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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended March 31, 2002
|OR                                           
|o                                             | 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 001-13083

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

|Delaware(State or other jurisdiction of
incorporation or organization)             |  | 95-4635504(IRS Employer Identification No.)
|---------------------------------------------------------------------------------- |  | -------------------------------------------
|1 WellPoint Way, Thousand Oaks, California(Address of principal executive offices) |  | 91362(Zip Code)                            

Registrant's telephone number, including area code(818) 234-4000

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

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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 ý No o

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 May 9, 2002Common Stock, $0.01 par value

145,014,876 shares


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WellPoint Health Networks Inc.  Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2002  Table of Contents

|                              |         |                                                                                                |                                                                                       | PAGE
|----------------------------- | ------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|PART I. FINANCIAL INFORMATION |         |                                                                                               
|                              | ITEM 1. |                                                                                                | Financial Statements                                                                  |     
|                              |         | Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001                         |                                                                                       | 1   
|                              |         | Consolidated Income Statements for the Quarter Ended March 31, 2002 and 2001                   |                                                                                       | 2   
|                              |         | Consolidated Statement of Changes in Stockholders' Equity for the Quarter Ended March 31, 2002 |                                                                                       | 3   
|                              |         | Consolidated Statements of Cash Flows for the Quarter Ended March 31, 2002 and 2001            |                                                                                       | 4   
|                              |         | Notes to Consolidated Financial Statements                                                     |                                                                                       | 5   
|                              | ITEM 2. |                                                                                                | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|                              | ITEM 3. |                                                                                                | Quantitative and Qualitative Disclosures About Market Risk                            |     
|PART II. OTHER INFORMATION    |         |                                                                                               
|                              | ITEM 6. |                                                                                                | Exhibits and Reports on Form 8-K                                                      |     
|SIGNATURES                    |         | 36                                                                                            

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ITEM 1. Financial Statements

WellPoint Health Networks Inc.  Consolidated Balance Sheets

|                                                 |                                                                                                                                                       | March 31,
2002             |                                            | December 31,
2001 |          
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | ---------
|
|
|ASSETS                                           |                                                                                                                                                       |                            |                                            |                   |          
|Current Assets:                                  |                                                                                                                                                       |                            |                                            |                   |          
|                                                 | Cash and cash equivalents                                                                                                                             |                            | $                                          | 817,063           |          
|                                                 | Investment securities, at market value                                                                                                                |                            |                                            | 4,511,777         |          
|                                                 | Receivables, net                                                                                                                                      |                            |                                            | 1,141,981         |          
|                                                 | Deferred tax assets, net                                                                                                                              |                            |                                            | 119,412           |          
|                                                 | Other current assets                                                                                                                                  |                            |                                            | 142,810           |          
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       | Total Current Assets       |                                            |                   | 6,733,043
|Property and equipment, net                      |                                                                                                                                                       |                            | 345,150                                    |                   |          
|Intangible assets, net                           |                                                                                                                                                       |                            | 813,982                                    |                   |          
|Goodwill, net                                    |                                                                                                                                                       |                            | 1,643,457                                  |                   |          
|Long-term investments, at market value           |                                                                                                                                                       |                            | 124,427                                    |                   |          
|Deferred tax assets, net                         |                                                                                                                                                       |                            |                                           |                   |          
|Other non-current assets                         |                                                                                                                                                       |                            | 144,208                                    |                   |          
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       |                            | Total Assets                               |                   | $        
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|LIABILITIES AND STOCKHOLDERS' EQUITY             |                                                                                                                                                       |                            |                                            |                   |          
|Current Liabilities:                             |                                                                                                                                                       |                            |                                            |                   |          
|                                                 | Medical claims payable                                                                                                                                |                            | $                                          | 2,227,814         |          
|                                                 | Reserves for future policy benefits                                                                                                                   |                            |                                            | 71,517            |          
|                                                 | Unearned premiums                                                                                                                                     |                            |                                            | 384,092           |          
|                                                 | Accounts payable and accrued expenses                                                                                                                 |                            |                                            | 895,028           |          
|                                                 | Experience rated and other refunds                                                                                                                    |                            |                                            | 256,973           |          
|                                                 | Income taxes payable                                                                                                                                  |                            |                                            | 160,656           |          
|                                                 | Other current liabilities                                                                                                                             |                            |                                            | 757,153           |          
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       | Total Current Liabilities  |                                            |                   | 4,753,233
|Accrued postretirement benefits                  |                                                                                                                                                       |                            | 122,670                                    |                   |          
|Reserves for future policy benefits, non-current |                                                                                                                                                       |                            | 221,395                                    |                   |          
|Long-term debt                                   |                                                                                                                                                       |                            | 1,173,584                                  |                   |          
|Deferred tax liabilities                         |                                                                                                                                                       |                            | 78,196                                     |                   |          
|Other non-current liabilities                    |                                                                                                                                                       |                            | 169,365                                    |                   |          
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       |                            | Total Liabilities                          |                   |          
|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, 147,007,928 and 135,307,637 issued at March 31, 2002 and December 31, 2001, respectively |                            |                                            | 1,470             |          
|                                                 | Treasury stock, at cost, 3,152,959 and 7,474,305 shares at March 31, 2002 and December 31, 2001, respectively                                         |                            |                                            | (187,794          | )        
|                                                 | Additional paid-in capital                                                                                                                            |                            |                                            | 1,714,066         |          
|                                                 | Retained earnings                                                                                                                                     |                            |                                            | 1,753,274         |          
|                                                 | Accumulated other comprehensive income                                                                                                                |                            |                                            | 4,808             |          
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       | Total Stockholders' Equity |                                            |                   | 3,285,824
|                                                 |                                                                                                                                                       |                            |                                            |                   |          
|                                                 |                                                                                                                                                       |                            | Total Liabilities and Stockholders' Equity |                   | $        
|                                                 |                                                                                                                                                       |                            |                                            |                   |          

