<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 SEPTEMBER 30, 1999

                                       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 NOVEMBER 11, 1999
       ------------------                    --------------------------------
   Common Stock, $0.0l par value                      63,638,380 shares


<PAGE>


                         WELLPOINT HEALTH NETWORKS INC.
                          THIRD QUARTER 1999 FORM 10-Q
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                      ----
<S>                                                                                   <C>
PART I.  FINANCIAL INFORMATION

  ITEM 1.   Financial Statements

            Consolidated Balance Sheets as of September 30, 1999 and
               December 31, 1998........................................................ 1

            Consolidated Income Statements for the Three and Nine Months
               Ended September 30, 1999 and 1998........................................ 2

            Consolidated Statement of Changes in Stockholders' Equity
               for the Nine Months Ended September 30, 1999............................. 3

            Consolidated Statements of Cash Flows for the
               Nine Months Ended September 30, 1999 and 1998............................ 4

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

  ITEM 2.   Management's Discussion and Analysis of
               Financial Condition and Results of Operations........................... 12

PART II.  OTHER INFORMATION

  ITEM 6.   Exhibits and Reports on Form 8-K........................................... 35

SIGNATURES  ........................................................................... 37

</TABLE>

<PAGE>



ITEM 1.   FINANCIAL STATEMENTS

                                                WELLPOINT HEALTH NETWORKS INC.
                                                 Consolidated Balance Sheets
<TABLE>
<CAPTION>

(IN THOUSANDS, EXCEPT SHARE DATA)                                         September 30,       December 31,
                                                                            1999                1998
                                                                          ------------        ------------
                                                                                    (Unaudited)
<S>                                                                       <C>                   <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                              $  644,032            $  410,875
   Investment securities, at market value                                  2,565,221             2,250,174
   Receivables, net                                                          488,104               485,259
   Deferred tax assets                                                       131,494               121,881
   Income taxes recoverable                                                        -                95,902
   Other current assets                                                       56,303                70,349
                                                                          ----------            ----------
       Total Current Assets                                                3,885,154             3,434,440
Property and equipment, net                                                  130,389               131,459
Intangible assets, net                                                        90,259                93,937
Goodwill, net                                                                312,521               336,155
Long-term investments, at market value                                       103,893               103,253
Deferred tax assets                                                           66,569                79,976
Other non-current assets                                                      45,688                46,614
                                                                          ----------            ----------
           Total Assets                                                   $4,634,473            $4,225,834
                                                                          ==========            ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Medical claims payable                                                 $1,077,072            $  946,502
   Reserves for future policy benefits                                        57,047                55,024
   Unearned premiums                                                         217,512               215,058
   Accounts payable and accrued expenses                                     455,763               342,713
   Experience rated and other refunds                                        213,005               249,685
   Income taxes payable                                                       69,026                     -
   Other current liabilities                                                 372,885               373,882
                                                                          ----------            ----------
      Total Current Liabilities                                            2,462,310             2,182,864
Accrued postretirement benefits                                               70,983                67,058
Reserves for future policy benefits, non-current                             293,455               319,056
Long-term debt                                                               501,827               300,000
Other non-current liabilities                                                 38,600                41,633
                                                                          ----------            ----------
      Total Liabilities                                                    3,367,175             2,910,611
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, 71,391,998 and 70,620,657 issued
       at September 30, 1999 and December 31, 1998, respectively                 714                   706
   Treasury stock, at cost, 6,376,556 and 3,501,556 shares at
       September 30, 1999 and December 31, 1998, respectively               (409,353)             (193,435)
   Additional paid-in capital                                                955,091               921,747
   Retained earnings                                                         774,462               576,598
   Accumulated other comprehensive income                                    (53,616)                9,607
                                                                          ----------            ----------
       Total Stockholders' Equity                                          1,267,298             1,315,223
                                                                          ----------            ----------
               Total Liabilities and Stockholders' Equity                 $4,634,473            $4,225,834
                                                                          ==========            ==========

</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 September 30,     Nine Months Ended September 30,
                                                             --------------------------------     ------------------------------
                                                              1999              1998               1999               1998
                                                              ----             -----               ----               ----
<S>                                                         <C>             <C>                <C>               <C>
Revenues:
  Premium revenue                                           $ 1,744,255       $1,480,058        $5,069,739       $4,375,261
  Management services revenue                                   103,989          109,587           323,188          329,002
  Investment income                                              43,269           39,094           126,604           70,511
                                                            -----------       -----------       -----------      ----------
                                                              1,891,513        1,628,739         5,519,531        4,774,774
Operating Expenses:
  Health care services and other benefits                     1,400,391        1,191,848         4,092,039        3,518,793
  Selling expense                                                85,263           71,255           240,882          207,039
  General and administrative expense                            269,245          240,985           786,520          729,831
                                                            -----------       ----------        ----------       ----------
                                                              1,754,899        1,504,088         5,119,441        4,455,663
                                                            -----------       ----------        ----------       ----------
Operating Income                                                136,614          124,651           400,090          319,111
  Interest expense                                                3,686            5,817            15,693           20,425
  Other expense, net                                              7,914            6,530            26,249           19,971
                                                            -----------       ----------        ----------       ----------

Income from Continuing Operations before Provision for
  Income Taxes and Cumulative Effect of Accounting Change       125,014          112,304           358,148          278,715
  Provision (benefit) for income taxes                           48,781          (39,904)          139,726           26,563
                                                            -----------       ----------        ----------       ----------
Income from Continuing Operations before Cumulative
  Effect of Accounting Change                                    76,233          152,208           218,422          252,152
Loss from Workers' Compensation Segment, net of tax                   -                -                 -          (12,592)
Loss on disposal of Workers' Compensation Segment                     -                -                 -          (75,676)
                                                            -----------       ----------        ----------       ----------
Loss from Discontinued Operations                                     -                -                 -          (88,268)
Cumulative Effect of Accounting Change, net of tax                    -                -           (20,558)               -
                                                            ===========       ==========        ==========       ==========
Net Income                                                  $    76,233       $  152,208        $  197,864       $  163,884
                                                            ===========       ==========        ==========       ==========


Earnings Per Share
  Income from continuing operations before cumulative
    effect of accounting change                             $      1.16       $     2.20       $      3.27       $     3.61
  Loss from discontinued operations                                   -                -                 -            (1.26)
  Cumulative effect of accounting change                              -                -             (0.31)               -
                                                            ===========       ==========       ===========       ==========
  Net Income                                                $      1.16       $     2.20       $      2.96       $     2.35
                                                             ===========      ===========       ===========      ==========

Earnings Per Share Assuming Full Dilution
  Income from continuing operations before cumulative
    effect of accounting change                             $      1.11       $     2.16        $      3.19      $      3.56
  Loss from discontinued operations                                   -                -                  -            (1.25)
  Cumulative effect of accounting change                              -                -              (0.30)               -
                                                            ===========       ==========        ===========      ===========
  Net Income                                                $      1.11       $     2.16        $      2.89      $      2.31
                                                            ===========       ==========        ===========      ===========

</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
                                                        ---------------------------                          Accumulated
                                                            Issued      In Treasury  Additional               Other
                                              Preferred -------------- ------------   Paid - in  Retained  Comprehensive
                                                Stock   Shares  Amount    Amount       Capital   Earnings     Income       Total
                                              --------- ------- ------ ------------ ------------ --------- ------------ -----------
<S>                                           <C>       <C>     <C>    <C>          <C>          <C>        <C>         <C>
Balance as of December 31, 1998                  $   -  70,621  $  706  $ (193,435)    $ 921,747 $ 576,598   $   9,607  $ 1,315,223

Comprehensive income
    Net income                                                                                     197,864                  197,864
    Other comprehensive income, net
        of tax (see Note 4)
        Change in unrealized valuation
          adjustment on investment
          securities,net of reclassification
          adjustment, net of deferred
          tax of $38,417                                                                                       (64,070)     (64,070)
        Foreign currency adjustments,
            net of deferred tax of $527                                                                            847          847
                                                                                                 --------- ------------ -----------
Total comprehensive income                                                                         197,864     (63,223)     134,641
                                                                                                 --------- ------------ -----------
Stock repurchased, 2,875,000 shares
        at cost                                                           (215,918)                                        (215,918)

Stock issued under Company's
        stock option / award plan                          771       8                    33,344                             33,352

