible assets provided in the Tax Reform Act of 1986 and the special deduction allowable to Blue Cross Blue Shield plans under certain circumstances. As a result of this settlement, gross unrecognized tax benefits were reduced by $291.7 and the consolidated results of operations were benefited by $272.9 through a reduction in income tax expense. We recorded additional tax benefits of $35.1 for intangible asset deductions and various other items. During the three months ended September30, 2009 and 2008, we recognized income tax expense (benefit) of $387.0 and $(271.3), respectively. During the nine months ended September30, 2009 and 2008, we recognized income tax expense of $1,059.2 and $455.3, respectively, which represents effective tax rates of 34.6% and 17.4%, respectively. The lower effective tax rate during the nine months ended September30, 2008 was primarily due to the settlements of IRS disputes described above. |
6. Goodwill and Other Intangib
6. Goodwill and Other Intangible Assets | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
6. Goodwill and Other Intangible Assets | 6.Goodwill and Other Intangible Assets As further discussed in Note 13, Segment Information, on April13, 2009 we announced that we entered into a definitive agreement to sell our NextRx subsidiaries, or PBM business, to Express Scripts, Inc., or Express Scripts. Our PBM business, together with other business units, partially supports our UniCare tradenames that are recognized as indefinite lived intangible assets. These tradenames will not be sold with the PBM business. Accordingly, once we receive no further future cash flows from the PBM business, a portion of these tradenames may be impaired as the cash flows from the remaining business units may not be sufficient to fully support the carrying value of these intangible assets. In addition, the UniCare tradenames are also partially supported by revenues generated from our UniCare subsidiaries, which among other products and services, sell health insurance products to commercial customers, as well as Medicare products to our Senior membership across the United States. We expect future revenues from these business units to decline in 2010, primarily due to a decline in our low margin auto-assigned membership associated with Medicare Part D. In addition, as a result of a strategic action as further discussed in Note 15, Subsequent Events, on October 28, 2009, we announced that we entered into a member transition agreement with Health Care Service Corporation, or HCSC, which operates as Blue Cross and Blue Shield in Illinois and Texas. Under this agreement, HCSC will, upon completion of receipt of regulatory approvals, offer guaranteed replacement coverage to our UniCare commercial group and individual members in those states. We expect most of this membership to transition to HCSC by December31, 2009. We expect that members transitioning to HCSC will experience significant benefits, including gaining access to HCSCs extensive provider networks and leading discounts. The anticipated closing of the Express Scripts transaction in the fourth quarter of 2009, the expected decline in 2010 Medicare Part D auto-assigned membership and the anticipated transition of our Illinois and Texas UniCare commercial group and individual members to HCSC by December31, 2009 triggered an interim impairment review of our UniCare tradenames as of September30, 2009. As a result, we identified and recorded a pre-tax impairment charge relating to our UniCare tradenames of $205.5 during the third quarter of 2009, the majority of which was driven by the loss of the 2010 Medicare Part D auto-assigned membership. These intangible assets are included in the Commercial and Consumer segments and were valued using the income approach valuation method, incorporating Level III internal estimates for inputs, including, but not limited to, revenue projections and discount rates. The valuation considered the expected future cash flows of all business units that support the affected tradenames. The following table represents a summary of activity related to other intangible assets for the nine months ended September30, 2009: Other Intangible Assets With FiniteLives With Indefinite |
7. Derivative Instruments and
7. Derivative Instruments and Hedging Activities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
7. Derivative Instruments and Hedging Activities | 7.Derivative Instruments and Hedging Activities In March 2008, the FASB issued additional guidance for disclosures about derivative instruments and hedging activities. The guidance requires expanded disclosures regarding the location and amounts of derivative instruments in an entitys financial statements, how derivative instruments and related hedged items are accounted for under FASB derivatives and hedging guidance and how derivative instruments and related hedged items affect an entitys financial position, operating results and cash flows. We adopted the guidance on January1, 2009 and its adoption did not have an impact on our consolidated financial position and results of operations. In accordance with the guidance, all investments in derivatives are recorded as assets or liabilities at fair value. A derivative