See the accompanying notes to the consolidated financial statements.

1

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WellPoint Health Networks Inc.  Consolidated Income Statements  (Unaudited)

|                                                  |                                         | Quarter Ended March 31,
|------------------------------------------------- | --------------------------------------- | -----------------------
|
|
|Revenues:                                         |                                         |                        
|                                                  | Premium revenue                         |                        
|                                                  | Management services and other revenue   |                        
|                                                  | Investment income                       |                        
|                                                  |                                         |                        
|                                                  |                                         |                        
|Operating Expenses:                               |                                         |                        
|                                                  | Health care services and other benefits |                        
|                                                  | Selling expense                         |                        
|                                                  | General and administrative expense      |                        
|                                                  |                                         |                        
|                                                  |                                         |                        
|                                                  |                                         |                        
|Operating Income                                  |                                         |                        
|                                                  | Interest expense                        |                        
|                                                  | Other expense, net                      |                        
|                                                  |                                         |                        
|Income before Provision for Income Taxes          |                                         |                        
|                                                  | Provision for income taxes              |                        
|                                                  |                                         |                        
|Net Income                                        |                                         | $                      
|                                                  |                                         |                        
|Earnings Per Share                                |                                         | $                      
|                                                  |                                         |                        
|Earnings Per Share Assuming Full Dilution         |                                         | $                      
|                                                  |                                         |                        
|Weighted Average Shares Outstanding               |                                         |                        
|                                                  |                                         |                        
|Fully Diluted Weighted Average Shares Outstanding |                                         |                        
|                                                  |                                         |                        

See
the accompanying notes to the consolidated financial statements.

2

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WellPoint Health Networks Inc.  Consolidated Statement of Changes in Stockholders' Equity  (Unaudited)

