<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

     /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000

                                       OR

     / /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                For the transition period from ______ to _______

                        COMMISSION FILE NUMBER 001-13803

                         WELLPOINT HEALTH NETWORKS INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                                 95-4635504
     (State or other jurisdiction of         (IRS Employer Identification No.)
     incorporation or organization)

1 WELLPOINT WAY, THOUSAND OAKS, CALIFORNIA                 91362
 (Address of principal executive offices)                (Zip Code)

        Registrant's telephone number, including area code (818) 703-4000

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:

     TITLE OF EACH CLASS                         OUTSTANDING AT AUGUST 11, 2000
     -------------------                         ------------------------------
Common Stock, $0.0l par value                          62,746,445 shares


<PAGE>


                         WELLPOINT HEALTH NETWORKS INC.
        QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000
                                TABLE OF CONTENTS



PART I.  FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----
<S>               <C>                                                                                     <C>
ITEM 1.           Financial Statements

                  Consolidated Balance Sheets as of June 30, 2000 and
                       December 31, 1999.................................................................. 1

                  Consolidated Income Statements for the Three and Six Months
                       Ended June 30, 2000 and 1999....................................................... 2

                  Consolidated Statement of Changes in Stockholders' Equity
                       for the Six Months Ended June 30, 2000............................................. 3

                  Consolidated Statements of Cash Flows for the
                       Six Months Ended June 30, 2000 and 1999............................................ 4

                  Notes to Consolidated Financial Statements.............................................. 5

    ITEM 2.       Management's Discussion and Analysis of
                       Financial Condition and Results of Operations..................................... 13

    ITEM 3.       Quantitative and Qualitative Disclosures About Market Risk............................. 30


PART II .OTHER INFORMATION

    ITEM 4.       Submission of Matters to a Vote of Securityholders..................................... 31

    ITEM 6.       Exhibits and Reports on Form 8-K....................................................... 32

SIGNATURES .............................................................................................. 34
</TABLE>

<PAGE>
ITEM 1.    FINANCIAL STATEMENTS

                         WELLPOINT HEALTH NETWORKS INC.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)                              June 30,       December 31,
                                                                2000             1999
                                                          --------------    --------------
<S>                                                       <C>               <C>
ASSETS
Current Assets:
  Cash and cash equivalents                               $      343,258    $      505,014
  Investment securities, at market value                       2,855,986         2,645,372
  Receivables, net                                               634,581           513,079
  Deferred tax assets                                             89,464            92,774
  Other current assets                                            53,350            59,725
                                                          --------------    --------------
  Total Current Assets                                         3,976,639         3,815,964
Property and equipment, net                                      140,087           125,917
Intangible assets, net                                            90,677            96,298
Goodwill, net                                                    479,534           307,647
Long-term investments, at market value                           113,560           108,280
Deferred tax assets                                              114,112            84,063
Other non-current assets                                          54,447            55,065
                                                          --------------    --------------
    Total Assets                                          $    4,969,056    $    4,593,234
                                                          ==============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Medical claims payable                                  $    1,323,792    $    1,142,183
  Reserves for future policy benefits                             58,732            57,435
  Unearned premiums                                              263,248           230,407
  Accounts payable and accrued expenses                          482,066           440,412
  Experience rated and other refunds                             216,884           223,066
  Income taxes payable                                            20,904            84,026
  Other current liabilities                                      421,059           349,757
                                                          --------------    --------------
  Total Current Liabilities                                    2,786,685         2,527,286
Accrued postretirement benefits                                   70,057            68,903
Reserves for future policy benefits, non-current                 275,638           291,626
Long-term debt                                                   399,362           347,884
Other non-current liabilities                                     43,302            44,835
                                                          --------------    --------------
  Total Liabilities                                            3,575,044         3,280,534
Stockholders' Equity:
  Preferred Stock - $0.01 par value, 50,000,000
    shares authorized, none issued and outstanding                    --                --
  Common Stock - $0.01 par value, 300,000,000 shares
    authorized, 71,390,971 issued at June 30, 2000
    and December 31, 1999                                            714               714
  Treasury stock, at cost, 9,041,022
    and 7,764,668 shares at June 30, 2000
    and December 31, 1999, respectively                         (566,379)         (481,331)
  Additional paid-in capital                                     962,084           955,016
  Retained earnings                                            1,002,017           854,642
  Accumulated other comprehensive income                          (4,424)          (16,341)
                                                          --------------    --------------
  Total Stockholders' Equity                                   1,394,012         1,312,700
                                                          --------------    --------------
    Total Liabilities and Stockholders' Equity            $    4,969,056    $    4,593,234
                                                          ==============    ==============
</TABLE>

       See the accompanying notes to the consolidated financial statements


                                       1
<PAGE>


                         WELLPOINT HEALTH NETWORKS INC.
                         Consolidated Income Statements
                                   (Unaudited)

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)                      Three Months Ended June 30,    Six Months Ended June 30,
                                                               ---------------------------   ---------------------------
                                                                    2000          1999           2000          1999
                                                               ------------   ------------   ------------   ------------
<S>                                                            <C>            <C>            <C>            <C>
Revenues:
  Premium revenue                                              $  2,132,678   $  1,708,755   $  4,123,107   $  3,325,484
  Management services revenue                                       110,919        104,761        221,343        219,199
  Investment income                                                  45,238         43,257         89,631         83,335
                                                               ------------   ------------   ------------   ------------
                                                                  2,288,835      1,856,773      4,434,081      3,628,018

Operating Expenses:
  Health care services and other benefits                         1,723,947      1,383,068      3,335,537      2,691,648
  Selling expense                                                    97,159         78,852        189,512        155,619
  General and administrative expense                                310,037        262,133        607,394        517,275
                                                               ------------   ------------   ------------   ------------
                                                                  2,131,143      1,724,053      4,132,443      3,364,542
                                                               ------------   ------------   ------------   ------------
Operating Income                                                    157,692        132,720        301,638        263,476
  Interest expense                                                    7,249          5,907         12,773         12,007
  Other expense, net                                                 13,249         10,250         21,056         18,335
                                                               ------------   ------------   ------------   ------------
Income before Provision for Income Taxes and Cumulative
  Effect of Accounting Change                                       137,194        116,563        267,809        233,134
  Provision for income taxes                                         53,527         45,484        104,498         90,945
                                                               ------------   ------------   ------------   ------------
Income before Cumulative Effect of Accounting Change                 83,667         71,079        163,311        142,189
Cumulative Effect of Accounting Change, net of tax                       --             --             --        (20,558)
                                                               ------------   ------------   ------------   ------------
Net Income                                                     $     83,667   $     71,079   $    163,311   $    121,631
                                                               ============   ============   ============   ============
Earnings Per Share
  Income before Cumulative Effect of Accounting Change         $       1.35   $       1.05   $       2.61   $       2.11
  Cumulative Effect of Accounting Change, net of tax                     --             --             --          (0.31)
  Net Income                                                   $       1.35   $       1.05   $       2.61   $       1.80
                                                               ============   ============   ============   ============
Earnings Per Share Assuming Full Dilution
  Income before Cumulative Effect of Accounting Change         $       1.30   $       1.03   $       2.53   $       2.07
  Cumulative Effect of Accounting Change, net of tax                     --             --             --          (0.30)
                                                               ------------   ------------   ------------   ------------
  Net Income                                                   $       1.30   $       1.03   $       2.53   $       1.77
                                                               ============   ============   ============   ============
</TABLE>

       See the accompanying notes to the consolidated financial statements


                                       2

<PAGE>

              WELLPOINT HEALTH NETWORKS INC.
Consolidated Statement of Changes in Stockholders' Equity
                       (Unaudited)

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                                                               Common Stock
                                                              --------------------------------------------------
                                                                      Issued                   In Treasury
                                                  Preferred   -----------------------   ------------------------
                                                    Stock       Shares       Amount       Shares         Amount
                                                 ----------   ----------   ----------   ----------    ----------
<S>                                              <C>          <C>          <C>          <C>           <C>
Balance as of December 31, 1999                  $        -      71,391    $      714        7,765    $ (481,331)

Stock grants to employees and directors                                                         (9)          592
Stock issued for employee stock option
  and stock purchase plans                                                                    (595)       36,556
Stock repurchased, at cost                                                                   1,880      (122,196)
Net losses from treasury stock reissued
Comprehensive income
  Net income
  Other comprehensive income, net of tax
    Change in unrealized valuation
    adjustment on investment
    securities, net of reclassification
    adjustment
    Foreign currency adjustments, net of tax

Total comprehensive income
                                                 ----------   ----------   ----------   ----------    ----------
Balance as of June 30, 2000                      $        -      71,391    $      714        9,041    $ (566,379)
                                                 ==========   ==========   ==========   ==========    ==========


<CAPTION>
                                                                              Accumulated
                                                 Additional                     Other
                                                  Paid-in      Retained     Comprehensive
                                                  Capital      Earnings         Income           Total
                                                 ----------   ----------    --------------    ----------
<S>                                              <C>          <C>           <C>               <C>
Balance as of December 31, 1999                  $  955,016   $  854,642    $      (16,341)   $1,312,700

Stock grants to employees and directors                                                              592
Stock issued for employee stock option
  and stock purchase plans                            7,068                                       43,624
Stock repurchased, at cost                                                                      (122,196)
Net losses from treasury stock reissued                          (15,936)                        (15,936)
Comprehensive income
  Net income                                                     163,311                         163,311
  Other comprehensive income, net of tax
    Change in unrealized valuation
    adjustment on investment
    securities, net of reclassification
    adjustment                                                                      12,449        12,449
    Foreign currency adjustments, net of tax                                          (532)         (532)
                                                              ----------    --------------    ----------
Total comprehensive income                                       163,311            11,917       175,228
                                                 ----------   ----------    --------------    ----------
Balance as of June 30, 2000                      $  962,084   $1,002,017    $       (4,424)   $1,394,012
                                                 ==========   ==========    ==============    ==========
</TABLE>