is defined as an instrument whose value is derived from an underlying instrument, index or rate, has a notional amount, requires little or no initial investment and can be net settled. We typically invest in the following types of derivative financial instruments: interest rate swaps, forward contracts, call options, credit default swaps, embedded derivatives and warrants. Derivatives embedded within non-derivative instruments (such as options embedded in convertible fixed maturity securities) are bifurcated from the host instrument when the embedded derivative is not clearly and closely related to the host instrument. Our use of derivatives is limited by statutes and regulations promulgated by the various regulatory bodies to which we are subject, and by our own derivative policy. We have exposure to economic losses due to interest rate risk arising from changes in the level or volatility of interest rates. We attempt to mitigate our exposure to interest rate risk through active portfolio management, which includes rebalancing our existing portfolios of assets and liabilities, as well as changing the characteristics of investments to be purchased or sold in the future. In addition, derivative financial instruments are used to modify the interest rate exposure of certain liabilities or forecasted transactions. These strategies include the use of interest rate swaps and forward contracts, which are used to lock-in interest rates or to hedge (on an economic basis) interest rate risks associated with variable rate debt. We have used these types of instruments as designated hedges against specific liabilities. If certain correlation, hedge effectiveness and risk reduction criteria are met, a derivative may be specifically designated as a hedge of exposure to changes in fair value or cash flow. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the nature of any hedge designation thereon. Amounts excluded from the assessment of hedge effectiveness, if any, as well as the ineffective portion of the gain or loss, are reported in results of operations immediately. If the derivative is not designated as a hedge, the gain or loss resulting from the change in the fair value of the derivative is recognized in results of operations in the period of change. We disco |
8. Retirement Benefits
8. Retirement Benefits | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
8. Retirement Benefits | 8.Retirement Benefits The components of net periodic benefit (credit) cost included in the consolidated statements of income for the three months ended September30, 2009 and 2008 are as follows: PensionBenefits OtherBenefits 2009 2008 2009 2008 Service cost $ 5.8 $ 7.4 $ 1.8 $ 1.5 Interest cost 23.0 25.0 8.0 8.3 Expected return on assets (35.9 ) (38.7 ) (0.6 ) (0.9 ) Recognized actuarial loss 0.6 0.1 1.8 1.3 Amortization of prior service credit (0.2 ) (0.2 ) (2.5 ) (2.5 ) Net periodic benefit (credit) cost $ (6.7 ) $ (6.4 ) $ 8.5 $ 7.7 The components of net periodic benefit (credit) cost included in the consolidated statements of income for the nine months ended September30, 2009 and 2008 are as follows: Pension Benefits OtherBenefits 2009 2008 2009 2008 Service cost $ 17.2 $ 22.6 $ 5.4 $ 4.4 Interest cost 68.7 74.9 23.9 24.7 Expected return on assets (107.3 ) (116.1 ) (1.9 ) (2.7 ) Recognized actuarial loss 1.7 0.1 5.3 3.9 Amortization of prior service credit (0.6 ) (0.6 ) (7.4 ) (7.3 ) Curtailment gain (1.4 ) Net periodic benefit (credit) cost $ (20.3 ) $ (20.5 ) $ 25.3 $ 23.0 For the year ending December31, 2009, no material contributions are required to meet the Employee Retirement Income Security Act, or ERISA, minimum required funding levels; however, we may elect to make discretionary contributions up to the maximum amount deductible for income tax purposes. Contributions of $65.3 and $65.6 were made to our retirement benefit plans during the three and nine months ended September30, 2009, respectively. |
9. Debt
9. Debt | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
9. Debt | 9.Debt In July 2009,May 2009 and March 2009, we repurchased $390.0, $300.0 and $400.0, respectively, of our $1,090.0 face value due at maturity zero coupon notes. The notes were issued in August 2007 in a private placement transaction. We paid cash totaling $553.8 to repurchase the notes, which had a remaining carrying value of zero at September30, 2009. On February5, 2009, we issued $400.0 of 6.000% notes due 2014 and $600.0 of 7.000% notes due 2019 under our shelf registration statement. The proceeds from this debt issuance have been used for general corporate purposes, including, but not limited to, repayment of current maturities of long-term debt and repurchasing shares of our common stock. The notes have a call feature that allows us to repurchase the notes at any time at our option and a put feature that allows a note holder to require us to repurchase the notes upon the occurrence of both a change of control event and a downgrade of the notes. We have a senior revolving credit facility, or the facility, with certain lenders for general corporate purposes. The facility, as amended, provides credit up to $2,392.0, which matures on September30, 2011. The interest rate on this facility is