|                                                                |                                        |                                                                                                        |   | Common Stock |         |  |   |       |  |        |   |   |         
|--------------------------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------------------------------------------ | - | ------------ | ------- |  | - | ----- |  | ------ | - | - | --------
|
|
|
|
|Balance as of December 31, 2001                                 |                                        | $                                                                                                      |  |              | 71,391  |  | $ | 714   |  | 7,474  |   | $ | (465,805
|Stock grants to employees and directors                         |                                        |                                                                                                        |   |              |         |  |   |       |  | (28    | ) |   | 1,544   
|Stock issued for employee stock option and stock purchase plans |                                        |                                                                                                        |   |              |         |  |   |       |  | (756   | ) |   | 39,755  
|Stock repurchased, at cost                                      |                                        |                                                                                                        |   |              |         |  |   |       |  | 2,000  |   |   | (122,265
|Stock issued under RightCHOICE purchase                         |                                        |                                                                                                        |   |              | 2,718   |  |   | 27    |  | (5,537 | ) |   | 358,977 
|100% Stock Dividend on March 15, 2002                           |                                        |                                                                                                        |   |              | 72,899  |  |   | 729   |  |        |   |   |         
|Net losses from treasury stock reissued                         |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|Comprehensive income (loss)                                     |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|                                                                | Net income                             |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|                                                                | Other comprehensive income, net of tax |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|                                                                |                                        | Change in unrealized valuation adjustment on investment securities, net of reclassification adjustment |   |              |         |  |   |       |  |        |   |   |         
|                                                                |                                        | Minimum pension liability adjustment, net of tax                                                       |   |              |         |  |   |       |  |        |   |   |         
|                                                                |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|Total comprehensive income (loss)                               |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|                                                                |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|Balance as of March 31, 2002                                    |                                        | $                                                                                                      |  |              | 147,008 |  | $ | 1,470 |  | 3,153  |   | $ | (187,794
|                                                                |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         

See the accompanying notes to the consolidated financial statements.

3

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WellPoint Health Networks Inc.  Consolidated Statements of Cash Flows  (Unaudited)

|                                                     |                                                                                   | Quarter Ended March 31,                                                                  |                                                                                
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------
|
|
|Cash flows from operating activities:                |                                                                                   |                                                                                          |                                                                                
|                                                     | Net income                                                                        |                                                                                          | $                                                                              
|                                                     | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                          |                                                                                
|                                                     |                                                                                   | Depreciation and amortization, net of accretion                                          |                                                                                
|                                                     |                                                                                   | (Gain) Loss on sales of assets, net                                                      |                                                                                
|                                                     |                                                                                   | Amortization of deferred gain on sale of building                                        |                                                                                
|                                                     |                                                                                   | Fair value adjustment of interest rate swaps on notes payable                            |                                                                                
|                                                     |                                                                                   | Accretion of interest on zero coupon convertible subordinated debentures and 63/8% Notes |                                                                                
|                                                     |                                                                                   | (Increase) decrease in certain assets:                                                   |                                                                                
|                                                     |                                                                                   |                                                                                          | Receivables, net                                                               
|                                                     |                                                                                   |                                                                                          | Other current assets                                                           
|                                                     |                                                                                   |                                                                                          | Other non-current assets                                                       
|                                                     |                                                                                   | Increase (decrease) in certain liabilities:                                              |                                                                                
|                                                     |                                                                                   |                                                                                          | Medical claims payable                                                         
|                                                     |                                                                                   |                                                                                          | Reserves for future policy benefits                                            
|                                                     |                                                                                   |                                                                                          | Unearned premiums                                                              
|                                                     |                                                                                   |                                                                                          | Accounts payable and accrued expenses                                          
|                                                     |                                                                                   |                                                                                          | Experience rated and other refunds                                             
|                                                     |                                                                                   |                                                                                          | Income taxes payable                                                           
|                                                     |                                                                                   |                                                                                          | Other current liabilities                                                      
|                                                     |                                                                                   |                                                                                          | Accrued postretirement benefits                                                
|                                                     |                                                                                   |                                                                                          | Other non-current liabilities                                                  
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|Cash flows from investing activities:                |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          | Investments purchased                                                          
|                                                     |                                                                                   |                                                                                          | Proceeds from investments sold                                                 
|                                                     |                                                                                   |                                                                                          | Property and equipment purchased                                               
|                                                     |                                                                                   |                                                                                          | Proceeds from property and equipment sold                                      
|                                                     |                                                                                   |                                                                                          | Acquisition of new businesses, net of cash acquired                            
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|Cash flows from financing activities:                |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          | Net (repayment) borrowing of long-term debt under the revolving credit facility
|                                                     |                                                                                   |                                                                                          | Net borrowing of long-term debt under 63/8% Notes due 2012                     
|                                                     |                                                                                   |                                                                                          | Proceeds from issuance of common stock                                         
|                                                     |                                                                                   |                                                                                          | Common stock repurchased                                                       
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|                                                     |                                                                                   |                                                                                          |                                                                                
|Net (decrease) increase in cash and cash equivalents |                                                                                   |                                                                                          | (211,413                                                                       
|Cash and cash equivalents at beginning of period     |                                                                                   |                                                                                          | 1,028,476                                                                      
|                                                     |                                                                                   |                                                                                          |                                                                                
|Cash and cash equivalents at end of period           |                                                                                   | $                                                                                        | 817,063                                                                        
|                                                     |                                                                                   |                                                                                          |                                                                                