       See the accompanying notes to the consolidated financial statements


                                       3

<PAGE>

                         WELLPOINT HEALTH NETWORKS INC.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                                     Six Months Ended June 30,
                                                                               --------------------------------
                                                                                    2000              1999
                                                                               --------------    --------------
<S>                                                                            <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Income before cumulative effect of accounting change                         $      163,311    $      142,189
  Adjustments to reconcile income before cumulative effect of accounting
       change to net cash provided by operating activities:
            Depreciation and amortization, net of accretion                            37,212            42,493
            Losses on sales of assets, net                                              7,885             3,341
            Provision (benefit) for deferred income taxes                                (391)            1,988
            Amortization of deferred gain on sale of building                          (2,213)           (2,213)
            Accretion of interest on zero coupon subordinated debentures                1,478                --
            (Increase) decrease in certain assets:
                 Receivables, net                                                     (68,032)          (46,815)
                 Income taxes recoverable                                                  --            15,192
                 Other current assets                                                   6,877            (6,261)
                 Other non-current assets                                                 418               618
            Increase (decrease) in certain liabilities:
                 Medical claims payable                                               100,275            82,784
                 Reserves for future policy benefits                                  (14,691)          (14,332)
                 Unearned premiums                                                     32,588             3,224
                 Accounts payable and accrued expenses                                 29,513            30,124
                 Experience rated and other refunds                                    (6,182)          (22,608)
                 Income taxes payable                                                 (62,798)               --
                 Other current liabilities                                             10,969            (7,998)
                 Accrued postretirement benefits                                        1,154             2,650
                 Other non-current liabilities                                            680              (308)
                                                                               --------------    --------------
                   Net cash provided by operating activities                          238,053           224,068
                                                                               --------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments purchased                                                            (2,227,796)       (1,706,000)
  Proceeds from investments sold and matured                                        2,035,113         1,410,735
  Property and equipment purchased                                                    (22,058)          (16,961)
  Proceeds from property and equipment sold                                             1,706               256
  Settlement of sales price for sale of Workers' Compensation business                     --            (6,733)
  Purchase of subsidiary, net of cash acquired                                       (142,858)               --
                                                                               --------------    --------------
                   Net cash used in investing activities                             (355,893)         (318,703)
                                                                               --------------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of long-term debt from Mass Mutual Note                                        --           (20,000)
  Net borrowing of long-term debt under the revolving credit facility                  50,000            20,000
  Proceeds from issuance of common stock                                               28,280            29,606
  Common stock repurchased                                                           (122,196)               --
                                                                               --------------    --------------
                   Net cash provided by (used in) financing activities                (43,916)           29,606
                                                                               --------------    --------------
Net decrease in cash and cash equivalents                                            (161,756)          (65,029)
Cash and cash equivalents at beginning of period                                      505,014           410,875
                                                                               --------------    --------------
Cash and cash equivalents at end of period                                     $      343,258    $      345,846
                                                                               ==============    ==============
</TABLE>

       See the accompanying notes to the consolidated financial statements


                                       4

<PAGE>

                         WELLPOINT HEALTH NETWORKS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   ORGANIZATION

     WellPoint Health Networks Inc. (the "Company" or "WellPoint") is one of the
     nation's largest publicly traded managed health care companies. As of June
     30, 2000, WellPoint had approximately 7.6 million medical members and
     approximately 34.4 million specialty members. The Company offers a broad
     spectrum of network-based managed care plans. WellPoint provides these
     plans to the large and small employer, individual and senior markets. The
     Company's managed care plans include preferred provider organizations
     ("PPOs"), health maintenance organizations ("HMOs"), point-of-service
     ("POS") plans, other hybrid medical plans and traditional indemnity plans.
     In addition, the Company offers managed care services, including
     underwriting, actuarial services, network access, medical cost management
     and claims processing. The Company offers a continuum of managed health
     care plans while providing incentives to members and employers to select
     more intensively managed plans. The Company also provides a broad array of
     specialty and other products and services, including pharmacy, dental,
     utilization management, life insurance, preventive care, disability,
     behavioral health, COBRA and flexible benefits account administration.

2.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements of WellPoint,
     in the opinion of management, reflect all material adjustments (which are
     of a normal recurring nature) necessary for the fair presentation of its
     financial position as of June 30, 2000, the results of its operations for
     the three months and six months ended June 30, 2000 and 1999, cash flows
     for the six months ended June 30, 2000 and 1999 and its changes in
     stockholders' equity for the six months ended June 30, 2000. The results of
     operations for the interim periods presented are not necessarily indicative
     of the operating results for the full year.

3.   ACQUISITION OF RUSH PRUDENTIAL

     On March 1, 2000, the Company completed its acquisition of Rush Prudential
     Health Plans ("Rush Prudential"). Rush Prudential offers a broad array of
     products and services ranging from HMO products to traditional PPO
     products. The acquisition has more than doubled the Company's current
     Illinois medical membership to nearly 600,000 members. The transaction,
     which was financed with both cash from operations and debt from the
     Company's existing revolving credit facility, is valued at approximately
     $200 million, subject to certain post-closing adjustments. This acquisition
     was accounted for under the purchase method of accounting. Cash of $106.1
     million and debt totaling $100.0 million were used to purchase net assets
     with a fair value of approximately $21.8 million, resulting in goodwill
     totaling $184.3 million. The purchase price allocation, as of June 30,
     2000, between goodwill and identifiable intangible assets has not been
     finalized.


                                       5
<PAGE>

                         WELLPOINT HEALTH NETWORKS INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

3.   ACQUISITION OF RUSH PRUDENTIAL, CONTINUED

     In accordance with the requirements of APB Opinion No. 16, "Business
     Combinations," the following unaudited pro forma summary presents the
     results of operations of WellPoint as if the acquisition of Rush Prudential
     had occurred on January 1, 1999. The pro forma information includes the
     results of operations for the period prior to the acquisition, adjusted for
     interest expense on long-term debt incurred to fund the acquisition,
     amortization of intangible assets and the related income tax effects. The
     pro forma financial information is presented for informational purposes
     only and may not be indicative of the results of operations had the Company
     been a single entity during the three and six months ended June 30, 2000
     and 1999, nor is it necessarily indicative of future results of operations.
     Pro forma earnings per share assuming full dilution is based on 64.6
     million and 68.9 million weighted average shares outstanding during the
     three months ended June 30, 2000 and 1999, respectively. For the six months
     ended June 30, 2000 and 1999, respectively, pro forma earnings per share
     assuming full dilution is based on 64.8 million and 68.7 million weighted
     average shares outstanding.

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)                  Three Months Ended             Six Months Ended
                                                           June 30,                      June 30,
                                                 ---------------------------   ---------------------------
                                                     2000            1999          2000           1999
                                                 ------------   ------------   ------------   ------------
<S>                                              <C>            <C>            <C>            <C>
Revenues                                         $  2,288,835   $  1,978,959   $  4,511,634   $  3,875,361
Income before Cumulative Effect of
      Accounting Change                          $     83,667   $     71,215   $    163,493   $    141,366
Net Income                                       $     83,667   $     71,215   $    163,493   $    120,808

Earnings Per Share Assuming Full Dilution
      Income before Cumulative Effect of
           Accounting Change                     $       1.30   $       1.03   $       2.52   $       2.06
      Net Income                                 $       1.30   $       1.03   $       2.52   $       1.76
</TABLE>


4.   DISCONTINUATION OF MEDICARE FISCAL INTERMEDIARY ACTIVITIES

     On May 3, 2000, the Company's wholly owned subsidiary Blue Cross of
     California ("BCC") announced that BCC would no longer participate as a
     Medicare fiscal intermediary, effective December 1, 2000. BCC served as the
     contractor for processing Medicare Part A (hospital) claims in California,
     Nevada and Hawaii, and home health and hospice claims for providers and
     Medicare beneficiaries in California, Nevada, Hawaii, Arizona, Oregon,
     Idaho, Washington and Alaska. This action does not affect the Company's
     offering of Medicare risk HMO and Medicare supplement products. In
     addition, the Company does not anticipate any material effect on the
     results of operations, cash flows or financial position.


                                       6
<PAGE>


5.   EARNINGS PER SHARE

     The following is an illustration of the dilutive effect of the Company's
     potential common stock on earnings per share ("EPS"). There were no
     antidilutive securities in any of the periods presented.

<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)                              Three Months Ended          Six Months Ended
                                                                       June 30,                   June 30,
                                                               -----------------------   ------------------------
                                                                   2000        1999         2000           1999
                                                               ----------   ----------   ----------    ----------
<S>                                                            <C>          <C>          <C>           <C>
BASIC EARNINGS PER SHARE CALCULATION:
NUMERATOR
Income before cumulative effect of accounting change           $   83,667   $   71,079   $  163,311    $  142,189
Cumulative effect of accounting change, net of tax                     --           --           --       (20,558)
                                                               ----------   ----------   ----------    ----------
Net Income                                                     $   83,667   $   71,079   $  163,311    $  121,631
                                                               ==========   ==========   ==========    ==========

DENOMINATOR
Weighted average shares outstanding                                62,197       67,606       62,520        67,433
                                                               ==========   ==========   ==========    ==========

EARNINGS PER SHARE
Income before cumulative effect of accounting change           $     1.35   $     1.05   $     2.61    $     2.11
Cumulative effect of accounting change, net of tax                     --           --           --         (0.31)
                                                               ----------   ----------   ----------    ----------
Net Income                                                     $     1.35   $     1.05   $     2.61    $     1.80
                                                               ==========   ==========   ==========    ==========