                                              ========= ======= ====== ============ ============ ========= ============ ===========
Balance as of September 30, 1999                 $   -  71,392  $  714  $ (409,353)    $ 955,091 $ 774,462   $ (53,616) $ 1,267,298
                                              ========= ======= ====== ============ ============ ========= ============ ===========
</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)                                                                             Nine Months Ended September 30,
                                                                                          --------------------------------
                                                                                             1999                   1998
                                                                                          ----------            -----------
<S>                                                                                       <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Income from continuing operations before cumulative effect of
    accounting change                                                                     $   218,422           $   252,152
  Adjustments to reconcile income from continuing operations to net cash
    provided by continuing operating activities:
     Depreciation and amortization, net of accretion                                           57,701                39,152
     Losses on sales of assets, net                                                             8,200                37,605
     Provision (benefit) for deferred income taxes                                             41,684               (19,119)
     Amortization of deferred gain on sale of building                                         (3,320)               (3,319)
     Accretion of interest on zero coupon convertible subordinated debentures                   1,004                     -
     (Increase) decrease in certain assets:
        Receivables, net                                                                       (4,387)             (101,196)
        Income taxes recoverable                                                              179,585               (71,794)
        Other current assets                                                                  (21,169)                 (354)
        Other non-current assets                                                                  926                 1,483
     Increase (decrease) in certain liabilities:
        Medical claims payable                                                                130,570                37,401
        Reserves for future policy benefits                                                   (23,578)               (5,062)
        Unearned premiums                                                                       2,454                 2,420
        Accounts payable and accrued expenses                                                  75,376                18,744
        Experience rated and other refunds                                                    (36,680)                3,341
        Other current liabilities                                                              13,716                28,195
        Accrued postretirement benefits                                                         3,925                   646
        Other non-current liabilities                                                             287                (1,127)
                                                                                          -----------           -----------
            Net cash provided by continuing operating activiteis                              644,716               219,168
                                                                                          -----------           -----------
Loss from discontinued operations                                                                   -               (12,592)
Adjustment to derive cash flows from discontinued operating activities:
        Change in net operating assets                                                              -                 8,233
                                                                                          -----------           -----------
Net cash used in discontinued operating activities                                                  -                (4,359)
                                                                                          -----------           -----------
            Net cash provided by operating activities                                         644,716               214,809
                                                                                          -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments purchased                                                                    (2,502,604)           (2,243,179)
  Proceeds from investments sold and matured                                                2,072,059             2,181,268
  Property and equipment purchased                                                            (26,589)              (58,473)
  Proceeds from property and equipment sold                                                       263                24,571
  Proceeds from sale of Workers' Compensation business                                              -               101,413
  Settlement of sales price for sale of Workers' Compensation business                         (6,733)                    -
                                                                                          -----------           -----------
            Net cash provided by (used in) continuing investing activities                   (463,604)                5,600
                                                                                          -----------           -----------
  Net cash provided by discontinued investing activities                                            -                15,877
                                                                                          -----------           -----------
            Net cash provided by (used in) investing activities                              (463,604)               21,477
                                                                                          -----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt                                                                      -              (135,000)
   Proceeds from issuance of zero coupon subordinated convertible debentures                  200,823                     -
   Proceeds from issuance of common stock                                                      33,352                23,979
   Common stock repurchased                                                                  (182,130)             (124,126)
                                                                                          -----------           -----------
            Net cash provided by (used in) financing activities                                52,045              (235,147)
                                                                                          -----------           -----------
Net increase in cash and cash equivalents                                                     233,157                 1,139
Cash and cash equivalents at beginning of period                                              410,875               269,067
                                                                                          -----------           -----------
Cash and cash equivalents at end of period                                                $   644,032           $   270,206
                                                                                          ===========           ===========
</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
     September 30, 1999, WellPoint had approximately 7.2 million medical members
     and approximately 30.6 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 typically offers such plans at
     a lower cost in exchange for additional cost-control measures, such as
     limited flexibility in choosing physicians and hospitals that are not
     included in the Company's provider networks. The Company believes that it
     is better able to predict and control its health care costs as its members
     select more intensively managed health care 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 September 30, 1999, the results of its operations
     for the quarter and nine months ended September 30, 1999 and 1998, cash
     flows for the nine months ended September 30, 1999 and 1998 and its changes
     in stockholders' equity for the nine months ended September 30, 1999. The
     results of operations for the interim periods presented are not necessarily
     indicative of the operating results for the full year.


                                       5


<PAGE>

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

3.   EARNINGS PER SHARE

     The following summarizes the dilutive effect of the Company's common stock
     equivalents, stock options and its subordinated convertible debentures, on
     earnings per share. There were no antidilutive securities in any of the
     periods presented.

<TABLE>
<CAPTION>

                                                                 Three Months Ended                    Nine Months Ended
                                                                    September 30,                        September 30,
                                                            ----------------------------          -----------------------------
                                                              1999               1998               1999                1998
                                                            ---------          ---------          ---------           ---------
<S>                                                         <C>                <C>                <C>                 <C>
BASIC EARNINGS PER SHARE CALCULATION:
NUMERATOR
Income from continuing operations before cumulative
  effect of accounting change                               $  76,233          $ 152,208          $ 218,422           $ 252,152
Loss from discontinued operations                                   -                  -                  -             (88,268)
Cumulative effect of accounting change                              -                  -            (20,558)                  -
                                                            ---------          ---------          ---------           ---------
Net Income                                                  $  76,233          $ 152,208          $ 197,864           $ 163,884
                                                            =========          =========          =========           =========
DENOMINATOR
Weighted average shares outstanding                            65,768             69,328             66,878              69,778
                                                            =========          =========          =========           =========
EARNINGS PER SHARE
Income from continuing operations before cumulative
  effect of accounting change                               $    1.16          $    2.20          $    3.27           $    3.61
Loss from discontinued operations                                   -                  -                  -               (1.26)
Cumulative effect of accounting change                              -                  -              (0.31)                  -
                                                            ---------          ---------          ---------           ---------
Net Income                                                  $    1.16          $    2.20          $    2.96           $    2.35
                                                            =========          =========          =========           =========
EARNINGS PER SHARE ASSUMING FULL DILUTION
CALCULATION:
NUMERATOR
Income from continuing operations before cumulative
  effect of accounting change                               $  76,233          $ 152,208          $ 218,422           $ 252,152
Interest expense on zero coupon convertible
  subordinated debentures, after tax                              639                  -                639                   -
                                                            ---------          ---------          ---------           ---------
Adjusted income from continuing operations before
  cumulative effect of accounting change                       76,872            152,208            219,061             252,152
Loss from discontinued operations                                   -                  -                  -             (88,268)
Cumulative effect of accounting change                              -                  -            (20,558)                  -
                                                            ---------          ---------          ---------           ---------
Adjusted Net Income                                         $  76,872          $ 152,208          $ 198,503           $ 163,884
                                                            =========          =========          =========           =========
DENOMINATOR
Weighted average shares outstanding                            65,768             69,328             66,878              69,778
Net effect of dilutive stock options                            1,152                993              1,234               1,111
Assumed conversion of zero coupon convertible
  subordinated debentures                                       2,032                  -                677                   -
                                                            ---------          ---------          ---------           ---------
Fully diluted weighted average shares outstanding              68,952             70,321             68,789              70,889
                                                            =========          =========          =========           =========
EARNINGS PER SHARE ASSUMING FULL DILUTION
Income from continuing operations before cumulative
  effect of accounting change                               $    1.11          $    2.16          $    3.19           $    3.56
Loss from discontinued operations                                   -                  -                  -               (1.25)
Cumulative effect of accounting change                              -                  -              (0.30)                  -
                                                            ---------          ---------          ---------           ---------
Net Income                                                  $    1.11          $    2.16          $    2.89           $    2.31
                                                            =========          =========          =========           =========
</TABLE>


                                       6

<PAGE>

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

<TABLE>
<CAPTION>

4.   COMPREHENSIVE INCOME

     The following summarizes comprehensive income reclassification adjustments
     required under SFAS No. 130.

                                                                                    Nine Months Ended
(In thousands)                                                                      September 30, 1999
                                                                                    ------------------
<S>                                                                                 <C>
Holding losses arising during the period (net of tax benefit of $37,290)                 $     (58,327)
Add:
  Reclassification adjustment  related to foreign exchange gains
    (net of tax expense of $127)                                                                   199
  Reclassification adjustment for realized losses on investment
    securities (net of tax benefit of $3,258)
                                                                                                (5,095)
                                                                                    ------------------
Net loss recognized in other comprehensive income (net of tax benefit of
    $40,421)                                                                             $     (63,223)
                                                                                    ==================
</TABLE>

5.   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 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 rules set forth in SFAS No. 133. The new standard will be effective
     in the first quarter of the year 2001. The Company is presently assessing
     the presentation and effect of SFAS No. 133 on the financial statements of
     the Company.