See the accompanying notes to the consolidated financial statements.

4

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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
March 31, 2002, WellPoint had approximately 13.0 million medical members and approximately 40.0 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 service, network access, medical cost management and claims processing. The Company also provides a broad array of specialty and other products and
services including pharmacy, dental, utilization management, vision, life insurance, preventive care, disability, behavioral health, medicare supplements, COBRA and flexible benefits account
administration. The Company markets its products in California primarily under the name Blue Cross of California, in Georgia primarily under the name Blue Cross Blue Shield of Georgia, in various
parts of Missouri (including the greater St. Louis area) under the name Blue Cross Blue Shield of Missouri and in various parts of the country under the name UNICARE or HealthLink. Historically, the
Company's primary market for its 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 and in Georgia
and in 85 counties in Missouri (including the greater St. Louis area) to market its products under the Blue Cross Blue Shield names and marks. The Company's customer base is diversified, with
extensive membership among large and small employer groups and individuals and a growing presence in the Medicare and Medicaid markets.

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 a
fair statement of its financial position as of March 31, 2002, the results of its operations for the quarter ended March 31, 2002 and 2001, cash flows for the quarter ended
March 31, 2002 and 2001 and its changes in stockholders' equity for the quarter ended March 31, 2002. The results of operations for the interim periods presented are not necessarily
indicative of the operating results for the full year.



On March 15, 2002, WellPoint effected a two-for-one split of the Company's Common Stock. The stock split was in the form of a stock
dividend of one additional share of WellPoint stock for each share held. Share and per share data for all periods presented herein have been adjusted to give effect to the stock split.

3.    Acquisitions

In 1996, the Company began pursuing a nationwide expansion strategy through selective acquisitions and start-up activities in key geographic areas.
More recently, the Company has focused on acquiring businesses that provide significant concentrations of members in strategic locations outside of California. In connection with this strategy, the
Company completed its acquisitions of RightCHOICE Managed Care, Inc. ("RightCHOICE") in 2002 and Cerulean Companies, Inc. ("Cerulean") in 2001.

5

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On
January 31, 2002, WellPoint completed its merger, through its wholly owned subsidiary, RWP Acquisition Corp., with RightCHOICE, the parent company of Blue Cross and Blue Shield
of Missouri, which served approximately 2.2 million medical members as of January 31, 2002. Under the terms of the transaction, total consideration paid to all holders of RightCHOICE
common stock and holders of employee stock options in the merger was $379.1 million in cash and 16.5 million shares of WellPoint Common Stock. The Company issued approximately
11.1 million shares from treasury stock and the remaining 5.4 million shares from newly issued shares of WellPoint Common Stock. The total purchase price of approximately
$1,442.1 million was used to purchase net assets with a fair value of approximately $303.6 million. This acquisition was accounted for under the purchase method of accounting and,
accordingly, the consolidated results of operations of the Company include the results of RightCHOICE from the date of acquisition. As a result of the acquisition of RightCHOICE, the Company estimates
that it will incur $88.0 million in expenses primarily related to change-in-control payments to RightCHOICE management and transaction costs. Generally accepted
accounting principles require that these expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed liabilities in the
allocation of the purchase price to the net assets acquired. Goodwill and other intangibles totaling $1,339.5 million includes $108.5 million of deferred and current tax liabilities
relating to identified intangibles. With the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," goodwill and other intangible assets with
indefinite useful lives are no longer amortized, but
instead subject to impairment tests. Identified intangibles with definite useful lives are being amortized on a straight-line basis over 14 to 20 years. The valuation process is not
yet complete and, as a result, the useful lives and method of amortization are only preliminary estimates. The estimated purchase price allocation between goodwill and identifiable intangible assets
is $1,029.5 million and $310.0 million, respectively.