EARNINGS PER SHARE ASSUMING FULL DILUTION CALCULATION:
NUMERATOR
Income before cumulative effect of accounting change           $   83,667   $   71,079   $  163,311    $  142,189
Interest expense on zero coupon convertible
  subordinated debentures, net of tax                                 470           --          940            --
                                                               ----------   ----------   ----------    ----------
Adjusted income before cumulative effect of accounting             84,137       71,079      164,251       142,189
change
Cumulative effect of accounting change, net of tax                     --           --      (20,558)
                                                               ----------   ----------   ----------    ----------
Adjusted Net Income                                            $   84,137   $   71,079   $  164,251    $  121,631
                                                               ==========   ==========   ==========    ==========
DENOMINATOR
Weighted average shares outstanding                                62,197       67,606       62,520        67,433
Net effect of dilutive stock options                                  893        1,248          834         1,274
Assumed conversion of zero coupon convertible
  subordinated debentures                                           1,481           --        1,481            --
                                                               ----------   ----------   ----------    ----------
Fully diluted weighted average shares outstanding                  64,571       68,854       64,835        68,707
                                                               ==========   ==========   ==========    ==========
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income before cumulative effect of accounting change           $     1.30   $     1.03   $     2.53    $     2.07
Cumulative effect of accounting change, net of tax                     --           --           --         (0.30)
                                                               ----------   ----------   ----------    ----------
Net Income                                                     $     1.30   $     1.03   $     2.53    $     1.77
                                                               ==========   ==========   ==========    ==========
</TABLE>


                                       7
<PAGE>


6.   COMPREHENSIVE INCOME

     The following summarizes comprehensive income reclassification adjustments
     for the six months ended June 30, 2000, included in the statement of
     changes in stockholders' equity:

<TABLE>
<CAPTION>
                                                                                 June 30,
(IN THOUSANDS)                                                                    2000
                                                                               ----------
<S>                                                                            <C>
Holding gain on investment securities arising during the period
(net of tax expense of $11,786)                                                $   18,434
Holding loss related to foreign exchange transactions
(net of tax benefit of $2,898)
                                                                                      170
Add:
  Reclassification adjustment for realized loss on investment securities
  (net of tax benefit of $3,826)
                                                                                   (5,985)
  Reclassification adjustment  related to foreign exchange gain on
  investment securities (net of tax expense of $2,557)
                                                                                     (702)
                                                                               ----------

Net gain recognized in other comprehensive income
(net of tax expense of $7,619)                                                 $   11,917
                                                                               ==========
</TABLE>

7.   NEW PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board (the "FASB") issued
     Statement of Financial Accounting Standards No. 133, "Accounting for
     Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No.
     133, as amended by SFAS No. 138 establishes the accounting and reporting
     standards for derivative instruments and for hedging activities. Upon
     adoption of SFAS No. 133, all derivatives must be recognized on the balance
     sheet at their then fair value. Any deferred gains and losses remaining on
     the balance sheet under previous hedge-accounting rules must be removed
     from the balance sheet and all hedging relationships must be designated
     anew and documented pursuant to the new accounting. The new standard will
     be effective in the first quarter of 2001. The Company is presently
     assessing the presentation and effect of SFAS No. 133 on the financial
     statements of the Company.

     In December 1999, the Securities and Exchange Commission issued Staff
     Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
     ("SAB 101"). SAB 101 provides guidance on revenue recognition and related
     disclosures. SAB 101 is effective no later than the fourth fiscal quarter
     beginning after December 15, 1999. The Company believes that SAB 101 has
     no effect on its current revenue recognition policies and related
     disclosures.


                                       8
<PAGE>


8.   CONTINGENCIES

     From time to time in the ordinary course of business, the Company and
     certain of its subsidiaries are parties to various legal proceedings, many
     of which involve claims for coverage. The Company, like HMOs and health
     insurers generally, excludes certain health care services from coverage
     under its HMO, PPO and other plans. The Company is, in its ordinary course
     of business, subject to the claims of its enrollees arising out of
     decisions to restrict treatment or reimbursement for certain services. The
     loss of even one such claim, if it results in a significant punitive damage
     award, could have a material adverse effect on the Company. In addition,
     the risk of potential liability under punitive damage theories may increase
     significantly the difficulty of obtaining reasonable settlements of
     coverage claims.

     In June 2000, the California Medical Association filed a lawsuit in U.S.
     district court in San Francisco against the Company's subsidiary, Blue
     Cross of California ("BCC"). The lawsuit alleges that BCC violated the
     federal Racketeering Influenced and Corrupt Organizations Act through
     various misrepresentations to and inappropriate actions against health
     care providers. In late 1999, a number of class-action lawsuits were
     brought against several of the Company's competitors alleging, among
     other things, various misrepresentations regarding their health plans
     and breaches of fiduciary obligations to health plan members. The
     Company has not yet been made a party to any of such member lawsuits.
     The financial and operational impact that these and other evolving
     theories of recovery will have on the managed care industry generally,
     or the Company in particular, is at present unknown.

     Certain of such legal proceedings are or may be covered under insurance
     policies or indemnification agreements. Based upon information presently
     available, management of the Company believes that the final outcome of all
     such proceedings should not have a material adverse effect on the Company's
     results of operations, cash flows or financial condition.


                                       9

<PAGE>

                           WELLPOINT HEALTH NETWORKS INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

9.   BUSINESS SEGMENT INFORMATION

     The Company has two reportable segments: the Large Employer Group business
     segment and the Individual and Small Employer Group business segment. The
     Large Employer Group and Individual and Small Employer Group segments
     provide a broad spectrum of network-based health plans, including HMOs,
     PPOs, POS plans, other hybrid plans and traditional indemnity products to
     large and small employers and individuals. The Company's senior and
     specialty businesses are included in the Corporate and Other segment.

     The following tables present segment information for the Large Employer
     Group and Individual and Small Employer Group for the three and six months
     ended June 30, 2000 and 1999, respectively.

QUARTER ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
                                                             Individual &
                                                Large          Small        Corporate
                                              Employer        Employer          &
                                                Group           Group          Other        Consolidated
                                             ------------    ------------   ------------    ------------
(IN THOUSANDS)
<S>                                          <C>             <C>            <C>             <C>
Premium revenue                              $  1,237,531    $    760,490   $    134,657    $  2,132,678
Management services revenue                        93,607             692         16,620         110,919
                                             ------------    ------------   ------------    ------------
Total revenue from external customers           1,331,138         761,182        151,277       2,243,597
Intercompany revenues                              (5,207)            750          4,457              --

Segment income                               $     58,186    $     43,435   $    (17,954)   $     83,667
                                             ============    ============   ============    ============

Segment assets                               $  2,158,391    $  1,041,934   $  1,768,731    $  4,969,056
                                             ============    ============   ============    ============
</TABLE>


QUARTER ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
                                                             Individual &
                                                Large          Small        Corporate
                                              Employer        Employer          &
                                                Group           Group          Other        Consolidated
                                             ------------    ------------   ------------    ------------
(IN THOUSANDS)
<S>                                          <C>             <C>            <C>             <C>
Premium revenue                              $    969,036    $    623,960   $    115,759    $  1,708,755
Management services revenue                        88,205           1,115         15,441         104,761
                                             ------------    ------------   ------------    ------------
Total revenue from external customers           1,057,241         625,075        131,200       1,813,516
Intercompany revenues                               3,567          (2,669)          (898)             --

Segment income                               $     43,347    $     26,710   $      1,022    $     71,079
                                             ============    ============   ============    ============

Segment assets                               $  2,293,132    $    902,396   $  1,221,725    $  4,417,253
                                             ============    ============   ============    ============
</TABLE>


                                       10
<PAGE>

                           WELLPOINT HEALTH NETWORKS INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


9.   BUSINESS SEGMENT INFORMATION, CONTINUED

SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
                                                             Individual &
                                                Large          Small        Corporate
                                              Employer        Employer          &
                                                Group           Group          Other        Consolidated
                                             ------------    ------------   ------------    ------------
(IN THOUSANDS)
<S>                                          <C>             <C>            <C>             <C>
Premium revenue                              $  2,381,648    $  1,480,336   $    261,123    $  4,123,107
Management services revenue                       186,779           1,658         32,906         221,343
                                             ------------    ------------   ------------    ------------
Total revenue from external customers           2,568,427       1,481,994        294,029       4,344,450
Intercompany revenues                              (4,588)            500          4,088              --

Segment income                               $    113,452    $     92,322   $    (42,463)   $    163,311
                                             ============    ============   ============    ============
</TABLE>


SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
                                                             Individual &
                                                Large          Small        Corporate
                                              Employer        Employer          &
                                                Group           Group          Other        Consolidated
                                             ------------    ------------   ------------    ------------
(IN THOUSANDS)
<S>                                          <C>             <C>            <C>             <C>
Premium revenue                              $  1,895,475    $  1,210,918   $    219,091    $  3,325,484
Management services revenue
                                                  187,544           2,988         28,667         219,199
                                             ------------    ------------   ------------    ------------
Total revenue from external customers           2,083,019       1,213,906        247,758       3,544,683

Intercompany revenues
                                                    7,270             500         (7,770)             --
Segment income before cumulative
  effect of accounting change                $     99,000    $     57,579   $    (14,390)   $    142,189
                                             ============    ============   ============    ============
</TABLE>


                                       11
<PAGE>

                           WELLPOINT HEALTH NETWORKS INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

10.  PENDING TRANSACTION

On July 9, 1998, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") by and among the Company, Cerulean Companies, Inc.
("Cerulean") and Water Polo Acquisition Corp., a wholly owned subsidiary of the
Company (the "Merger Sub"). Pursuant to the Merger Agreement, Cerulean will
merge with and into Merger Sub (the "Merger"). Cerulean is the parent company of
Blue Cross and Blue Shield of Georgia, Inc., which served approximately 1.8
million persons in the State of Georgia as of June 30, 2000. At the effective
time of the Merger, the shareholders of Cerulean will receive WellPoint Common
Stock with a market value of $500 million (subject to certain adjustments).
Certain shareholders of Cerulean will have the option to receive cash in lieu of
WellPoint Common Stock in the Merger, subject to a maximum aggregate limit of
$225 million. The transaction is intended to qualify as a tax-free
reorganization for Cerulean shareholders that elect to receive WellPoint Common
Stock. In order to complete the transaction, the Company must obtain the
approval of the Georgia Department of Insurance after a public hearing and
Cerulean's shareholders must approve the transaction at a shareholder's meeting.
The Company currently expects the transaction to be completed during the fourth
quarter of 2000.