based on either (i)the LIBOR rate plus a predetermined percentage rate based on our credit rating at the date of utilization, or (ii)a base rate as defined in the facility agreement. Our ability to borrow under this facility is subject to compliance with certain covenants. There were no amounts outstanding under this facility as of September30, 2009 or during the three or nine months then ended. At September30, 2009, we had $2,392.0 available under this facility. We have an authorized commercial paper program of up to $2,500.0, the proceeds of which may be used for general corporate purposes. At September30, 2009, we had $541.0 outstanding under this program. Commercial paper borrowings have been classified as long-term debt at September30, 2009 and December31, 2008 in accordance with FASB guidance for short-term obligations expected to be refinanced, as our practice and intent is to replace short-term commercial paper outstanding at expiration with additional short-term commercial paper for an uninterrupted period extending for more than one year or our ability to redeem our commercial paper with borrowings under the senior credit facility described above. We are a member of the Federal Home Loan Bank of Indianapolis and the Federal Home Loan Bank of Cincinnati, collectively, the FHLBs, and as a member we have the ability to obtain cash advances subject to certain requirements. In order to obtain cash advances, we are required to pledge securities as collateral to the FHLBs, initially equal to a certain percentage of the cash borrowings, depending on the type of securities pledged as collateral. The market value of the collateral is monitored daily by the FHLBs, and if it falls below the required percentage of the cash borrowings, we are required to pledge additional securities as collateral or repay a portion of the outstanding cash advance balance. In addition, our borrowings may be limited based on the amount of our investment in the |
10. Commitments and Contingenc
10. Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
10. Commitments and Contingencies | 10.Commitments and Contingencies Litigation In July 2005, we entered into a settlement agreement with representatives of more than 700,000 physicians nationwide to resolve certain cases brought by physicians. The cases resolved were known as the CMA Litigation, the Shane Litigation, the Thomas Litigation (Kenneth Thomas, M.D., et al. vs. Blue Cross Blue Shield Association, et al.) and certain other similar cases brought by physicians. Final monetary payments were made in October 2006. Following its acquisition in 2005, WellChoice, Inc., or WellChoice, was merged with and into a wholly-owned subsidiary of WellPoint. Since the WellChoice transaction closed on December28, 2005, after we reached settlement with the plaintiffs, WellChoice continued to be a defendant in the Thomas (now known as Love) Litigation and was not affected by the prior settlement between us and plaintiffs. The Love Litigation alleged that the BCBSA and the Blue Cross and Blue Shield plans violated the Racketeer Influenced and Corrupt Organizations Act, or RICO. On April27, 2007, we, along with 22 other Blue Cross and Blue Shield plans and the BCBSA, announced a settlement of the Love Litigation. The Court granted final approval of the settlement on April20, 2008. The appeal of the settlement was dismissed on June19, 2009. We tendered final payment under the settlement agreement on June26, 2009. The settlement did not have a material effect on our consolidated financial position or results of operations. Prior to the acquisition of WellPoint Health Networks Inc., or WHN, the group benefit operations, or GBO, of John Hancock Mutual Life Insurance Company, or John Hancock, entered into a number of reinsurance arrangements, including with respect to personal accident insurance and the occupational accident component of workers compensation insurance, a portion of which was originated through a pool managed by Unicover Managers,Inc. Under these arrangements, John Hancock assumed risks as a reinsurer and transferred certain of such risks to other companies. Similar reinsurance arrangements were entered into by John Hancock following WHNs acquisition of the GBO of John Hancock. These various arrangements have become the subject of disputes, including a number of legal proceedings to which John Hancock is a party. We were in arbitration with John Hancock regarding these arrangements. The arbitration panels Phase I ruling addressed liability. In April 2007, the arbitration panel issued a Phase II ruling stating the amount we owe to John Hancock for losses and expenses John Hancock paid through June30, 2006. The panel further outlined a process for determining our liability for losses and expenses paid after June30, 2006, which liability has not yet been determined. We filed a Petition to Confirm, which was granted by the Court. John Hancock filed an appeal with the Seventh Circuit Court of Appeals. The Seventh Circuit upheld the order from the district court confirming the arbitration awards. Hancock then filed a petition for rehearing en banc, which was unanimously denied by the Seventh Circuit. We believe that the liability that may result from this matter is unlikely t |