6.   CONTINGENCIES

     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.
     Recently, a number of class-action lawsuits have been 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 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.

                                      7

<PAGE>


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

7.   BUSINESS SEGMENT INFORMATION

     Effective April 1, 1999, the Company effected a modification of its
     internal business operations. As a result of this modification, 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 both
     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, individuals and seniors.

     The following tables present segment information for the Large Employer
     Group and Individual and Small Employer Group business units for the
     quarters and nine months ended September 30, 1999 and 1998, respectively.

<TABLE>
<CAPTION>

QUARTER ENDED SEPTEMBER 30, 1999
                                                 Large              Individual &       Corporate
                                                Employer           Small Employer          &
                                                 Group                 Group             Other           Consolidated
                                               ----------          --------------      ----------        ------------
<S>                                            <C>                 <C>                 <C>               <C>
(IN THOUSANDS)
Premium revenue                                $  970,406          $      660,180      $  113,669          $1,744,255
Management services revenue                        88,667                     820          14,502             103,989
                                               ----------          --------------      ----------        ------------
Total revenue from external customers           1,059,073                 661,000         128,171           1,848,244
Intercompany revenues                               5,574                   2,700          (8,274)                  -
Segment income from continuing
  operations                                   $   48,885          $       40,240      $  (12,292)         $   76,233
                                               ==========          ==============      ==========        ============
</TABLE>


                                       8

<PAGE>

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

7.   BUSINESS SEGMENT INFORMATION, CONTINUED

<TABLE>
<CAPTION>

QUARTER ENDED SEPTEMBER 30, 1998

                                                 Large              Individual &       Corporate
                                                Employer           Small Employer          &
                                                 Group                 Group             Other           Consolidated
                                               ----------          --------------      ----------        ------------
<S>                                            <C>                 <C>                 <C>               <C>
(IN THOUSANDS)
Premium revenue                                $  859,419          $      533,778      $   86,861          $1,480,058
Management services revenue                        96,565                   1,194          11,828             109,587
                                               ----------          --------------      ----------        ------------
Total revenue from external customers             955,984                 534,972          98,689           1,589,645
Intercompany revenues                               3,436                   -              (3,436)                  -
Segment income from continuing
  operations                                   $   57,696          $       27,035      $   67,477          $  152,208
                                               ==========          ==============      ==========        ============

<CAPTION>

NINE MONTHS ENDED SEPTEMBER 30, 1999

                                                 Large              Individual &       Corporate
                                                Employer           Small Employer          &
                                                 Group                 Group             Other           Consolidated
                                               ----------          --------------      ----------        ------------
<S>                                            <C>                 <C>                 <C>               <C>
(IN THOUSANDS)
Premium revenue                                $2,865,881          $    1,871,098      $  332,760        $  5,069,739
Management services revenue                       276,211                   3,808          43,169             323,188
                                               ----------          --------------      ----------        ------------
Total revenue from external customers           3,142,092               1,874,906         375,929           5,392,927
Intercompany revenues                              12,844                   3,200         (16,044)                  -
Segment income from continuing
  operations                                   $  147,885          $       97,819      $  (27,282)       $    218,422
                                               ==========          ==============      ==========        ============
Segment Assets                                 $2,209,139          $      946,177      $1,479,157        $  4,634,473
                                               ==========          ==============      ==========        ============
</TABLE>


                                       9

<PAGE>

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


7.   BUSINESS SEGMENT INFORMATION, CONTINUED

<TABLE>
<CAPTION>


NINE MONTHS ENDED SEPTEMBER 30, 1998
                                                          Large          Individual &       Corporate
                                                        Employer        Small Employer          &
                                                          Group             Group             Other          Consolidated
                                                    ------------------ ----------------- ----------------- -----------------
<S>                                                 <C>                <C>               <C>               <C>
(IN THOUSANDS)
Premium revenue                                           $ 2,570,067       $ 1,550,542      $    254,652       $ 4,375,261
Management services revenue                                   292,074             3,421            33,507           329,002
                                                    ------------------ ----------------- ----------------- -----------------
Total revenue from external customers                       2,862,141         1,553,963          288,159          4,704,263
Intercompany revenues                                          11,162                 -          (11,162)                 -
Segment income from continuing
  operations                                             $    144,390       $   108,638      $      (876)       $   252,152
                                                    ================== ================= ================= =================
Segment Assets                                           $  2,251,411       $   755,330      $  1,179,358       $ 4,186,099
                                                    ================== ================= ================= =================
</TABLE>

8.   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 1.6 million persons in the State of Georgia as of December
     31, 1998. 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. On June
     25, 1999, the shareholders of Cerulean approved the plan of merger with the
     Company. In order to complete the transaction, the Company must obtain the
     approval of the Georgia Department of Insurance after a public hearing. See
     "Item 2. Management's Discussion and Analysis of Financial Condition and
     Results of Operations."

9.   ACCOUNTING CHANGE

     Effective January 1, 1999, the Company changed its method of accounting for
     start-up costs related to the Company's provider and sales network
     development to comply with AICPA Statement of Position No. 98-5, "Reporting
     on the Costs of Start-Up Activities." The change involves expensing these
     costs as incurred, rather than capitalizing and subsequently amortizing
     such costs.


                                      10

<PAGE>

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

9.   ACCOUNTING CHANGE, CONTINUED

     The change in accounting principle resulted in the write-off of the costs
     capitalized as of January 1, 1999. The cumulative effect of the write-off,
     which totals $20.6 million, net of tax, has been expensed and reflected in
     the Company's results of operations for the nine months ended September 30,
     1999.

10.  LONG-TERM DEBT

     ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES

     During the quarter ended September 30, 1999, the Company issued $299
     million aggregate principal amount at maturity of zero coupon convertible
     subordinated debentures due 2019. The proceeds totaled approximately
     $200.8 million. The debentures accrue interest at a yield to maturity of
     2.0% per year, compounded semi-annually. The debentures will result in an
     increase in accrued interest expense of approximately $3.9 million during
     the one-year period immediately following their issuance, with such
     annual accrued interest expense increasing until maturity. The debentures
     may be converted into common stock at the option of the debentureholder, at
     a rate of 6.797 shares per $1,000 principal amount at maturity.

11.  SUBSEQUENT EVENTS

     On October 6, 1999, the board of directors authorized the repurchase of
     some or all of the Company's zero coupon convertible subordinated
     debentures for cash. On November 1, 1999, the Company repurchased $33
     million in aggregate principal amount at maturity of the Company's zero
     coupon subordinated convertible debentures due 2019 at a total purchase
     price of $19.8 million. The gain on such repurchase will be reported on the
     Company's financial statements as an extraordinary item in the fourth
     quarter of 1999.

     On October 5, 1999, the board of directors amended WellPoint's existing
     stock repurchase program in order to authorize the future repurchase of up
     to five million shares of its outstanding common stock. Between October 1
     and October 5, 1999, the Company repurchased approximately 1.4 million
     shares of its common stock under its previous authorization.


                                      11

<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 September 30, 1999, WellPoint had approximately 7.2 million
medical members and approximately 30.6 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.

SALE OF WORKERS' COMPENSATION SEGMENT

On July 29, 1998, WellPoint entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement") by and between WellPoint and Fremont Indemnity Company
("Fremont"). Pursuant to the Stock Purchase Agreement, Fremont acquired all of
the outstanding capital stock of UNICARE Specialty Services, Inc., a wholly
owned subsidiary of WellPoint ("UNICARE Specialty"). The transaction was
completed on September 1, 1998. The principal asset of UNICARE Specialty was the
capital stock of UNICARE Workers' Compensation Insurance Company ("UNICARE
Workers' Compensation"). The purchase price for the acquisition was the
statutory surplus (adjusted in accordance with the terms of the Purchase
Agreement) of UNICARE Workers' Compensation as of the date of the closing. The
purchase price based upon adjusted statutory surplus of UNICARE Workers'
Compensation as of September 1, 1998, the closing date of the transaction, was
approximately $110.0 million. Subsequent to September 1, 1998, the Company and
Fremont are jointly marketing integrated workers' compensation and medical
insurance products in the small employer group market.


                                      12

<PAGE>

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 previously acquired two businesses, 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 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 will need to develop satisfactory provider and sales networks and
successfully convert acquired books of business to the Company's existing
information systems, which will require additional expenditures by the
Company.