                                       12
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

This discussion contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors
including, but not limited to, those set forth under "Factors That May Affect
Future Results of Operations."

GENERAL

The Company is one of the nation's largest publicly traded managed health care
companies. As of June 30, 2000, WellPoint had approximately 7.6 million medical
members and approximately 34.3 million specialty members. The Company offers a
broad spectrum of network-based managed care plans. WellPoint provides these
plans to the large and small employer, individual and senior markets. The
Company's managed care plans include HMOs, PPOs, POS plans, other hybrid plans
and traditional indemnity plans. In addition, WellPoint offers managed care
services, including underwriting, claims processing, actuarial services, network
access and medical cost management. The Company also provides a broad array of
specialty and other products, including pharmacy, dental, utilization
management, life insurance, preventive care, disability insurance, behavioral
health, COBRA and flexible benefits account administration. The Company markets
its products in California under the name Blue Cross of California and outside
of California under the name UNICARE. Historically, the Company's primary market
for managed care products has been California. The Company holds the exclusive
right in California to market its products under the Blue Cross name and mark.

NATIONAL EXPANSION AND OTHER RECENT DEVELOPMENTS

In an effort to pursue the expansion of the Company's business outside the state
of California, the Company acquired two businesses in 1996 and 1997, the Life
and Health Benefits Management Division ("MMHD") of Massachusetts Mutual Life
Insurance Company and the Group Benefits Operations (the "GBO") of John Hancock
Mutual Life Insurance Company. The Company's March 1, 2000 acquisition of Rush
Prudential Health Plans ("Rush Prudential") and its pending transaction with
Cerulean is also a component of this expansion strategy.

As a result of the GBO and MMHD acquisitions, the Company has significantly
expanded its operations outside of California. In order to integrate its
acquired businesses and implement the Company's regional expansion strategy, the
Company has, and will need to continue to develop satisfactory networks of
hospitals, physicians and other health care service providers, develop
distribution channels for its products and successfully convert acquired books
of business to the Company's existing information systems, which will require
continued investments by the Company.

In response to rising medical and pharmacy costs the Company has from time to
time implemented premium increases with respect to certain of its products. The
Company will continue to evaluate the need for further premium increases, plan
design changes and other


                                       13
<PAGE>

NATIONAL EXPANSION AND OTHER RECENT DEVELOPMENTS, CONTINUED

appropriate actions in the future in order to maintain or restore profit
margins. There can be no assurances, however, that the Company will be able to
take subsequent pricing or other actions or that any actions previously taken or
implemented in the future will be successful in addressing any concerns that may
arise with respect to the performance of certain businesses.

ACQUISITION OF RUSH PRUDENTIAL

On March 1, 2000, the Company completed its acquisition of Rush Prudential (See
Note 3 to the Consolidated Financial Statements). Rush Prudential offers a broad
array of products and services ranging from HMO products to traditional PPO
products. Rush Prudential has historically experienced a higher loss ratio than
the Company's core business, which may result in an increase in the Company's
overall loss ratio. The acquisition has more than doubled the Company's Illinois
medical membership to nearly 600,000 members. The transaction, which was
financed with cash from operations and debt from the Company's existing
revolving credit facility, is valued at approximately $200 million, subject to
certain post- closing adjustments. This acquisition was accounted for under the
purchase method of accounting.

PENDING ACQUISITION OF CERULEAN

On July 9, 1998, the Company entered into an Agreement and Plan of Merger with
Cerulean (See Note 10 to the Consolidated Financial Statements). Cerulean,
principally through its Blue Cross and Blue Shield of Georgia subsidiary, offers
insured and administrative services products primarily in the State of Georgia.
Cerulean has historically experienced a higher administrative expense ratio than
the Company's core businesses due to its higher concentration of administrative
services business. Cerulean has also historically experienced a higher medical
loss ratio than the Company's core businesses due to its higher percentage of
large group business, and fewer managed care offerings. Accordingly, it is
expected that Cerulean's higher loss and administrative expense ratios will
ultimately contribute to an increase in those ratios for the Company.

In September 1998, a class action lawsuit was filed in Richmond County, Georgia
on behalf of certain current and former policyholders of Blue Cross Blue Shield
of Georgia (the "Conversion Litigation"). The claims brought in the Conversion
Litigation relate to the conversion of Blue Cross Blue Shield of Georgia from a
non-profit entity to a for-profit entity in October 1996 (the "Conversion"). At
the time of the Conversion, each eligible Blue Cross Blue Shield of Georgia
subscriber was offered five shares of Cerulean Class A stock. In order to
receive such shares, each eligible subscriber had to return certain election
forms prepared by Cerulean. At the time of the Conversion, approximately 90,000
of the 160,000 eligible subscribers did not return their election forms. The
litigation sought to compel Cerulean to issue five additional shares of its
Class A Common Stock to each of the 90,000 subscribers. On December 17, 1998,
the Superior Court judge in the Conversion Litigation issued an order in favor
of the plaintiffs. Cerulean filed an appeal with the Georgia Supreme Court,
which accepted jurisdiction and granted expedited treatment to the appeal. On
May 3, 1999, the Georgia Supreme Court reversed the ruling of the Superior
Court, holding that the Superior


                                       14
<PAGE>


PENDING ACQUISITION OF CERULEAN, CONTINUED

Court erred in considering and ruling upon the plaintiffs' claims. The Georgia
Supreme Court's ruling did not affect pending derivative and fraud claims
brought by the plaintiffs.

The plaintiffs in this litigation subsequently filed a petition with the Georgia
Department of Insurance, arguing substantially the same claims made in the
Richmond County litigation. This petition was denied by the Georgia Department
of Insurance, and the plaintiffs brought an appeal in the Richmond County
Superior Court. On September 23, 1999, the Superior Court judge ruled in favor
of the plaintiffs and effectively overturned the denial of the plaintiffs'
petition by the Georgia Department of Insurance. The Superior Court judge ruled
that the Conversion was not carried out in accordance with the terms of the
order issued in 1996 by the Georgia Department of Insurance and that, as a
result, the plaintiffs were entitled to be issued five shares each of Cerulean
Class A Common Stock. The judge's order directed the Georgia Department of
Insurance to vacate its earlier order denying the plaintiffs' petition and to
enter an order in their favor. At the same time, the judge also denied a motion
by Cerulean to intervene in the plaintiffs' appeal.

The Georgia Department of Insurance and Cerulean each filed motions with the
Georgia Supreme Court for appeal of these orders and, on November 12, 1999, the
Georgia Supreme Court transferred the appeals to the Georgia Court of Appeals,
Georgia's intermediate level court. The Georgia Court of Appeals held oral
arguments on the case on March 22, 2000. On June 29, 2000, the Georgia Court of
Appeals reversed the September 23, 1999 decision of the Superior Court judge and
affirmed the Georgia Department of Insurance's earlier denial of the plaintiffs'
petition. On July 19, 2000, the plaintiffs filed a petition with the Georgia
Supreme Court seeking to appeal the Georgia Court of Appeals' decision.

On August 1, 2000, the plaintiffs filed a motion in the Richmond County
Superior Court seeking to enforce a purported settlement of the litigation
with Cerulean. Cerulean has notified the plaintiffs in writing that it
considers the claims in this motion to be frivolous and to constitute abusive
litigation under Georgia law and that it intends to seek damages and
attorney's fees against the plaintiffs, and their counsel if they do not
withdraw the motion.

In order to complete the Merger, a number of conditions must be satisfied,
including approval by the Georgia Department of Insurance after a public
hearing, approval by Cerulean's shareholders and the absence of pending material
litigation. The plaintiffs in the Richmond County litigation have been granted
the right to intervene in the public hearing as policyholders of Blue Cross Blue
Shield of Georgia.

The Merger Agreement between the Company and Cerulean originally provided that
either party could terminate the Merger Agreement if all conditions to closing
were not satisfied on or before July 9, 1999. The Company and Cerulean have
agreed to an extension of this date until December 31, 2000. The Company
currently expect the transaction to be completed during the fourth quarter of
2000. However, if all of the conditions to closing have not been satisfied by
the extended termination date and Cerulean and WellPoint have not mutually
agreed to a further extension of the termination date, then either WellPoint or
Cerulean could elect to terminate the Merger Agreement.


                                       15
<PAGE>


LEGISLATION

In September 1999, the California Legislature enacted and the California
Governor subsequently signed into law a number of health care reform measures.
California legislation enacted during 1999, among other things, establishes an
explicit duty on managed care entities to exercise ordinary care in arranging
for the provision of medically necessary health care services and establishes a
system of independent medical review. This legislation is discussed in greater
detail in the Company's Annual Report on Form 10-K for the year ended December
31, 1999. Federal legislation enacted during the last four years seeks, among
other things, to insure the portability of health coverage and mandates minimum
maternity hospital stays. In 1997, Texas adopted legislation purporting to make
managed care organizations such as the Company liable for their failure to
exercise ordinary care when making health care treatment decisions. Similar
legislation has also been enacted in Georgia. These and other proposed measures
may have the effect of dramatically altering the regulation of health care and
of increasing the Company's loss ratio and administrative costs or decreasing
the affordability of the Company's products.


                                       16

<PAGE>

CONSOLIDATED RESULTS OF OPERATIONS

The Company's revenues are primarily generated from premiums earned for
risk-based health care and specialty services provided to its members, fees for
administrative services, including claims processing and access to provider
networks for self-insured employers, and investment income. Operating expenses
include health care services and other benefits expenses, consisting primarily
of payments for physicians, hospitals and other providers for health care and
specialty products claims; selling expenses for broker and agent commissions;
general and administrative expenses; interest expense; depreciation and
amortization expense; and income taxes.

The Company's consolidated results of operations for the three months ended June
30, 2000 include a full three months of earnings for Rush Prudential. The
Company's consolidated results of earnings for the six months ended June 30,
2000 include the results of Rush Prudential from March 1, 2000, the date of its
acquisition.