On
March 15, 2001, the Company completed its acquisition of Cerulean, the parent company of Blue Cross Blue Shield of Georgia, Inc., which served approximately
1.9 million medical members in the state of Georgia as of March 31, 2001. This acquisition was accounted for under the purchase method of accounting and accordingly, the consolidated
results of operations of the Company include the results of Cerulean from the date of acquisition. The cash purchase price was $700.0 million. As a result of the acquisition of Cerulean, the
Company incurred $134.5 million in expenses primarily related to change in control payments to Cerulean management and transaction costs. Generally accepted accounting principles require that
these expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price to the
net assets acquired. Cash of $200.0 million and debt of $500.0 million were used to purchase net assets with a fair value of approximately $334.8 million. Goodwill and other
intangibles totaling $602.9 million includes $149.1 million of deferred and current tax liabilities relating to identified intangibles. Other intangibles with definite useful lives are
being amortized using a straight-line basis or the timing of related cash flows depending upon the expected amortization pattern over five to 25 years. The purchase price allocation
between goodwill and identifiable intangible assets is $235.3 million and $367.6 million, respectively.

In
accordance with the requirements of Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") the following unaudited pro forma
summary presents revenues, net income and per share data of WellPoint as if the acquisitions of Cerulean and RightCHOICE had occurred on January 1, 2001. The pro forma information includes the
results of operations for the period prior to the acquisition, adjusted for interest expense on long-term debt incurred to fund the acquisitions, amortization of goodwill and intangible
assets and the related income tax effects. The pro forma financial information for the quarter ended March 31, 2001 is presented under the requirements of APB Opinion No. 16, "Business
Combinations," which allows for amortization of goodwill and other intangible assets with indefinite useful lives. The pro forma financial information for the quarter ended March 31, 2002 is
presented under the requirements of SFAS

6

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No. 141 which disallows the amortization of goodwill and other intangible assets with indefinite useful lives.

The
pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations had the Company been a single entity during the
quarter ended March 31, 2002 and 2001, nor is it necessarily indicative of future results of operations. Pro forma earnings per share is based on 144.8 million and 142.5 million
weighted average shares outstanding for the quarter ended March 31, 2002 and 2001, respectively. Pro forma earnings per share assuming full dilution is based on 151.9 million and
149.1 million weighted average shares outstanding for the quarters ended March 31, 2002 and 2001, respectively.

Quarter Ended March 31,2002

2001(In thousands, except per share data)Revenues

$
4,053,715

$
3,388,136Net Income

$
133,842

$
106,026Earnings Per ShareBasic

$
0.92

$
0.74Diluted

$
0.88

$
0.71


4.    Long-Term Debt

63/8% Notes due 2012

On January 16, 2002, the Company issued $350.0 million aggregate principal amount at maturity of 63/8% Notes due January 15,
2012 (the "2002 Notes"). The net proceeds of this offering totaled approximately $348.9 million. The net proceeds from the sale of the 2002 Notes were used to finance the RightCHOICE merger
discussed in Note 3. The 2002 Notes bear interest at a rate of 63/8% per annum, payable semi-annually in arrears on January 15 and July 15 of each year
commencing July 15, 2002. Interest is computed on the basis of a 360-day year of twelve 30-day months. At March 31, 2002, the Company had $348.9 million
(based upon the principal amount of $350.0 million less discount) of 2002 Notes outstanding. The related interest expense and amortization of discount for the quarter ended March 31,
2002 totaled $4.8 million.