In response to rising medical and pharmacy costs with respect to certain
products offered to the Company's individual and small group customers in
California, the Company has recently implemented premium increases with
respect to certain of such products. The Company will continue to evaluate
the need for further premium increases, plan design changes and other
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.

PENDING ACQUISITION OF CERULEAN

On July 9, 1998, the Company entered into an Agreement and Plan of Merger with
Cerulean (See Note 8 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


                                      13

<PAGE>

PENDING ACQUISITION OF CERULEAN, CONTINUED

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 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 has
discretionary authority in deciding whether to hear such appeals. Cerulean is
currently evaluating various alternative courses of action to resolve the
litigation.

On June 25, 1999, Cerulean held a special meeting of shareholders, at which
the Cerulean shareholders approved the plan of merger with the Company. In
order to complete the Merger, a number of other conditions must be satisfied,
including approval by the Georgia Department of Insurance after a public
hearing 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, 1999. The Company does
not currently expect that the Merger will be completed prior to the end of
1999. 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.

                                      14

<PAGE>

LEGISLATION

In September 1999, the California Legislature enacted and the California
Governor subsequently signed into law a number of health care reform
measures. The following is a summary of the material terms of the most
significant of these new laws. The Managed Health Care Insurance
Accountability Act of 1999 ("SB 21"), which becomes effective for health care
services rendered after January 1, 2001, establishes an explicit duty on
managed care entities to exercise ordinary care in arranging for the
provision of medically necessary health care services to their subscribers
and imposes liability for all harm legally caused by the failure to exercise
such ordinary care. Managed care entities may be held liable if their failure
to exercise ordinary care results in the denial, delay or modification of a
health care service recommended for or furnished to the subscriber and the
subscriber suffers "substantial harm." For purposes of the statute,
"substantial harm" is defined as the loss of life, loss of or significant
impairment of a limb or bodily function, significant disfigurement, severe
and chronic pain or significant financial loss. Liability may be established
for health care services regardless of whether the recommending health care
provider is a contracting provider with the managed care entity. Managed care
plans may not seek indemnity from a health care provider for the liability
imposed by the statute. A cause of action may not be maintained under the
statute against a managed care entity unless the subscriber has exhausted
independent medical review procedures, except in instances where substantial
harm has occurred or will imminently occur prior to the completion of the
independent medical review.

Assembly Bill 55 ("AB 55") establishes an independent medical review system
effective as of January 1, 2001. Every health plan enrollee, whether
currently under the regulatory supervision of the California Department of
Corporations or the California Department of Insurance, must be provided with
an opportunity to seek an independent medical review whenever health care
services have been denied, modified or delayed by a managed care entity or
one of its contracting providers, if this decision was based on a finding
that the proposed services are not medically necessary. Under AB 55, there is
no minimum dollar level for claims to be subject to the independent review
process and the enrollee will not have any responsibility for the payment of
any application or processing fee. An enrollee's provider may assist and
advocate in the review. All health plan contracts issued or renewed after
January 1, 2000 must provide an opportunity to seek an independent review
effective as of January 1, 2001. The statute does not apply to decisions by a
health plan that health care services are not covered under the plan issued
to the subscriber. The newly established Department of Managed Care (which is
described below) is instructed to contract with one or more medical review
organizations by January 1, 2001.

Assembly Bill 88 ("AB 88") requires that any health care service plan
contract or disability insurance policy issued or renewed on or after July 1,
2000 must provide coverage for the diagnosis and medically necessary
treatment of severe mental illness under the same terms and conditions
applied to other medical conditions.


                                      15

<PAGE>

LEGISLATION, CONTINUED

Assembly Bill 78 ("AB 78") provides for the creation of a Department of
Managed Care into which will be transferred the existing health care service
plan operations of the California Department of Corporations. This will
become operative on the earlier of July 1, 2000 or the issuance of an
executive order by the California Governor. The Department of Managed Care
will be advised by an advisory committee consisting of 22 members, 11 of whom
will be appointed by the Governor, 10 of whom will be appointed by the joint
recommendation of the Governor, the Speaker of the California Assembly and
the California Senate Committee on Rules and one of whom will be the Director
of the Department (who will be appointed by the Governor). This advisory
committee will issue an annual report, which will include a report card
issued to the public on the comparative performance of managed care
organizations. This bill also establishes an Office of Patient Advocate, who
will be appointed by the California Governor, to represent the interest of
enrollees. The Office of Patient Advocate will be charged with the
responsibility of helping enrollees secure health care services and will have
access to the records of the Department of Managed Care. Under the
legislation, the new Department of Managed Care will be granted expanded
powers, including the ability to order the discontinuance of "unsafe or
unjurious practices."

Senate Bill 260 ("SB 260") establishes a Financial Solvency Standards Board
(the "Board") comprised of the Director of the Department of Managed Care
(the "Director") and seven members appointed by the Director. The Board will
review financial solvency matters affecting the delivery of health care
services and recommend financial solvency requirements relating to plan
operations, plan-affiliate operations and transactions, plan-provider
contractual relationships and provider-affiliate operations and transactions.
Effective January 1, 2001, every contract between a health care service plan
and a risk-bearing organization (i.e., any provider group that provides
services in exchange for fixed capitation payments) must include a
requirement that the risk-bearing organization furnish financial information
to the health care service plan. In addition, the health care service plan
must disclose information to the risk-bearing organization that enables the
organization to be informed regarding its financial risk. Plans must provide
payment of all risk arrangements, excluding capitation payments, within 180
days after the close of each fiscal year. On or before June 30, 2000, the
Director must adopt regulations providing for a process of reviewing and
grading risk-bearing organizations based on criteria regarding financial
responsibility, estimates for incurred but not reported claims ("IBNR"),
tangible net equity and level of working capital. Risk-bearing organizations
may not be at financial risk for the provision of health care services unless
a particular contract provision allocating such risk has first been
negotiated and agreed to between the health care service plan and the
risk-bearing organization. In addition, no contract between a health care
service plan and a risk-bearing organization may include any provision that
requires a health care provider to accept rates or methods of payments unless
the provisions have first has been negotiated and agreed to between the plan
and the risk-bearing organization.

Senate Bill 559 ("SB 559"), which is effective July 1, 2000, imposes certain
disclosure obligations and other limitations on health care plans, such as the
Company, that make their networks of contracted providers available to other
entities. Under SB 559, health care plans must disclose to contracting providers
that they intend to make their health care networks, and the negotiated
discounts, available to other payors such as self-insured employers or workers'


                                      16

<PAGE>

LEGISLATION, CONTINUED

compensation insurance companies. Providers may decline to be included in any
list of contracted providers made available to any payor entity that does not
provide financial incentives to, or otherwise actively encourage, the payor's
members to use the list of contracting providers when obtaining medical care.

The California Legislature also adopted new legislation that imposes
restrictions on the categories of persons that may be involved in medical
management activities and on the conduct of such activities. Various other
newly adopted bills mandate coverage for certain benefits, such as the
provision of oral contraceptives, and place further limitations on health
plan operations. Although it is too early to determine the effects of the
recently enacted legislation, the Company expects that this legislation and
any other legislation adopted in the future will increase the Company's cost
of operations and may have the effect of increasing the Company's loss ratio
or decreasing the affordability of its products. As a result, this
legislation could have a material adverse effect on the Company's results of
operations, financial condition and cash flows.

In May 1997, the Texas Legislature adopted Senate Bill No. 386 ("SB 386").
Among other things, this legislation purports to make managed care
organizations ("MCOs") such as the Company liable for the failure by the MCO,
its employees or agents to exercise ordinary care when making "health care
treatment decisions" (as defined in SB 386). The legislation was effective as
of September 1, 1997. In September 1998, the United States District Court for
the Southern District of Texas ruled, in part, that the MCO liability
provisions of SB 386 are not preempted by the Federal Employee Retirement
Income Security Act of 1974 ("ERISA"). To date, this legislation has not
adversely affected the Company's results of operations. Similar legislation
was recently enacted in Georgia. Although the Company maintains insurance
covering such liabilities, to the extent that this legislation (or similar
legislation that may be subsequently adopted at the Federal or state level)
effectively expands the scope of liability of MCOs such as the Company, it
may have a material adverse effect on the Company's results of operations,
financial condition or cash flows. Even if the Company is not held to be
liable under any litigation, the existence of potential MCO liability may
cause the Company to incur greater costs in defending such litigation.