The following table sets forth selected operating ratios. The loss ratio for
health care services and other benefits is shown as a percentage of premium
revenue. All other ratios are shown as a percentage of premium revenue and
management services revenue combined.

<TABLE>
<CAPTION>


                                                   Three Months Ended                      Six Months Ended
                                                        June 30,                               June 30,
                                          -------------------------------------  -------------------------------------
                                                2000                1999               2000                1999
                                          -----------------   -----------------  -----------------   -----------------
<S>                                    <C>                   <C>                <C>                 <C>
Operating Revenues:
  Premium revenue                                    95.1%               94.2%              94.9%               93.8%
  Management services revenue                         4.9%                5.8%               5.1%                6.2%
                                          -----------------   -----------------  -----------------   -----------------
                                                    100.0%              100.0%             100.0%              100.0%
Operating Expenses:
  Health care services and other
    benefits (loss ratio)                            80.8%               80.9%              80.9%               80.9%
  Selling expense                                     4.3%                4.3%               4.4%                4.4%
  General and administrative expense                 13.8%               14.5%              14.0%               14.6%

</TABLE>

                                       17

<PAGE>



MEMBERSHIP

The following table sets forth membership data and the percent change in
membership:

<TABLE>
<CAPTION>

MEDICAL MEMBERSHIP (A) (B) (C):

                                                            As of June  30,
                                                     -------------------------------         Percent
                                                         2000             1999                Change
                                                     --------------   --------------        ----------
<S>                                                 <C>              <C>                   <C>
Large Employer Group (d)
  California
    HMO                                                  1,721,826        1,543,940             11.5%
    PPO and Other                                        1,893,291        1,630,206             16.1%
                                                     --------------   --------------
      Total California                                   3,615,117        3,174,146             13.9%
                                                     --------------   --------------
  Texas                                                    183,546          167,936              9.3%
  Georgia                                                   42,339           53,230            -20.5%
  Illinois                                                 463,064          242,195             91.2%
  Other States                                           1,171,861        1,314,072            -10.8%
                                                     --------------   --------------
      Total Large Employer Group                         5,475,927        4,951,579             10.6%
                                                     --------------   --------------

Individual and Small Employer Group
  California
    HMO                                                    347,208          350,492             -0.9%
    PPO and Other                                        1,207,551        1,169,503              3.3%
                                                     --------------   --------------
      Total California                                   1,554,759        1,519,995              2.3%
                                                     --------------   --------------
  Texas                                                    173,479          130,195             33.2%
  Georgia                                                   28,906           26,210             10.3%
  Illinois                                                  60,033           33,109             81.3%
  Other States                                             102,171          126,998            -19.5%
                                                     --------------   --------------
      Total Individual and Small Employer Group          1,919,348        1,836,507              4.5%
                                                     --------------   --------------
Senior (e)
  California
    HMO                                                     32,953           22,460             46.7%
    PPO and Other                                          170,953          165,581               3.2%
                                                     --------------   --------------
      Total California                                     203,906          188,041              8.4%
                                                     --------------   --------------
  Texas (f)                                                    223           23,518            -99.1%
  Georgia                                                      788              423             86.3%
  Illinois                                                   9,114            2,244            306.1%
  Other States                                               8,467           12,144            -30.3%
                                                     --------------   --------------
      Total Senior                                         222,498          226,370             -1.7%
                                                     --------------   --------------
Total Medical Membership                                 7,617,773        7,014,456              8.6%
                                                     ==============   ==============

MEMBERSHIP BY NETWORK (G)
  Proprietary Networks                                   5,904,555        5,038,295             17.2%
  Affiliate Networks                                     1,057,781        1,180,750            -10.4%
  Non-Network                                              655,437          795,411            -17.6%
                                                     --------------   --------------
TOTAL MEDICAL MEMBERSHIP                                 7,617,773        7,014,456              8.6%
                                                     ==============   ==============

MANAGEMENT SERVICES MEMBERSHIP
  California                                             1,259,587        1,086,790             15.9%
  Other States                                           1,246,918        1,384,584             -9.9%
                                                     --------------   --------------
TOTAL MANAGEMENT SERVICES MEMBERSHIP                     2,506,505        2,471,374              1.4%
                                                     ==============   ==============
</TABLE>


(a)  Membership numbers are approximate and include some estimates based upon
     the number of contracts at the relevant date and an actuarial estimate of
     the number of members represented by the contract.
(b)  Classification between states for employer groups is determined by the zip
     code of the subscriber.
(c)  Medical membership includes management services members which are primarily
     included in the Large Employer Group segment.

                                       18
<PAGE>

MEMBERSHIP, CONTINUED

(d)  Large Employer Group membership includes 746,321 and 594,661
     state-sponsored programs members as of June 30, 2000 and 1999,
     respectively.
(e)  Senior membership includes members covered under both Medicare risk and
     Medicare supplement products.
(f)  In the fourth quarter of 1999, the Company's UNICARE Life & Health
     Insurance Company made a strategic decision to discontinue its offering of
     Medicare supplement products primarily in the state of Texas.
(g)  Proprietary networks consist of California, Texas and other
     WellPoint-developed networks. Affiliate networks consist of third-party
     networks and networks owned by the Company as a result of acquisitions that
     incorporate provider discounts and some basic managed care elements.
     Non-network consists of fee for service and percentage-of-billed charges
     contracts with providers.

SPECIALTY MEMBERSHIP

<TABLE>
<CAPTION>

                                      As of June 30,
                             ---------------------------------      Percent
                                 2000               1999             Change
                             --------------    ---------------   ---------------
<S>                        <C>                <C>               <C>
Pharmacy                        25,125,427         20,463,928             22.8%

Dental                           2,223,465          2,528,406            -12.1%

Utilization Management           2,124,169          2,687,303            -20.9%

Life                             2,025,181          2,068,316             -2.0%

Disability                         564,030            623,528             -9.5%

Behavioral Health                2,285,920          2,036,256             12.3%

</TABLE>


COMPARISON OF RESULTS FOR THE SECOND QUARTER 2000 TO THE SECOND QUARTER 1999

The following table depicts premium revenue by business segment:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                        Three Months Ended June 30,
                                                       2000                 1999
                                               -------------------  -------------------
<S>                                          <C>                   <C>
Large Employer Group                                  $ 1,237,531           $  969,036
Individual and Small Employer Group                       760,490              623,960
Other                                                     134,657              115,759
                                               -------------------  -------------------
Consolidated                                          $ 2,132,678          $ 1,708,755
                                               ===================  ===================

</TABLE>


Premium revenue increased 24.8%, or $423.9 million, to $2,132.7 million for the
three months ended June 30, 2000 from $1,708.8 million for the three months
ended June 30, 1999. The overall increase was due to an increase in insured
member months of 13.0% in the Large Employer Group and Individual and Small
Employer Group business segments, in addition to the implementation of premium
increases in both segments.

                                       19

<PAGE>



COMPARISON OF RESULTS FOR THE SECOND QUARTER 2000 TO THE SECOND QUARTER 1999,
CONTINUED

The following table depicts management services revenue by business segment:

<TABLE>
<CAPTION>

      (IN THOUSANDS)                                          Three Months Ended June 30,
                                                               2000                 1999
                                                       -------------------  --------------------
<S>                                                  <C>                   <C>
      Large Employer Group                                    $  93,607             $  88,205
      Individual and Small Employer Group                           692                 1,115
      Other                                                      16,620                15,441
                                                       -------------------  --------------------
      Consolidated                                           $  110,919            $  104,761
                                                       ===================  ====================
</TABLE>


Management services revenue increased approximately $6.2 million to $110.9
million for the three months ended June 30, 2000 from $104.8 million for the
three months ended June 30, 1999. The change is primarily due to an increase in
insured member months of approximately 1.0%, in addition to the implementation
of price increases, partially offset by attrition related to previously acquired
businesses which had experienced higher per member per month rates than the
Company's other businesses.

Investment income was $45.2 million for the three months ended June 30, 2000
compared to $43.3 million for the three months ended June 30, 1999, an increase
of $1.9 million. Net realized losses on investment securities totaled $6.0
million for the three months ended June 30, 2000 in comparison to $4.2 million
for the three months ended June 30, 1999. Net interest and dividend income
increased $10.9 million to $51.0 million for the three months ended June 30,
2000, in comparison to $48.6 million for the three months ended June 30, 1999.
This increase was primarily due to higher average investment balances and yields
for debt securities in 2000 versus 1999 (See "--Liquidity and Capital
Resources").

The loss ratio attributable to managed care and related products for the three
months ended June 30, 2000 decreased to 80.8% compared to 80.9% for the three
months ended June 30, 1999. The slight decline was due primarily to the effect
of price increases primarily within the Individual and Small Employer Group
business segment, offset by growth in the Company's Large Employer Group
business segment which has historically experienced a higher loss ratio than the
Company's individual and small employer group business.

Selling expense consists of commissions paid to outside brokers and agents
representing the Company. The selling expense ratio remained unchanged at 4.3%
for the three months ended June 30, 2000 compared to the three months ended June
30, 1999.

The administrative expense ratio decreased to 13.8% for the three months ended
June 30, 2000 from 14.5% for the three months ended June 30, 1999. The overall
decline is primarily attributable to savings from the consolidation of various
regional offices outside of California, the integration of information systems
centers related to acquired businesses on the Company's information systems
platform, a reduction in Year 2000 expense from 1999 levels in addition to
economies of scale associated with premium revenue growth in relation to fixed
corporate administrative expenses.

                                       20
<PAGE>

COMPARISON OF RESULTS FOR THE SECOND QUARTER 2000 TO THE SECOND QUARTER 1999,
CONTINUED

Interest expense increased $1.3 million for the three months ended June 30, 2000
compared to the three months ended June 30, 1999. The increase in interest
expense was related to the higher average debt balance in 2000 compared to 1999,
which was partially offset by a decrease in the effective interest rate due to
the issuance of the Company's Zero Coupon Convertible Subordinated Debentures
(the "Debentures") in July 1999. The weighted average interest rate for all debt
for the three months ended June 30, 2000, including the fees associated with the
Company's borrowings and interest rate swap agreements, was 6.5%.