The
2002 Notes may be redeemed, in whole or in part, at the Company's option at any time. The redemption price for any 2002 Notes redeemed will be equal to the greater of the following
amounts: 1) 100% of the principal amount of the 2002 Notes being redeemed on the redemption date; and 2) the
sum of the present values of the remaining scheduled payments of principal and interest on the 2002 Notes being redeemed on that redemption date (not including any portion of any payments of interest
accrued to the redemption date) discounted to the redemption date on a semiannual basis at the Treasury rate as determined by the Reference Treasury Dealer (J.P. Morgan Securities Inc. or
Deutsche Banc Alex. Brown or their respective successors), plus 25 basis points. In each case, the redemption price will also include accrued and unpaid interest on the 2002 Notes to the redemption
date.

63/8% Notes due 2006

On June 15, 2001, the Company issued $450.0 million aggregate principal amount at maturity of 63/8% Notes due June 15, 2006
(the "2001 Notes"). The net proceeds of this offering totaled approximately $449.0 million. The net proceeds from the sale of the 2001 Notes were used for repayment of indebtedness under the
Company's revolving credit facilities. The 2001 Notes bear interest at a rate of 63/8% per annum, payable semi-annually in arrears on June 15 and December 15
of each year commencing December 15, 2001. Interest is computed on the basis of a 360-day year of

7

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twelve 30-day months. At March 31, 2002, the Company had $449.1 million (based upon the principal amount of $450.0 million less discount) of 2001 Notes outstanding.
The related interest expense and amortization of discount for quarter ended March 31, 2002 totaled $7.4 million.

The
2001 Notes may be redeemed, in whole or in part, at the Company's option at any time. The redemption price for any 2001 Notes redeemed will be equal to the greater of the following
amounts: 1) 100% of the principal amount of the 2001 Notes being redeemed on the redemption date; and 2) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2001 Notes being redeemed on that redemption date (not including any portion of any payments of interest accrued to the redemption date) discounted to the redemption date on a
semiannual basis at the Treasury rate as determined by the designated Reference Treasury Dealer (Salomon Smith Barney Inc. or UBS Warburg LLC or their respective successors), plus 25 basis
points. In each case, the redemption price will also include accrued and unpaid interest on the 2001 Notes to the redemption date.

The
2002 and 2001 Notes are unsecured obligations and rank equally with all of the Company's existing and future senior unsecured indebtedness. All existing and future liabilities of the
Company's subsidiaries are and will be effectively senior to the 2002 and 2001 Notes. The indenture governing the 2002 and 2001 Notes contains a covenant that limits the Company's ability and that of
the Company's subsidiaries to create liens on Company property or assets to secure certain indebtedness without also securing the 2002 and 2001 Notes.

Revolving Credit Facility

Effective as of March 30, 2001, the Company entered into two new unsecured revolving credit facilities allowing aggregate indebtedness of
$1.0 billion. Upon execution of these facilities, the Company terminated its prior $1.0 billion unsecured revolving facility. Borrowings under these facilities (which are generally
referred to collectively in this Quarterly Report on Form 10-Q as the Company's "revolving 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 then-current rating of the Company's unsecured long-term debt by specified rating
agencies. One facility, which provides for borrowings of up to $750.0 million expires as of March 30, 2006, although it may be extended for up to two additional one-year
periods under certain circumstances. The other facility, which provides for borrowings of up to $250.0 million was originally set to expire on March 30, 2002. In March 2002, the
Company amended this facility to provide for a one-year extension with an expiration date of March 28, 2003. Any amount outstanding under this facility as of March 28, 2003
may be converted into a one-year term loan at the option of the Company.

Borrowings
under the facilities are made on a committed basis or, in the case of the $750.0 million facility, pursuant to an auction bid process. The $750.0 million
facility also contains sublimits for letters of credit and "swingline" loans. Each credit agreement requires the Company to maintain certain financial ratios and contains restrictive convenants,
including restrictions on the occurrence of additional indebtedness and the granting of certain liens, limitations on acquisitions and investments and limitations on changes in control. The total
amount outstanding under these facilities was $225.0 million as of March 31, 2002. The total amount outstanding under the Company's revolving credit facility as of December 31,
2001 was $235.0 million.