A variety of other health care reform measures are currently pending or have
been recently enacted at the Federal, state and local levels. Federal
legislation enacted during the last three years seeks, among other things, to
insure the portability of health coverage and mandates minimum maternity
hospital stays. The United States Congress is currently considering a number
of alternative health care reform measures that would among other things,
mandate external review of treatment denial decisions and provide for managed
care liability. 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 or decreasing the affordability of the Company's
products.

YEAR 2000

The Company is substantially dependent on its computer systems, business
applications and other information technology systems ("IT systems"), due to
the nature of its managed health


                                      17

<PAGE>

YEAR 2000, CONTINUED

care business and the increasing number of electronic transactions in the
industry. Historically, many IT systems were developed to recognize the year
as a two-digit number, with the digits "00" being recognized as the year
1900. The year 2000 presents a number of potential problems for such systems,
including potentially significant processing errors or failure. Given the
Company's reliance on its computer systems to process health care
transactions, the Company's results of operations could be materially
adversely affected by any significant errors or failures. Additionally, the
year 2000 presents potential problems for other systems and applications
containing date-dependent embedded microprocessors ("non-IT systems"), such
as elevators and heating and ventilation equipment.

The Company has developed and has substantially completed a comprehensive
plan designed to address the "year 2000" issue for its IT and non-IT systems
and applications. With respect to IT systems, during 1997 the Company
completed a detailed risk assessment of its various computer systems,
business applications and other affected systems, formulated a plan for
specific remediation efforts and began certain of such remediation efforts.
During the quarter ended March 31, 1999, the Company completed its
remediation efforts and its initial round of internal testing of its systems
and applications. During the quarter ended June 30, 1999, the Company
completed its third-party review of certain of its year 2000 remediation
efforts. This third-party review included an assessment of the procedures
undertaken by the Company as well as a computer software test of selected
portions of the Company's mission-critical computer code. The Company's
internal testing and third-party review to date have not identified any
expected material year 2000-related deficencies with respect to the Company's
IT systems. As part of the Company's on-going year 2000 readiness efforts,
additional internal testing of the Company's systems and applications and
additional third-party review are being conducted during the remainder of
1999.

With respect to non-IT systems, the Company has completed the replacement or
renovation of Company-owned systems to address year 2000 issues. The Company
has completed its review of non-IT systems in leased facilities and, where
appropriate, has obtained certifications from property owners that non-IT
systems in leased facilities have been remediated or replaced.

The Company currently estimates that its costs related to year 2000
compliance remediation for Company-owned IT systems and applications will be
approximately $8 to $10 million in 1999. During the nine months ended
September 30, 1999, the Company expended approximately $5.3 million for
remediation of its IT software systems and applications and approximately
$0.8 million for renovation or replacement of its telecommunications
equipment. The Company currently estimates that its total costs in 1999 with
respect to non-IT systems and applications will be approximately $1 million.
The Company's expenditures with respect to non-IT systems include the
acquisition of back-up power supplies for the Company's Thousand Oaks,
California headquarters facility and its Woodland Hills, California facility
(which houses the Company's data center). The Company expenses year 2000
remediation costs as incurred and expects to fund these costs through cash
flow from operations. While the immediacy of year 2000 compliance measures
has caused the Company to defer or cancel certain IT projects, the Company
does not expect such actions to have a material effect on the Company's
results of operations or financial condition.


                                      18

<PAGE>

YEAR 2000, CONTINUED

The Company's various business units have formulated detailed contingency
plans in order to address unexpected year 2000 readiness issues or issues
beyond the Company's control. These contingency plans are focused on
identifying potential failure scenarios for the Company's IT and non-IT
systems and those of third parties with which the Company interacts and on
ensuring the continuation of critical business operations. The Company has
integrated each of these contingency plans into a Company-wide contingency
plan, which the Company intends to continue updating during the remainder of
1999.

The Company has been conducting tests with and assembling survey data from
health care transaction clearing houses, third party vendors and certain
other parties with which the Company communicates electronically to determine
the compliance efforts being undertaken by these parties and to assess the
Company's potential business exposure to any non-compliant systems operated
by these parties. Health care claims submitted electronically to the Company
are generally submitted through clearing houses on behalf of health care
providers. Based on the testing done and the survey data and other
information compiled by the Company to date, the Company has not identified
any third parties that the Company currently expects will suffer year
2000-related problems likely to have a significant adverse effect on the
Company's operations. In addition, the Health Care Finance Administration
("HCFA"), which regulates the Medicare program, has already phased in
requirements that health care providers submit Medicare claims in a year 2000
compliant format and the Company believes that substantially all providers
have complied with this requirement. However, many third parties are
currently in the process of conducting final testing and certification of
their own year 2000 compliance measures. In addition, an inherent limitation
of testing with third parties is that all potential significant year
2000-related problems might not be brought to the Company's attention. As a
result, at the current time the Company does not believe that it has
sufficient information to determine whether its external relationships will
be materially adversely affected by year 2000 compliance problems.

If the Company's year 2000 issues were not completely resolved prior to the
end of 1999, the Company could be subject to a number of potential
consequences, including, among others, an inability to timely and accurately
process health care claims, collect customers' premiums or administrative
fees, verify subscriber eligibility, assess utilization trends or compile
accurate financial data for use by management. In particular, the Company may
experience a decrease in electronic health claims submission, which could
cause the Company's claims inventory to increase on a temporary basis. An
increase in claims inventory could prevent the Company from identifying
emerging utilization trends quickly and taking appropriate actions to
mitigate such trends through pricing actions, benefit redesign or other
actions. In addition, the anticipation of year 2000 problems could cause
health care providers or members to accelerate the timing of medical
procedures or otherwise modify their behavior in a manner that, at least
temporarily, could increase the Company's costs of operations.

The Company is attempting to limit its exposure to year 2000 issues by
closely monitoring its on-going year 2000 readiness efforts, assessing the
year 2000 readiness efforts of various third parties with which it interacts
and developing contingency plans addressing potential problems


                                      19

<PAGE>

YEAR 2000, CONTINUED

that could have a material adverse effect on the Company's results of
operations. Although the testing completed by the Company and third parties
thus far has not revealed any material deficiencies in the Company's
remediation and readiness plans and the Company intends to put into place
programs and procedures designed to mitigate the aforementioned risks, there
can be no assurances that all potential problems may be mitigated by these
procedures.

                                      20

<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 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                     Nine Months Ended
                                                    September 30,                          September 30,
                                         ------------------------------------  -------------------------------------
                                               1999               1998               1999                1998
                                         -----------------  -----------------  ------------------  -----------------
<S>                                      <C>                <C>                <C>                 <C>
Operating Revenues:
  Premium revenue                                   94.4%              93.1%               94.0%              93.0%
  Management services revenue                        5.6%               6.9%                6.0%               7.0%
                                         -----------------  -----------------  ------------------  -----------------
                                                   100.0%             100.0%              100.0%             100.0%
Operating Expenses:
  Health care services and other
    benefits (loss ratio)                           80.3%              80.5%               80.7%              80.4%
  Selling expense                                    4.6%               4.5%                4.5%               4.4%
  General and administrative expense                14.6%              15.2%               14.6%              15.5%

</TABLE>

                                      21

<PAGE>

MEMBERSHIP

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

MEDICAL MEMBERSHIP (A) (B):

<TABLE>
<CAPTION>

                                                             As of September 30,
                                                    -------------------------------------           Percent
                                                          1999                1998                   Change
                                                    -----------------   -----------------         ------------
<S>                                                 <C>                 <C>                       <C>
Large Employer Group (c)
  California
    HMO                                                    1,575,946           1,374,949                14.6%
    PPO and Other                                          1,758,296           1,401,997                25.4%
                                                    -----------------   -----------------
      Total California                                     3,334,242           2,776,946                20.1%
                                                    -----------------   -----------------
  Texas                                                      171,124             172,429                -0.8%
  Georgia                                                     54,630              93,026               -41.3%
  Other States                                             1,548,828           1,877,960               -17.5%
                                                    -----------------   -----------------
      Total Large Employer Group                           5,108,824           4,920,361                 3.8%

                                                    -----------------   -----------------
Individual and Small Employer Group
  California
    HMO                                                      339,699             321,614                 5.6%
    PPO and Other                                          1,165,462           1,143,016                 2.0%
                                                    -----------------   -----------------
      Total California                                     1,505,161           1,464,630                 2.8%
                                                    -----------------   -----------------
  Texas                                                      152,350              79,084                92.6%
  Georgia                                                     29,024              18,334                58.3%
  Other States                                               147,917             137,120                 7.9%
                                                    -----------------   -----------------
      Total Individual and Small Employer Group            1,834,452           1,699,168                 8.0%
                                                    -----------------   -----------------