The Company's income before the cumulative effect of accounting change for the
three months ended June 30, 2000 was $83.7 million, compared to $71.1 million
for the three months ended June 30, 1999. Earnings per share before the
cumulative effect of accounting change totaled $1.35 and $1.05 for the three
months ended June 30, 2000 and 1999, respectively. Earnings per share before the
cumulative effect of accounting change assuming full dilution totaled $1.30 and
$1.03 for the three months ended June 30, 2000 and 1999, respectively.

Earnings per share for the three months ended June 30, 2000 is based upon
weighted average shares outstanding of 62.2 million, excluding potential common
stock, and 64.6 million shares, assuming full dilution. Earnings per share for
the three months ended June 30, 1999 is based on 67.6 million shares, excluding
potential common stock, and 68.9 million shares, assuming full dilution. For the
three months ended June 30, 2000, the decrease in weighted average shares
outstanding primarily relates to the effect of the repurchase of approximately
6.2 million treasury shares during the twelve months ended June 30, 1999. For
weighted average shares outstanding assuming full dilution, the decline was
partially offset by the impact of the assumed conversion of the Debentures.

COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS
ENDED JUNE 30, 1999

The following table depicts premium revenue by business segment:

<TABLE>
<CAPTION>


     (IN THOUSANDS)                                        Six Months Ended June 30,
                                                           2000                 1999
                                                    -------------------  -------------------
<S>                                               <C>                   <C>
     Large Employer Group                                  $ 2,381,648         $  1,895,475
     Individual and Small Employer Group                     1,480,336            1,210,918
     Other                                                     261,123              219,091
                                                    -------------------  -------------------
     Consolidated                                          $ 4,123,107          $ 3,325,484
                                                    ===================  ===================
</TABLE>

Premium revenue increased 24.0%, or $797.6 million, to $4,123.1 million for the
six months ended June 30, 2000 from $3,325.5 million for the six months ended
June 30, 1999. The overall increase was due to an increase in insured member
months of 11.6% in the Large Employer Group and Individual and Small Employer
Group business segments, in addition to the implementation of premium increases
in both segments.

                                       21


<PAGE>


COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS
ENDED JUNE 30, 1999, CONTINUED

The following table depicts management services revenue by business segment:

<TABLE>
<CAPTION>

     (IN THOUSANDS)                                        Six Months Ended June 30,
                                                           2000                 1999
                                                    -------------------  --------------------
<S>                                                <C>                  <C>
     Large Employer Group                                   $  186,779            $  187,544
     Individual and Small Employer Group                         1,658                 2,988
     Other                                                      32,906                28,667
                                                    -------------------  --------------------
     Consolidated                                           $  221,343            $  219,199
                                                    ===================  ====================

</TABLE>

Management services revenue increased approximately $2.1 million to $221.3
million for the six months ended June 30, 2000 from $219.2 million for the six
months ended June 30, 1999. The change is primarily due to an increase in
insured member months of approximately 0.5%, in addition to the implementation
of price increases, partially offset by attrition related to previously acquired
businesses which had experienced higher per member per month rates than the
Company's other businesses.

Investment income was $89.6 million for the six months ended June 30, 2000
compared to $83.3 million for the six months ended June 30, 1999, an increase of
$6.3 million. Net realized losses on investment securities totaled $11.2 million
for the six months ended June 30, 2000 in comparison to $3.2 million for the six
months ended June 30, 1999. Net interest and dividend income increased $10.9
million to $100.0 million for the three months ended June 30, 2000, in
comparison to $89.1 million for the six months ended June 30, 1999. This
increase was primarily due to higher average investment balances and yields for
debt securities in 2000 versus 1999 (See "--Liquidity and Capital Resources").

The loss ratio attributable to managed care and related products for the six
months ended June 30, 2000 remained unchanged at 80.9% for the six months ended
June 30, 2000 and 1999.

The selling expense ratio remained unchanged at 4.4% for the six months ended
June 30, 2000 compared to the six months ended June 30, 1999.

The administrative expense ratio decreased to 14.0% for the six months ended
June 30, 2000 from 14.6% for the six months ended June 30, 1999. The overall
decline is primarily attributable to savings from the consolidation of various
regional offices outside of California, the integration of information systems
centers related to acquired businesses on the Company's information systems
platform, a reduction in Year 2000 expense from 1999 levels in addition to
economies of scale associated with premium revenue growth in relation to fixed
corporate administrative expenses.

Interest expense increased $0.8 million for the six months ended June 30, 2000
compared to the six months ended June 30, 1999. The increase in interest expense
was related to the higher average debt balance in 2000 compared to 1999, which
was partially offset by a decrease in the effective interest rate due to the
issuance of the Company's Debentures in July 1999. The weighted average interest
rate for all debt for the six months ended June 30, 2000, including

                                       22
<PAGE>

COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS
ENDED JUNE 30, 1999, CONTINUED


the fees associated with the Company's borrowings and interest rate swap
agreements, was 6.4%.

Effective January 1, 1999, the Company changed its method of accounting for
start-up costs related to the Company's provider network development. The
cumulative effect of this change of $20.6 million, after tax, is reflected in
the results of operations for the six months ended June 30, 1999. The Company's
income before the cumulative effect of accounting change for the six months
ended June 30, 2000 was $163.3 million, compared to $142.2 million for the six
months ended June 30, 1999. Earnings per share before the cumulative effect of
accounting change totaled $2.61 and $2.11 for the six months ended June 30, 2000
and 1999, respectively. Earnings per share before the cumulative effect of
accounting change assuming full dilution totaled $2.53 and $2.07 for the six
months ended June 30, 2000 and 1999, respectively.

Earnings per share for the six months ended June 30, 2000 is based upon weighted
average shares outstanding of 62.5 million, excluding potential common stock,
and 64.8 million shares, assuming full dilution. Earnings per share for the six
months ended June 30, 1999 is based on 67.4 million shares, excluding potential
common stock, and 68.7 million shares, assuming full dilution. For the six
months ended June 30, 2000, the decrease in weighted average shares outstanding
primarily relates to the effect of the repurchase of approximately 6.2 million
treasury shares during the twelve months ended June 30, 1999. For weighted
average shares outstanding assuming full dilution, the decline was partially
offset by the impact of the assumed conversion of the Debentures.

FINANCIAL CONDITION

The Company's consolidated assets increased by $375.9 million, or 8.2%, from
$4,593.2 million as of December 31, 1999 to $4,969.1 million as of June 30,
2000. The increase in total assets was primarily due to an increase in goodwill
totaling $171.9 million related to the purchase of Rush Prudential, an increase
in receivables related to the timing of certain large customer payments, and
growth in cash and investments primarily as a result of operating cash flow. The
Company is currently in the process of completing the final asset valuation in
connection with the Rush Prudential acquisition and, as a result, the allocation
of the purchase price between goodwill and identifiable intangible assets was
preliminary as of June 30, 2000. Cash and investments totaled $3.3 billion as of
June 30, 2000, or 66.7% of total assets.

Overall claims liabilities increased $167.0 million, or 11.2%, from $1,491.2
million as of December 31, 1999 to $1,658.2 million as of June 30, 2000. This
increase is primarily due to an increase in insured membership from December 31,
1999 to June 30, 2000 of approximately 8.9% in the Company's Large Employer
Group and Individual and Small Employer Group business segments.

As of June 30, 2000, the Company's long-term indebtedness was $399.4 million, of
which $149.4 million was related to the Company's Debentures and $250.0 million
was related to the Company's revolving credit facility. As of December 31, 1999,
the Company's long-term

                                       23
<PAGE>


FINANCIAL CONDITION, CONTINUED

indebtedness was $347.9 million, of which $200.0 million was outstanding under
the Company's revolving credit facility.

Stockholders' equity totaled $1,394.0 million as of June 30, 2000, an increase
of $81.3 million from $1,312.7 million as of December 31, 1999. The increase was
primarily due to net income of $163.3 million for the six months ended June 30,
2000, an increase in net unrealized gains on investment securities, net of tax,
of $11.9 million and $44.2 million of stock issuances under the Company's stock
option/purchase plans. These increases were partially offset by stock
repurchases made during 2000 totaling $122.2 million, funded primarily from
income from operations. In addition, the Company experienced net losses on the
reissuance of the Company's Common Stock from treasury of $15.9 million.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of cash are premium and management services
revenues received and investment income. The primary uses of cash include health
care claims and other benefits, capitation payments, income taxes, repayments of
long-term debt, interest expense, broker and agent commissions, administrative
expenses and capital expenditures. In addition to the foregoing, other uses of
cash include costs of provider networks and systems development, and costs
associated with acquisitions and the integration of acquired businesses.

The Company generally receives premium revenue in advance of anticipated claims
for related health care services and other benefits. The Company's investment
policies are designed to provide liquidity, preserve capital and maximize yield.
Cash and investment balances maintained by the Company are sufficient to meet
applicable regulatory financial stability and net worth requirements, including
license requirements of the Blue Cross Blue Shield Association. As of June 30,
2000, the Company's investment portfolio consisted primarily of investment grade
fixed maturity securities.

Net cash flow provided by operating activities was $238.1 million for the six
months ended June 30, 2000, compared with $224.1 million for the six months
ended June 30, 1999. Cash flow from operations for the six months ended June 30,
2000 was due primarily to income before the cumulative effect of accounting
change of $163.3 million, increases in medical claims payable of $100.3 million
related to the growth of insured members and the timing of other operating
liability payments, and increases in unearned premiums of $32.6 million. These
items were partially offset by an increase in accounts receivable of $68.0
million, which was primarily related to the timing of collection of large
customer receivables in the normal course of business, and a decline in income
taxes payable of $62.8 million primarily related to tax payments made during the
second quarter of 2000.