11. Capital Stock
11. Capital Stock | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
11. Capital Stock | 11.Capital Stock Stock Repurchase Program We regularly review the appropriate use of capital. Accordingly, under our Board of Directors authorization, we maintain a common stock repurchase program. Repurchases may be made from time to time at prevailing market prices, subject to certain restrictions on volume, pricing and timing. The repurchases are effected from time to time in the open markets through negotiated transactions and through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the nine months ended September30, 2009, we repurchased and retired approximately 40.8 shares at an average per share price of $44.38, for an aggregate cost of $1,811.4. During the nine months ended September30, 2008, we repurchased and retired approximately 50.1 shares at an average per share price of $60.80, for an aggregate cost of $3,047.0. The excess of cost of the repurchased shares over par value is charged on a pro rata basis to additional paid-in capital and retained earnings. On March5, 2009, our Board of Directors authorized an increase of $1,500.0 in our stock repurchase program. As of September30, 2009, $710.8 remained authorized for future repurchases. Subsequent to September30, 2009, we repurchased and retired approximately 6.7 shares for an aggregate cost of approximately $313.1, leaving approximately $397.7 for authorized future repurchases at October23, 2009. On October 23, 2009, our Board of Directors authorized an increase of $500.0 in our stock repurchase program, subject to completion of the Express Scripts transaction and pending current market conditions, including the possible impact of health care reform. Our stock repurchase program is discretionary as we are under no obligation to repurchase shares. We repurchase shares under the program when we believe it is a prudent use of capital. Stock Incentive Plans A summary of stock option activity for the nine months ended September30, 2009 is as follows: Number ofShares Weighted- Average OptionPrice per Share Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding at January1, 2009 24.2 $ 62.36 Granted 6.8 30.30 Exercised (1.4 ) 29.68 Forfeited or expired (1.1 ) 64.21 Outstanding at September30, 2009 28.5 56.24 5.4 $ 176.6 Exercisable at September30, 2009 19.4 61.09 4.9 $ 78.8 A summary of the status of nonvested restricted stock activity, including restricted stock units, for the nine months ended September30, 2009 is as follows: Restricted StockShares And Units Weighted- Average GrantDate Fair Value per Share Nonvested at January 1, 2009 1.3 $ 71.15 Granted 3.9 30.46 Vested (0.6 ) 73.64 Forfeited (0.1 ) 46.63 Nonvested at September 30, 2009 4.5 36.45 |
12. Earnings per Share
12. Earnings per Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
12. Earnings per Share | 12.Earnings per Share The denominator for basic and diluted earnings per share for the three and nine months ended September30, 2009 and 2008 is as follows: ThreeMonthsEnded September30 NineMonthsEnded September30 2009 2008 2009 2008 Denominator for basic earnings per share weighted average shares 471.5 510.7 483.2 524.3 Effect of dilutive securities employee and director stock options and non-vested restricted stock awards 5.3 2.8 3.8 3.6 Denominator for diluted earnings per share 476.8 513.5 487.0 527.9 During the three months ended September30, 2009 and 2008, weighted average shares related to certain stock options of 16.7 and 18.6, respectively, were excluded from the denominator for diluted earnings per share because the stock options were anti-dilutive. During the nine months ended September30, 2009 and 2008, weighted average shares related to certain stock options of 18.4 and 16.4, respectively, were excluded from the denominator for diluted earnings per share because the stock options were anti-dilutive. During the nine months ended September30, 2009, we issued approximately 3.9 restricted stock units under our stock incentive plans, 0.7 of whose vesting is contingent upon us meeting specified annual operating gain targets for 2009. The 0.7 restricted stock units have been excluded from the denominator for diluted earnings per share and will be included only if and when the contingency is met. |
13. Segment Information
13. Segment Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
13. Segment Information | 13.Segment Information Our organizational structure is comprised of three reportable segments: Commercial, Consumer and Other. Our Commercial and Consumer segments both offer a diversified mix of managed care products, including PPOs, HMOs, traditional indemnity benefits and POS plans, as well as a variety of hybrid benefit plans, including CDHPs, hospital only and limited benefit products. Our Commercial segment includes Local Group (including UniCare), National Accounts and certain other ancillary business operations (dental, vision, life and disability and workers compensation). Business units in the Commercial segment offer fully-insured products and provide a broad array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. Our Consumer segment includes Senior, State-Sponsored