Senior (d)
  California
    HMO                                                       24,514              13,757                78.2%
    PPO and Other                                            167,506             157,147                 6.6%
                                                    -----------------   -----------------
      Total California                                       192,020             170,904                12.4%
                                                    -----------------   -----------------
  Texas                                                       22,883              26,252               -12.8%
  Georgia                                                        473                 240                97.1%
  Other States                                                15,711              11,587                35.6%
                                                    -----------------   -----------------
      Total Senior                                           231,087             208,983                10.6%
                                                    -----------------   -----------------
Total Medical Membership                                   7,174,363           6,828,512                 5.1%
                                                    -----------------   -----------------
                                                    -----------------   -----------------

MEMBERSHIP BY NETWORK (E)
  Proprietary Networks                                     5,213,681           4,451,048                17.1%
  Affiliate Networks                                       1,185,652           1,400,591               -15.3%
  Non-Network                                                775,030             976,873               -20.7%
                                                    -----------------   -----------------
TOTAL MEDICAL MEMBERSHIP                                   7,174,363           6,828,512                 5.1%
                                                    -----------------   -----------------
                                                    -----------------   -----------------

TOTAL MANAGEMENT SERVICES MEMBERSHIP (F)                   2,593,384           2,603,521                -0.4%
                                                    -----------------   -----------------
                                                    -----------------   -----------------

</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. Medical membership reflects a shift of 244,716
     members and 182,608 members as of September 30, 1999 and September 30,
     1998, respectively, representing employees (and their dependents) of
     certain California-based companies who reside out-of-state and were
     previously classified as California members.

(c)  Large Employer Group membership includes 621,845 and 464,969
     state-sponsored program members as of September 30, 1999 and 1998,
     respectively.

(d)  Senior membership includes members covered under both Medicare risk and
     Medicare supplement products.

(e)  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.

(f)  Medical membership includes management services members which are all
     included within in the Large Employer Group segment.

                                      22

<PAGE>

SPECIALTY MEMBERSHIP

<TABLE>
<CAPTION>

                                   As of September 30,
                             ---------------------------------       Percent
                                 1999               1998             Change
                             --------------    ---------------   ---------------
<S>                          <C>               <C>               <C>
Pharmacy (a)                    20,701,034         14,625,859             41.5%
Dental                           2,463,704          3,042,115            -19.0%
Utilization Management           2,674,736          2,882,164             -7.2%
Life                             2,038,744          2,151,722             -5.3%
Disability                         605,380            867,117            -30.2%
Behavioral Health (b)            2,089,118            731,907            185.4%

</TABLE>

(a)  Effective January 1, 1999, WellPoint revised its methodology of counting
     pharmacy members. As a result of this revision, pharmacy members for whom
     WellPoint provides claims processing services are now counted separately
     from pharmacy members for whom WellPoint provides clinical management
     services. As of September 30, 1999, WellPoint provided both claims
     processing services and clinical management services to approximately 4.3
     million members.

(b)  The increase in behavioral health membership is primarily due to
     approximately 1.4 million additional California large employer group and
     certain state-sponsored program members whose behavioral health benefits
     were formerly not counted separately from medical benefits.

COMPARISON OF RESULTS FOR THE THIRD QUARTER 1999 TO THE THIRD QUARTER 1998

The following table depicts premium revenue by business segment:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                    Three Months Ended September 30,
                                                      1999                 1998
                                               -------------------  -------------------
<S>                                            <C>                  <C>
Large Employer Group                                   $  970,406           $  859,419
Individual and Small Employer Group                       660,180              533,778
Other                                                     113,669               86,861
                                               -------------------  -------------------
Consolidated                                          $ 1,744,255          $ 1,480,058
                                               -------------------  -------------------
                                               -------------------  -------------------

</TABLE>

Premium revenue increased 17.9%, or $264.2 million, to $1,744.3 million for the
quarter ended September 30, 1999 from $1,480.1 million for the quarter ended
September 30, 1998. The overall increase was due to an increase in insured
member months of 8.9% in the Large Employer Group and Individual and Small
Employer Group business segments, in addition to the implementation of premium
increases in both segments.

                                      23

<PAGE>

<PAGE>

COMPARISON OF RESULTS FOR THE THIRD QUARTER 1999 TO THE THIRD QUARTER 1998,
CONTINUED

The following table depicts management services revenue by business segment:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                     Three Months Ended September 30,
                                                      1999                 1998
                                               -------------------  --------------------
<S>                                            <C>                  <C>
Large Employer Group                                    $  88,667             $  96,565
Individual and Small Employer Group                           820                 1,194
Other                                                      14,502                11,828
                                               -------------------  --------------------
Consolidated                                           $  103,989            $  109,587
                                               -------------------  --------------------
                                               -------------------  --------------------

</TABLE>

Management services revenue decreased approximately $5.6 million to $104.0
million for the quarter ended September 30, 1999 from $109.6 million for the
quarter ended September 30, 1998. The change is primarily due to a 1.4%
decrease in management services member months and lower per member per month
rates. The decrease in management services member months was primarily
related to attrition on acquired MMHD membership and, to a lesser extent, the
GBO membership.

Investment income was $43.3 million for the quarter ended September 30, 1999
compared to $39.1 million for the quarter ended September 30, 1998, an increase
of $4.2 million. Net realized losses on investment securities totaled $11.7
million for the quarter ended September 30, 1999 in comparison to a gain of $5.4
million for the quarter ended September 30, 1998. Net interest and dividend
income increased $19.7 million to $55.1 million for the quarter ended September
30, 1999, in comparison to $35.4 million for the quarter ended September 30,
1998. This increase was primarily due to interest income of $14.4 million
related to the Company's refund from the Internal Revenue Service ("IRS")(See
"--Liquidity and Capital Resources") and higher average investment balances in
1999 versus 1998. Interest and dividend income for the three months ended
September 30, 1999 also includes a $1.3 million charge related to the partial
termination of the Company's interest rate swap agreements (See "--Liquidity and
Capital Resources").

The loss ratio attributable to managed care and related products for the quarter
ended September 30, 1999 decreased to 80.3% compared to 80.5% for the quarter
ended September 30, 1998. The decrease was due primarily to price increases
within the Individual and Small Employer Group business segment.

Selling expense consists of commissions paid to outside brokers and agents
representing the Company. The selling expense ratio increased to 4.6% for the
quarter ended September 30, 1999 from 4.5% for the quarter ended September 30,
1998.

The administrative expense ratio decreased to 14.6% for the quarter ended
September 30, 1999 from 15.2% for the quarter ended September 30, 1998. The
overall decline is primarily attributable to savings from the consolidation of
various regional offices outside of California (primarily servicing the
Company's Large Employer Group business), the integration of information systems
centers related to acquired businesses on the Company's information system
platform, and a reduction in Year 2000 expense from 1998 levels in addition to

                                      24

<PAGE>

economies of scale associated with premium revenue growth in relation to fixed
corporate administrative expenses.

Interest expense decreased $2.1 million during the quarter ended September 30,
1999. The decline is primarily related to $2.7 million lower than anticipated
interest costs related to the final settlement on the purchase price of the GBO
acquisition. The Company's long-term indebtedness at September 30, 1999 was
$501.8 million compared to $253.0 million at September 30, 1998. The weighted
average interest rate for all long-term debt for the quarter ended September 30,
1999, including the fees associated with the borrowings and interest rate swaps,
was 6.1%.

The provision for income taxes increased $88.7 million, resulting in a tax
provision of $48.8 million for the quarter ended September 30, 1999. The
increase was primarily due to the effect of a private letter ruling received
from the IRS in September 1998, which resulted in a decrease in income tax
expense of $85.5 million during 1998. Excluding the ruling, the provision for
income taxes would have been $45.6 million during the quarter ended September
30, 1998, representing an overall tax rate consistent with the current period.

The Company's net income for the quarter ended September 30, 1999 was $76.2
million, compared to $152.2 million for the quarter ended September 30, 1998.
Earnings per share totaled $1.16 and $2.20 for the quarters ended September 30,
1999 and 1998, respectively. Earnings per share assuming full dilution totaled
$1.11 and $2.16 for the quarters ended September 30, 1999 and 1998,
respectively.