Net cash used in investing activities for the six months ended June 30, 2000
totaled $356.0 million, compared with $318.7 million for the six months ended
June 30, 1999. The cash used in 2000 was attributable primarily to the purchase
of investments of $2.2 billion and the purchase of property, plant and
equipment, net of sales proceeds, of $20.4 million. In addition, during the six
months ended June 30, 2000, net cash used in investing activities was affected
by the purchase of Rush Prudential for approximately $206.1 million less
acquired cash of

                                       24
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

$63.2 million. These items were partially offset by the proceeds from
investments sold and matured of $2.0 billion.

Net cash used in financing activities totaled $43.9 million for the six months
ended June 30, 2000, compared to net cash provided by financing activities
totaling $29.6 million for the six months ended June 30, 1999. Net cash used in
financing activities during the six months ended June 30, 2000 was primarily
affected by an increase in indebtedness of $150.0 million under the Company's
revolving credit facility, partially offset by the repayment of $100.0 million
under the same facility. In addition, the Company repurchased 1.9 million shares
of the Company's Common Stock for an aggregate $122.2 million and issued Common
Stock for an aggregate of $28.3 million pursuant to the Company's stock
incentive and employee stock purchase programs.

The Company has a $1.0 billion unsecured revolving credit facility. Borrowings
under the credit facility bear interest at rates determined by reference to the
bank's base rate or to the London Interbank Offered Rate ("LIBOR") plus a margin
determined by reference to the Company's leverage ratio (as defined in the
credit agreement) or the then-current rating of the Company's unsecured
long-term debt by specified rating agencies. Borrowings under the credit
facility are made on a committed basis or pursuant to an auction-bid process.
The credit facility expires as of May 15, 2002, although it may be extended for
an additional one-year period under certain circumstances. The credit agreement
requires the Company to maintain certain financial ratios and contains
restrictive covenants, including restrictions on the occurrence of additional
indebtedness and the granting of certain liens, limitations on acquisitions and
investments and limitations on changes in control. The total amount outstanding
under the credit facility was $250 million as of June 30, 2000 and $200 million
as of December 31, 1999. The weighted average interest rate, including
associated fees and the Company's interest rate swap agreements, for the six
months ended June 30, 2000 was 7.9%.

As part of a hedging strategy, the Company has entered into interest rate swap
agreements in order to reduce the volatility of interest expense resulting from
changes in interest rates. As of June 30, 2000, the Company had entered into
$200 million of floating to fixed rate swap agreements, which consists of a $150
million notional amount swap agreement at 6.99% and a $50 million notional
amount swap agreement at 7.06%.

The Company has entered into foreign currency forward exchange contracts for
each of the fixed maturity securities on hand as of June 30, 2000 denominated in
foreign currencies in order to hedge asset positions with respect to these
securities. The unrealized gains and losses from such forward exchange contracts
are reflected in accumulated other comprehensive income. In addition, the
Company has entered into forward exchange contracts to hedge the foreign
currency risk between the trade date and the settlement date when a
foreign-currency denominated bond is purchased. Gains and losses from these
contracts are recognized in income.

Certain of the Company's subsidiaries are required to maintain minimum capital
requirements prescribed by various regulatory agencies, including the California
Department of Managed Health Care, and the Departments of Insurance in
California and various other states. As of

                                       25

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

June 30, 2000, those subsidiaries of the Company were in compliance with all
minimum capital requirements.

In July 1996, the Company filed a registration statement relating to the
issuance of $1.0 billion of senior or subordinated unsecured indebtedness. As of
June 30, 2000, no indebtedness had been issued pursuant to this registration
statement.

The Company believes that cash flow generated by operations, and its cash and
investment balances, supplemented by the Company's ability to borrow under its
existing revolving credit facility or through public or private financing
sources will be sufficient to fund continuing operations and expected capital
requirements (including the proposed Merger with Cerulean) for the foreseeable
future.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Certain statements contained herein, such as statements concerning potential or
future loss ratios, pending acquisitions and other statements regarding matters
that are not historical facts, are forward-looking statements (as such term is
defined in the Securities Exchange Act of 1934). Such statements involve a
number of risks and uncertainties that may cause actual results to differ from
those projected. Factors that can cause actual results to differ materially
include, but are not limited to, those discussed below and those discussed from
time to time in the Company's various filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K.

The Company's operations are subject to substantial regulation by Federal,
state and local agencies in all jurisdictions in which the Company operates.
Many of these agencies have increased their scrutiny of managed health care
companies in recent periods or are expected to increase their scrutiny as
newly passed legislation becomes effective. From time to time, the Company
and its subsidiaries receive requests for information from regulatory
agencies or are notified that such agencies are conducting reviews,
investigations or other proceedings with respect to certain of the Company's
activities. The Company also provides insurance products to Medi-Cal
beneficiaries in various California counties under contracts with the
California Department of Health Services (or delegated local agencies) and
provides administrative services to the Health Care Finance Administration
("HCFA") in various capacities. There can be no assurance that acting as a
government contractor in these circumstances will not increase the risk of
heightened scrutiny by such government agencies or that such scrutiny will
not have a material adverse effect on the Company, either through negative
publicity about the Company or through an adverse impact on the Company's
results of operations.  In addition, profitability from this business may be
adversely affected through inadequate premium rate increases due to
governmental budgetary issues. Future actions by any regulatory agencies may
have a material adverse effect on the Company's business.

Completion of the Company's pending transaction with Cerulean is contingent
upon, among other things, receipt of necessary approvals from certain federal
and state agencies on or before December 31, 2000. Broad latitude in
administering the applicable regulations is given to the agencies from which
WellPoint and Cerulean must seek these approvals. There can be no assurance that
these approvals will be obtained. As a condition to approval of the transaction,
regulatory agencies may impose requirements or limitations or costs on the way
that the combined company conducts business after consummation of the
transaction. If the Company or Cerulean were to agree to any material
requirements or limitations in order to obtain any

                                       26
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATION, CONTINUED

approvals required to consummate the transaction, such requirements or
limitations or additional costs associated therewith could adversely affect
WellPoint's ability to integrate the operations of Cerulean with those of
WellPoint, and a material adverse effect on WellPoint's revenues and results of
operations following completion of the transaction could result.

The Company intends to incur debt to finance some or all of the cash payments to
be made to Cerulean shareholders in connection with the pending acquisition. In
addition, WellPoint has received authorization to, and has, repurchased shares
of WellPoint stock to offset shares that are expected to be issued in connection
with the transaction. WellPoint has made significant purchases of treasury stock
for this purpose, using excess cash as well as the issuance of additional
indebtedness. Upon completion of the Cerulean transaction, WellPoint could incur
significant additional indebtedness to fund not only the cash portion of the
transaction but also any further repurchases of shares of WellPoint stock. Such
additional indebtedness may require that a significant amount of the Company's
cash flow be applied to the payment of interest, and there can be no assurance
that the Company's operations will generate sufficient cash flow to service the
indebtedness. Any additional indebtedness may adversely affect the Company's
ability to finance its operations and could limit its ability to pursue business
opportunities that may be in the best interests of the Company and its
stockholders.

As part of the Company's business strategy, the Company has acquired substantial
operations in new geographic markets over the last four years. The Company has
also entered into a merger agreement with Cerulean, pursuant to which Cerulean
will become a wholly owned subsidiary of the Company. These businesses, some of
which include substantial indemnity-based insurance operations, have experienced
varying profitability or losses in recent periods. Since the relevant dates of
acquisition of MMHD and GBO, the Company has continued to work extensively on
the integration of these businesses. The Company has also begun its integration
of the Rush Prudential business. However, there can be no assurances regarding
the ultimate success of the Company's integration efforts or regarding the
ability of the Company to maintain or improve the results of operations of the
businesses of completed or pending transactions as the Company pursues its
strategy of motivating the acquired members to select managed care products. In
order to implement this business strategy, the Company has incurred and will,
among other things, need to continue to incur considerable expenditures for
provider networks, distribution channels and information systems in addition to
the costs associated with the integration of these acquisitions. The integration
of these complex businesses may result in, among other things, temporary
increases in claims inventory or other service-related issues that may
negatively affect the Company's relationship with its customers and contribute
to increased attrition of such customers. The Company's results of operations
could be adversely affected in the event that the Company experiences such
problems or is otherwise unable to implement fully its expansion strategy.

The Company and certain of its subsidiaries are subject to capital requirements
by the California Department of Managed Health Care, various other state
departments of insurance and the Blue Cross Blue Shield Association. Although
the Company believes that it is currently in compliance with all applicable
requirements, there can be no assurances that such requirements will not be
increased in the future.


                                       27
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATION, CONTINUED

From time to time, the Company and certain of its subsidiaries are parties to
various legal proceedings, many of which involve claims for coverage encountered
in the ordinary course of business. The Company, like HMOs and health insurers
generally, excludes certain health care services from coverage under its HMO,
PPO and other plans. The Company is, in its ordinary course of business, subject
to the claims of its enrollees arising out of decisions to restrict treatment or
reimbursement for certain services. The loss of even one such claim, if it
results in a significant punitive damage award, could have a material adverse
effect on the Company. In addition, the risk of potential liability under
punitive damage theories may increase significantly the difficulty of obtaining
reasonable settlements of coverage claims.

In June 2000, the California Medical Association filed a lawsuit in U.S.
district court in San Francisco against the Company's subsidiary, Blue Cross
of California ("BCC"). The lawsuit alleges that BCC violated the federal
Racketeering Influenced and Corrupt Organizations Act through various
misrepresentations to and inappropriate actions against health care
providers. In late 1999, a number of class-action lawsuits were brought
against several of the Company's competitors alleging, among other things,
various misrepresentations regarding their health plans and breaches of
fiduciary obligations to health plan members. The Company has not yet been
made a party to any of such member lawsuits. The financial and operational
impact that these and other evolving theories of recovery will have on the
managed care industry generally, or the Company in particular, is at present
unknown.