and Individual business. Senior business includes services such as Medicare Part D, Medicare Advantage, and Medicare Supplement, while State-Sponsored business includes our managed care alternatives for the Medicaid and State Childrens Health Insurance Plan programs. Our Other segment includes the Comprehensive Health Solutions Business unit, or CHS, that brings together our resources focused on optimizing the quality of health care and cost of care management. CHS includes provider relations, care and disease management, employee assistance programs, including behavioral health, radiology benefit management, analytics-driven personal health care guidance and our PBM business, which includes NextRx, and our specialty pharmacy, PrecisionRx Specialty Solutions. Our Other segment also includes results from our Federal Government Solutions, or FGS, business. FGS business includes the Federal Employee Program and National Government Services, Inc., which acts as a Medicare contractor in several regions across the nation. The Other segment also includes other businesses that do not meet the quantitative thresholds for an operating segment as defined in FASB segment reporting guidance, as well as intersegment sales and expense eliminations and corporate expenses not allocated to the other reportable segments. On April13, 2009 we announced that we entered into a definitive agreement to sell our PBM business to Express Scripts, one of the largest PBM companies in North America, for $4,675.0, consisting of at least $3,275.0 in cash, subject to customary working capital and indebtedness adjustments. In connection with the agreement, at closing, we will enter into a 10-year contract for Express Scripts to provide PBM services to us following the close of the transaction. The transaction is expected to close in the fourth quarter of 2009, subject to customary closing conditions and any required regulatory approvals. As a result of our decision to sell our PBM business, we determined that the plan of sale criteria in FASB guidance for long-lived assets classified as held for sale have been met. Therefore, in accordance with the guidance, the carrying value of |
14. Comprehensive Income
14. Comprehensive Income | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
14. Comprehensive Income | 14.Comprehensive Income The components of comprehensive income for the three and nine months ended September30, 2009 and 2008 are as follows: ThreeMonthsEnded September30 NineMonthsEnded September30 2009 2008 2009 2008 Net income $ 730.2 $ 820.7 $ 2,004.1 $ 2,159.3 Change in net unrealized losses on investments 489.9 (287.9 ) 1,073.0 (668.3 ) Change in non-credit component of other-than-temporary impairment losses on investments 2.7 (18.6 ) Change in net unrealized losses on cash flow hedges (0.1 ) (0.1 ) (2.2 ) (0.4 ) Change in net periodic pension and postretirement costs 1.8 (0.8 ) 1.4 (2.4 ) Foreign currency translation adjustments 1.5 3.5 Comprehensive income $ 1,226.0 $ 531.9 $ 3,061.2 $ 1,488.2 |
15. Subsequent Events
15. Subsequent Events | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
15. Subsequent Events | 15.Subsequent Events In May 2009, the FASB issued subsequent events guidance, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. We have evaluated subsequent events for recognition or disclosure through the time of filing these consolidated financial statements on Form 10-Q with the SEC on October28, 2009. As a result of a strategic action, on October 28, 2009, we announced that we entered into a member transition agreement with HCSC, which operates as Blue Cross and Blue Shield in Illinois and Texas. Under this agreement, HCSC will, upon completion of receipt of regulatory approvals, offer guaranteed replacement coverage to our UniCare commercial group and individual members in those states. We believe this agreement provides our UniCare commercial membership in Illinois and Texas with an opportunity for a smooth transition of benefits and coverage, and we expect most of this membership to transition to HCSC by December31, 2009. We expect that members transitioning to HCSC will experience significant benefits, including gaining access to HCSCs extensive provider networks and leading discounts. For those members who elect not to accept HCSCs offer of replacement coverage, UniCare will continue to provide coverage until the members current policies expire or are terminated. UniCare will continue to operate nationwide and offer Senior and State-Sponsored related products and specialty products. While we will recognize certain revenues and expenses associated with this agreement in the fourth quarter of 2009, we do not expect this transaction to have a material impact on our consolidated financial position or results of operations. |
Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information [Text Block] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2009-09-30 |
Entity Information
Entity Information (USD $) | ||
9 Months Ended
Sep. 30, 2009 | Oct. 23, 2009
| |
Entity [Text Block] | ||
Trading Symbol | WLP | |
Entity Registrant Name | WELLPOINT INC | |
Entity Central Index Key | 0001156039 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 458,345,599 |