Earnings per share for the quarter ended September 30, 1999 is based upon
weighted average shares outstanding of 65.8 million, excluding common stock
equivalents, and 69.0 million shares, assuming full dilution. Earnings per
share for the quarter ended September 30, 1998 is based on 69.3 million
shares excluding common stock equivalents, and 70.3 million shares, assuming
full dilution. For the quarter ended September 30, 1999, the decrease in
weighted average shares outstanding primarily relates to the effect of the
repurchase of approximately 2.9 million treasury shares during the quarter
ended September 30, 1999 in addition to 0.9 million shares repurchased during
the fourth quarter of 1998. In addition, for weighted average shares
outstanding assuming full dilution, the decline was partially offset by the
impact of the assumed conversion of the Company's zero coupon subordinated
convertible debentures.

                                      25

<PAGE>

COMPARISON OF RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1998

The following table depicts premium revenue by business segment:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                   Nine Months Ended September 30,
                                                    1999                 1998
                                             -------------------  -------------------
<S>                                          <C>                  <C>
Large Employer Group                                $ 2,865,881          $ 2,570,067
Individual and Small Employer Group                   1,871,098            1,550,542
Other                                                   332,760              254,652
                                             -------------------  -------------------
Consolidated                                        $ 5,069,739          $ 4,375,261
                                             -------------------  -------------------
                                             -------------------  -------------------

</TABLE>

Premium revenue increased 15.9%, or $694.4 million, to $5,069.7 million for the
nine months ended September 30, 1999 from $4,375.3 million for the nine months
ended September 30, 1998. The overall increase was due to an increase in insured
member months of 9.7%, in the Large Employer Group and the Individual and Small
Employer Group business segments, and the implementation of price increases
throughout the Company's business segments.

The following table depicts management services revenue by business segment:

<TABLE>
<CAPTION>

(IN THOUSANDS)                                   Nine Months Ended September 30,
                                                   1999                  1998
                                             ------------------   -------------------
<S>                                          <C>                  <C>
Large Employer Group                                $  276,211            $  292,074
Individual and Small Employer Group                      3,808                 3,421
Other                                                   43,169                33,507
                                             ------------------   -------------------
Consolidated                                        $  323,188            $  329,002
                                             -------------------  -------------------
                                             -------------------  -------------------
</TABLE>

Management services revenue decreased 1.8% for the nine months ended September
30, 1999 in comparison to the same period in the prior year. The overall decline
is due to a 5.6% decline in management services member months, offset by the
implementation of price increases in the Large Employer Group business segment.
The decrease in management services member months was primarily related to
attrition on acquired MMHD membership and, to a lesser extent, the GBO
membership.

Investment income was $126.6 million for the nine months ended September 30,
1999 compared to $70.5 million for the nine months ended September 30, 1998, an
increase of $56.1 million. The increase was primarily attributable to the
recognition of an "other than temporary" decline in value in accordance with
SFAS No. 115 of $48.7 million in 1998 relating to the Company's equity holding
in FPA Medical Management Inc. ("FPA"). Net realized losses on investment
securities totaled $15.0 million for the nine months ended September 30, 1999 in
comparison to a gain of $14.2 million for the nine months ended September 30,
1998, excluding the FPA loss. Net interest and dividend income increased $36.4
million to $144.1 million for the nine months ended September 30, 1999 in
comparison to $107.7 million for the nine months ended September 30, 1998. This
increase was primarily

                                      26

<PAGE>

due to interest income of $23.8 million related to the Company's refund from
the IRS (See "--- Liquidity and Capital Resources") and higher average
investment balances in 1999 versus 1998. Interest and dividend income for the
nine months ended September 30, 1999 also includes a $1.3 million charge
related to the partial termination of the Company's interest rate swap
agreements (See "--Liquidity and Capital Resources").

The loss ratio attributable to managed care and related products for the nine
months ended September 30, 1999 increased to 80.7% compared to 80.4% for the
nine months ended September 30, 1998. The increase is primarily due to rising
cost trends for certain customer groups within the Individual and Small Employer
Group business segment.

The selling expense ratio increased slightly to 4.5% for the nine months ended
September 30, 1999 from 4.4% from the nine months ended September 30, 1998.

The administrative expense ratio decreased to 14.6% for the nine months ended
September 30, 1999 from 15.5% for the nine months ended September 30, 1998. The
overall decline is primarily attributable to savings from the consolidation of
various offices outside of California, the integration of information systems
centers related to acquired businesses on the Company's information system
platform and a reduction in Year 2000 expense from 1998 levels, in addition to
economies of scale associated with premium revenue growth in relation to certain
fixed administrative expenses.

Interest expense was $15.7 million for the nine months ended September 30, 1999
and $20.4 million for the nine months ended September 30, 1998. The decrease in
interest expense is related to the lower average debt balance in 1999 compared
to 1998, partially offset by an increase in the effective interest rate due to
the amortization of fixed costs. The weighted average interest rate for all debt
for the nine months ended September 30, 1999, including the fees associated with
the borrowings and interest rate swaps, was 6.93%.

The provision for income taxes increased $113.1 million, resulting in a tax
provision of $139.7 million for the nine months ended September 30, 1999. The
increase was primarily due to the effect of a private letter ruling received
from the IRS in September 1998, which resulted in a decrease in income tax
expense of $85.5 million during 1998. Excluding the ruling, the provision for
income taxes would have been $112.1 million during the nine months ended
September 30, 1998, representing an overall tax rate consistent with the
current period.

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 nine months ended September 30, 1999. (See
Note 9 to the Consolidated Financial Statements) The Company's income from
continuing operations excluding the cumulative effect for the nine months ended
September 30, 1999 was $218.4 million, compared to $252.2 million for the nine
months ended September 30, 1998. Earnings per share from continuing operations,
excluding the cumulative effect of accounting change, totaled $3.27 and $3.61
for the nine months ended

                                      27

<PAGE>

September 30, 1999 and 1998, respectively. Earnings per share from continuing
operations, excluding the cumulative effect of accounting change and assuming
full dilution, totaled $3.19 and $3.56 for the nine months ended September
30, 1999 and 1998, respectively.

Earnings per share for the nine months ended September 30, 1999 is based upon
weighted average shares outstanding of 66.9 million, excluding common stock
equivalents, and 68.8 million shares, assuming full dilution. Earnings per
share for the nine months ended September 30, 1998 is based on 69.8 million
shares excluding common stock equivalents, and 70.9 million shares, assuming
full dilution. The decrease in weighted average shares outstanding primarily
relates to the effect of the repurchase of approximately 3.7 million shares
during the twelve months ended September 30, 1999. In addition, for weighted
average shares outstanding assuming full dilution, the decline was partially
offset by the impact of the assumed conversion of the Company's zero coupon
subordinated convertible debentures.

                                      28

<PAGE>

FINANCIAL CONDITION

The Company's consolidated assets increased by $408.7 million, or 9.7%, from
$4,225.8 million as of December 31, 1998 to $4,634.5 million as of September 30,
1999. Cash and investments were $3.3 billion as of September 30, 1999, or 71.5%
of total assets. Income taxes recoverable declined approximately $164.9 million,
resulting in a net payable of $69.0 million at September 30, 1999. The primary
reason for the decrease was the third quarter receipt of the aforementioned IRS
refund.

Overall claims liabilities increased $107.0 million, or 8.1%, from $1,320.6
million as of December 31, 1998 to $1,427.6 million as of September 30, 1999.
This increase is primarily due to an increase in insured membership from
December 31, 1998 to September 30, 1999 of approximately 6.3% in the
Company's Large Employment Group and Individual and Small Employer Group
business segments, in addition to the timing of certain pharmacy payments.

Stockholders' equity totaled $1,267.3 million as of September 30, 1999, a
decrease of $47.9 million from $1,315.2 million as of December 31, 1998. The
decline resulted primarily from stock repurchases made during the quarter
totaling $215.9 million, funded primarily by proceeds from the Company's
issuance of zero coupon convertible subordinated debentures, and a $63.2 million
decrease in net unrealized valuation adjustment on investment securities, net of
tax partially offset by net income of $197.9 million for the nine months ended
September 30, 1999 and $33.3 million of stock issuances under the Company's
stock option plans.

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 September
30, 1999, the Company's investment portfolio consisted primarily of investment
grade fixed maturity securities.

Net cash flow provided by continuing operating activities was $644.7 million for
the nine months ended September 30, 1999, compared with $219.2 million for the
nine months ended September 30, 1998. Cash flow from continuing operations for
the nine months ended September 30, 1999 was due primarily to income from
continuing operations, before cumulative effect of the accounting change, of
$218.4 million, adjusted for a decrease in

                                      29

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

income taxes recoverable of $179.6 million, which was related to the August
1999 receipt of the tax refund from the IRS. In addition, cash flow from
continuing operations was impacted by increases in medical claims payable of
$130.6 million related to the growth of insured members, and the timing of
other operating liability payments.