The Company's future results will depend in large part on accurately predicting
health care costs incurred on existing business and upon the Company's ability
to control future health care costs through product and benefit design,
underwriting criteria, utilization management and negotiation of favorable
provider contracts. Changes in mandated benefits, utilization rates, demographic
characteristics, health care practices, provider consolidation, inflation, new
pharmaceuticals/technologies, clusters of high-cost cases, the regulatory
environment and numerous other factors are beyond the control of any health plan
provider and may adversely affect the Company's ability to predict and control
health care costs and claims, as well as the Company's financial condition,
results of operations or cash flows. Periodic renegotiation of hospital and
other provider contracts coupled with continued consolidation of physician,
hospital and other provider groups may result in increased health care costs and
limit the Company's ability to negotiate favorable rates. Recently, large
physician practice management companies have experienced extreme financial
difficulties, including bankruptcy, which may subject the Company to increased
credit risk related to provider groups and cause the Company to incur
duplicative claims expense. Additionally, the Company faces competitive pressure
to contain premium prices. Fiscal concerns regarding the continued viability of
government-sponsored programs such as Medicare and Medicaid may cause decreasing
reimbursement rates for these programs. Any limitation on the Company's ability
to increase or maintain its premium levels, design products, implement
underwriting criteria or negotiate competitive provider contracts may adversely
affect the Company's financial condition or results of operations.

Managed care organizations operate in a highly competitive environment that has
undergone significant change in recent years as a result of business
consolidations, new strategic alliances,

                                       28
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATION, CONTINUED

aggressive marketing practices by competitors and other market pressures.
Additional increases in competition (including competition from market entrants
offering internet-based products and services) could adversely affect the
Company's financial condition, cash flows or results of operations.

As a result of the Company's recent acquisitions, the Company operates on a
select geographic basis nationally and offers a spectrum of health care and
specialty products through various risk-sharing arrangements. The Company's
health care products include a variety of managed care offerings as well as
traditional fee-for-service coverage. With respect to product type,
fee-for-service products are generally less profitable than managed care
products. A critical component of the Company's expansion strategy is to
transition over time the traditional insurance members of the Company's acquired
businesses to more managed care products.

With respect to the risk-sharing nature of products, managed care products that
involve greater potential risk to the Company generally tend to be more
profitable than management services products and those managed care products
where the Company is able to shift risks to employer groups. Individuals and
small employer groups are more likely to purchase the Company's higher-risk
managed care products because such purchasers are generally unable or unwilling
to bear greater liability for health care expenditures. Typically,
government-sponsored programs involve the Company's higher risk managed care
products. Over the past few years, the Company has experienced a slight decline
in margins in its higher risk managed care products and to a lesser extent on
its lower-risk managed care and management services products. This decline is
primarily attributable to product mix change, product design, competitive
pressure and greater regulatory restrictions applicable to the small employer
group market. From time to time, the Company has implemented price increases in
certain of its managed care businesses. While these price increases are intended
to improve profitability, there can be no assurance that this will occur.
Subsequent unfavorable changes in the relative profitability between the
Company's various products could have a material adverse effect on the Company's
results of operations and on the continued merits of the Company's geographic
expansion strategy.

Substantially all of the Company's investment assets are in interest-yielding
debt securities of varying maturities or equity securities. The value of fixed
income securities is highly sensitive to fluctuations in short- and long-term
interest rates, with the value decreasing as such rates increase and increasing
as such rates decrease. In addition, the value of equity securities can
fluctuate significantly with changes in market conditions. Changes in the value
of the Company's investment assets, as a result of interest rate fluctuations,
can affect the Company's results of operations and stockholders' equity. There
can be no assurances that interest rate fluctuations will not have a material
adverse effect on the results of operations or financial condition of the
Company.

The Company's operations are dependent on retaining existing employees,
attracting additional qualified employees and achieving productivity gains from
the Company's investment in technology. The Company faces intense competition
for qualified information technology personnel and other skilled professionals.
There can be no assurances that an inability to retain

                                       29
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATION, CONTINUED

existing employees or attract additional employees will not have a material
adverse effect on the Company's results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from that disclosed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

                                       30
<PAGE>

PART II  OTHER INFORMATION

ITEM 4. Submission of Matters to a Vote of Securityholders

On May 9, 2000, the annual meeting of stockholders of the Company was held. The
agenda items for such meeting are shown below along with the vote of the
Company's Common Stock with respect to such agenda items.

1.   Election of three Class I Directors to serve until the 2003 Annual Meeting
of Stockholders or the election of their successors.

                  Nominee: Roger E. Birk
                           Votes FOR: 57,629,610
                           Votes WITHHELD AUTHORITY: 571,902

                  Nominee: Sheila P. Burke
                           Votes FOR: 57,631,964
                           Votes WITHHELD AUTHORITY: 569,548

                  Nominee: Elizabeth A. Sanders
                           Votes FOR: 57,632,189
                           Votes WITHHELD AUTHORITY: 569,323

The terms of W. Toliver Besson, Stephen L. Davenport, Julie A. Hill and Leonard
D. Schaffer continued after the meeting.

2.   Proposal to approve an amendment and restatement of the Company's Employee
     Stock Purchase Plan.

                  Votes FOR:                          50,215,176
                  Votes AGAINST:                       7,676,721
                  Votes ABSTAIN:                         309,615
                  Broker non-votes:                            0

3.       Ratification of the selection of PricewaterhouseCoopers LLP as the
         Company's independent public accountants for the fiscal year ending
         December 31, 2000.

                  Votes FOR:                            58,049,811
                  Votes AGAINST:                            27,042
                  Votes ABSTAIN:                           124,359
                  Broker non-votes:                              0


                                       31
<PAGE>

PART II  OTHER INFORMATION, Continued

ITEM 6. Exhibits and Reports on Form 8-K
     (a)  Exhibits

          2.01 Amended and Restated Recapitalization Agreement dated as of March
               31, 1995 by and among the Registrant, Blue Cross of California,
               Western Health Partnership and Western Foundation for Health
               Improvement, incorporated by reference to Exhibit 2.1 of the
               Registrant's Registration Statement on Form S-4 dated April 8,
               1996

          2.02 Agreement and Plan of Merger dated as of July 9, 1998, by and
               among Cerulean Companies, Inc., WellPoint and Water Polo
               Acquisition Corp., incorporated by reference to Exhibit 2.4 of
               the Registrant's Registration Statement on Form S-4 (Registration
               No. 333-64955).

          2.03 Stock Purchase Agreement dated as of July 29, 1998, by and
               between the Registrant and Fremont Indemnity Company,
               incorporated by reference to Exhibit 2.1 to the Registrant's
               Current Report on Form 8-K dated September 1, 1998.

          2.04 First Amendment to the Stock Purchase Agreement dated as of
               November 5, 1998, by and between the Registrant and Fremont
               Indemnity Company, incorporated by reference to Exhibit 2.05 to
               the Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1998.

          2.05 Second Amendment to the Stock Purchase Agreement dated as of
               February 1, 1999, by and between the registrant and Fremont
               Indemnity Company, incorporated by reference to Exhibit 2.06 to
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1998.

          2.06 First Amendment to the Agreement and Plan of Merger dated as of
               July 9, 1999, by and among Cerulean Companies, Inc., the
               Registrant and Water Polo Acquisition Corp., incorporated by
               reference to Exhibit 2.07 to Registrant's Quarterly Report on
               Form 10-Q for the quarter ended June 30, 1999.

          2.07 Second Amendment to the Agreement and Plan of Merger dated as of
               December 31, 1999, by and among Cerulean Companies, Inc., the
               Registrant and Water Polo Acquisition Corp. incorporated by
               reference to Exhibit 2.07 of the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1999.

          3.01 Restated Certificate of Incorporation of the Registrant,
               incorporated by reference to Exhibit 3.1 of the Registrant's
               Current Report on Form 8-K filed on August 5, 1997.

          3.02 Bylaws of the Registrant, incorporated by reference to Exhibit
               4.2 of the Registrant's Registration Statement on Form S-8,
               Registration No. 333-90791

          4.01 Specimen of common stock certificate of WellPoint Health Networks
               Inc., incorporated by reference to Exhibit 4.4 of Registrant's
               Registration Statement on Form 8-B, Registration No. 001-13083

                                       32
<PAGE>

PART II  OTHER INFORMATION, Continued

          ITEM 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits, Continued

          4.02  Restated Certificate of Incorporation of the Registrant
                (included in Exhibit 3.01)

          4.03  Bylaws of the Registrant (included in Exhibit 3.02)

          4.04  Indenture dated as of July 2, 1999 by and between the Registrant
                and The Bank of New York, as trustee (including the form of
                Debenture attached as Exhibit A thereto), incorporated by
                reference to Exhibit 4.04 to the Registrant's Quarterly Report
                on Form 10-Q for the quarter ended June 30, 1999.

          10.01 Amendment No. 1 to the Special Executive Retirement Plan for
                Leonard D. Schaeffer.

          10.02 WellPoint Health Networks Inc. Supplemental Executive Retirement
                Plan.

          27.1  Financial Data Schedule

(b)      Reports on Form 8-K

No Current Reports on Form 8-K were filed by the Company during the period
covered by this Quarterly Report on Form 10-Q.


                                      33

<PAGE>



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                   WELLPOINT HEALTH NETWORKS INC.
                                   Registrant


Date: August 11, 2000              By:  \s\ LEONARD D. SCHAEFFER
                                      --------------------------------------
                                      Leonard D. Schaeffer
                                      Chairman of the Board of Directors
                                      and Chief Executive Officer



Date: August 11, 2000             By:  \s\ DAVID C. COLBY
                                      --------------------------------------
                                      David C. Colby
                                      Executive Vice President
                                      and Chief Financial Officer



Date: August 11, 2000             By:  \s\ KENNETH C. ZUREK
                                      --------------------------------------
                                      Kenneth C. Zurek
                                      Senior Vice President, Controller
                                      and Taxation


                                       34