Net cash used in continuing investing activities for the nine months ended
September 30, 1999 totaled $463.6 million, compared with net cash provided by
continuing investing activities of $5.6 million for the nine months ended
September 30, 1998. The cash used in 1999 was attributable primarily to the
purchase of investments and property, plant and equipment, net of sales proceeds
of $2.5 billion and $26.3 million, respectively, in addition to the first
quarter 1999 adjustment of $6.7 million of the sales price of the Company's
workers' compensation business, which was sold in 1998. This was partially
offset by the proceeds from investments sold and matured of $2.1 billion.

Net cash provided by financing activities totaled $52.0 million for the nine
months ended September 30, 1999, compared to net cash used in financing
activities of $235.1 million for the nine months ended September 30, 1998. Net
cash provided by financing activities during the current period was primarily
impacted by approximately $201 million of proceeds related to the issuance
of zero coupon convertible subordinated debentures (See Note 10 to the
Consolidated Financial Statements), partially offset by the repurchase of 2.9
million shares of the Company's common stock. In addition, the Company received
proceeds of $33.4 million from the issuance of common stock related to its stock
option plans.

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-yearLIQUIDITY AND CAPITAL RESOURCES, CONTINUED
 period under certain circumstances. The credit agreement requires the Company
to maintain certain financial ratios and contains restrictive covenants,
including restrictions on the 37 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 $300 million as of September 30, 1999 and $280 million as of
December 31, 1998, respectively. The weighted average interest rate, including
associated fees and the Company's interest rate swap agreements, for the quarter
ended September 30, 1999 was 6.11%.

As part of a hedging strategy to limit its exposure to interest rate increases,
in August 1996 the Company entered into a swap agreement for a notional amount
of $100.0 million bearing a fixed interest rate of 6.45% and having a maturity
date of August 17, 1999. In September 1996, the Company entered into two
additional swap agreements for notional amounts of $150.0 million each, bearing
fixed interest rates of 6.99% and 7.05%, respectively, and having maturity dates
of October 17, 2003 and October 17, 2006, respectively.

                                      30

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

During the quarter ended September 30, 1999, the Company's 6.45%, $100.0
million fixed interest rate swap agreement matured. In addition, on September
22, 1999, the Company entered into a partial termination agreement to reduce
the notional amount of the Company's 7.05%, $150.0 million swap agreement to
$100 million. All of the remaining terms and conditions of the swap agreement
are unchanged, with the exception of the fixed interest rate which was 7.06%
as of September 30, 1999. On October 1, 1999, the Company entered into
another partial termination agreement for an additional $50 million of the
above-mentioned swap agreement, bringing the outstanding notional amount to
$50 million.

The Company has entered into foreign currency forward exchange contracts for
each of the fixed maturity securities on hand as of September 30, 1999
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 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.

During the quarter ended September 30, 1998, the Company received a private
letter ruling from the Internal Revenue Service with respect to the treatment of
certain payments made at the time of WellPoint's 1996 Recapitalization and the
acquisition of the commercial operations of its former majority stockholder. The
ruling allows the Company to deduct as an ordinary and necessary business
expense the $800 million cash payment made by such stockholder in May 1996 to
one of two newly formed charitable foundations. The Company anticipates
liquidity for 1999 will be positively impacted by a reduction in tax payments of
approximately $47 million, of which $20 million was utilized during the nine
months ended September 30, 1999. In August 1999, the Company received a cash
refund (including applicable accrued interest) of approximately $183 million
which is reflected in the statement of cash flows for the nine months ended
September 30, 1999. The Company has also submitted a claim for refund with
respect to an additional $38 million.

In July 1999, the Company received proceeds of approximately $200.8 million
from the issuance of zero coupon convertible subordinated debentures due
2019. Of this amount, $162 million was used to repurchase 2,000,000 shares of
the Company's Common Stock from the California HealthCare Foundation, and
the remaining proceeds are available for general corporate purposes. The
debentures accrue interest at a yield to maturity of 2.0% per year,
compounded semi-annually. The debentures will result in an increase in
accrued interest expense of approximately $3.9 million during the one-year
period immediately following their issuance, with such annual accrued
interest expense increasing until maturity. The debentures may be converted
into Common Stock, at the option of the debentureholder, at a rate of 6.797
shares per $1,000 principal amount at maturity. The Company may redeem the
debentures for cash at any time after July 2, 2002. The applicable redemption
price will be the original issue price plus original issue discount accrued
to the date of redemption. The debentureholders can cause the Company to
repurchase the debentures on July 2, 2002, July 2, 2009 and July 2, 2014 at a
price equal to the original issue price plus original issue discount accrued
to the date of repurchase.

                                      31
<PAGE>

On October 6, 1999, the board of directors authorized the repurchase from time
to time of some or all of the Company's zero coupon convertible subordinated
debentures for cash. On November 1, 1999, the Company repurchased $33 million
aggregate principal amount of the debentures for a total purchase price of $19.8
million.

On October 5, 1998, the board or directors amended WellPoint's existing stock
repurchase program  in order to authorize the future repurchase of up to five
million shares of its outstanding common stock. Between October 1 and October
5, 1999, the Company repurchased approximately 1.4 million shares of its
common stock under its previous authorization. The Company intends to monitor
its other cash needs before making additional repurchases of its zero coupon
convertible subordinated debentures or its common stock.

Certain of the Company's subsidiaries are required to maintain minimum capital
requirements prescribed by various regulatory agencies, including the California
Department of Corporations, and the Departments of Insurance in various states.
As of September 30, 1999, 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
September 30, 1999, no indebtedness had been issued pursuant to this
registration statement.

The Company believes that cash flow generated by operations, its cash and
investment balances, supplemented by the Company's ability to borrow under its
existing revolving credit facility or to conduct a public offering under its
debt registration statement 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.

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, 1999. 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 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.

                                      32

<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, CONTINUED

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. Since the purchase price is
fixed at $500 million, the number of shares required to be issued as a result
of the pending transaction with Cerulean is dependent upon the stock price on
the closing date. WellPoint has made significant purchases of treasury stock
for this purpose, using excess cash as well as the issuance of additional
indebtedness under its revolving credit facility and from the issuance of its
zero coupon convertible subordinated debentures. 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 during the last three 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,
which include substantial indemnity-based insurance operations, have experienced
varying profitability or losses in recent periods. Since the relevant dates of
acquisition, the Company has continued to work extensively on the integration of
these businesses; 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'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. The Company also provides insurance products to
Medi-Cal beneficiaries in various California counties under contracts with the
California Department of Health Services 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

                                      33

<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, CONTINUED

the risk of heightened scrutiny by such government agencies and that
profitability from this business will not 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.

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

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. Recently, a number of class-action lawsuits have been 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 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, aggressive marketing practices by
competitors and other market pressures. Additional increases in competition
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

                                 34

<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, CONTINUED

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. In response to the pressure on margins in 1998 and again in 1999,
the Company 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 is dependent on retaining existing employees, attracting additional
qualified employees and achieving productivity gains from the Company's
investment in technology to meet its future profit objectives. The Company faces
intense competition for qualified personnel, especially qualified computer
programmers, actuaries and other professional and technical employees. There can
be no assurances that an inability to retain existing employees or attract
additional employees will not have a material adverse effect on the Company's
results of operations.

                                      35

<PAGE>

PART II    OTHER INFORMATION

ITEM6.     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 Reorganization dated as of
                     July 22, 1997 by and among the Registrant,
                     WellPoint Health Networks Inc., a California
                     corporation ("WellPoint California"), and WLP
                     Acquisition Corp., incorporated by reference to
                     Exhibit 99.1 of the Registrant's Current Report on
                     Form 8-K filed on August 5, 1997

           2.03      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).

           2.04      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.

           2.05      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.

           2.06      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.

           2.07      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.

           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

                                      36

<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.

           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.

                                      37

<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: November 12, 1999                  By:  \S\ LEONARD D. SCHAEFFER
                                              ------------------------
                                              Leonard D. Schaeffer
                                              Chairman of the Board of Directors
                                              and Chief Executive Officer



Date: November 12, 1999                  By:  \S\ DAVID C. COLBY
                                              -------------------
                                              David C. Colby
                                              Executive Vice President
                                              and Chief Financial Officer



Date: November 12, 1999                  By:  \S\ S. LOUISE MCCRARY
                                              ---------------------
                                              S. Louise McCrary
                                              Senior Vice President and
                                              Chief Accounting Officer

                                      38