The
agreement provides for interest on committed advances 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 unsecured long-term debt by specified rating agencies. Interest is determined using whichever of these methods is the most favorable to the
Company. The effective interest rates were 2.15% and 2.76% at March 31, 2002 and December 31, 2001, respectively. Borrowings under the credit facility are made on a committed basis or
pursuant to an auction-bid

8

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process. A facility fee based on the facility amount, regardless of utilization, is payable quarterly. The facility fee rate is also determined by the unsecured debt ratings or the leverage ratio of
the Company.

Zero Coupon Convertible Subordinated Debentures

On July 2, 1999, the Company issued $299.0 million aggregate principal amount at maturity of zero coupon convertible subordinated debentures due
2019 (the "Debentures"). The proceeds totaled approximately $200.8 million. The Debentures accrue interest at a yield to maturity of 2.0% per year compounded semi-annually. Holders
have the option to convert the Debentures into the Company's common stock at any time prior to maturity at a rate of 13.594 shares per $1,000 principal amount at
maturity. In lieu of delivering shares of common stock upon conversion of any Debentures, the Company may elect to pay cash for the Debentures in an amount equal to the last reported sales price of
its common stock on the trading day preceding the conversion date. The Debentures are subordinate in right of payment to all existing and future senior indebtedness.

On
October 6, 1999, the Board of Directors authorized the repurchase of some or all of the Company's Debentures for cash. The Company did not repurchase any Debentures during the
quarter ended March 31, 2002 and year ended December 31, 2001.

As
of March 31, 2002 and December 31, 2001, the Company had $154.6 million and $153.9 million (based upon the original issue price plus accrued interest),
respectively, of Debentures outstanding. Accrued interest related to the Debentures was $8.2 million and $7.5 million, respectively, as of March 31, 2002 and December 31,
2001.

9

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5.    Earnings Per Share

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

|                                                                                |  | Quarter Ended March 31,
|------------------------------------------------------------------------------- |  | -----------------------
|
|
|Basic Earnings Per Share Calculation:                                           |  |                        
|Numerator                                                                       |  |                        
|Net Income                                                                      |  | $                      
|                                                                                |  |                        
|Denominator                                                                     |  |                        
|Weighted average shares outstanding                                             |  |                        
|                                                                                |  |                        
|Earnings Per Share                                                              |  | $                      
|                                                                                |  |                        
|Earnings Per Share Assuming Full Dilution Calculation:                          |  |                        
|Numerator                                                                       |  |                        
|Net Income                                                                      |  | $                      
|Interest expense on zero coupon convertible subordinated debentures, net of tax |  |                        
|                                                                                |  |                        
|Adjusted Net Income                                                             |  | $                      
|                                                                                |  |                        
|Denominator                                                                     |  |                        
|Weighted average shares outstanding                                             |  |                        
|Net effect of dilutive stock options                                            |  |                        
|Assumed conversion of zero coupon convertible subordinated debentures           |  |                        
|                                                                                |  |                        
|Fully diluted weighted average shares outstanding                               |  |                        
|                                                                                |  |                        
|Earnings Per Share Assuming Full Dilution                                       |  | $                      
|                                                                                |  |                        

10

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6.    Comprehensive Income

The following summarizes comprehensive income reclassification adjustments included in the statement of changes in stockholders' equity:

Quarter Ended March 31, 2002(In thousands)Holding loss on investment securities arising during the period (net of tax benefit of $31,048)

$
(50,621
)Reclassification adjustment for realized gain on investment securities (net of tax expense of $4,516)


6,775Holding gain related to swap transactions (net of tax expense of $1,161)


1,676Net change in pension liability (net of tax expense of $295)


442Net loss recognized in other comprehensive income (net of tax benefit of $25,076)

$
(41,728
)


7.    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.

In
June 2000, the California Medical Association filed a lawsuit in U.S. district court in San Francisco against BCC. The lawsuit alleges that BCC violated the RICO Act through
various misrepresentations to and inappropriate actions against health care providers. In late 1999, a number of class-action lawsuits were brought against several of the Company's competitors
alleging, among other things, various misrepresentations regarding their health plans and breaches of fiduciary obligations to health plan members. In August 2000, the Company was added as a
party toShane v. Humana, et al., a class-action lawsuit brought on behalf of health care providers nationwide. In addition to the RICO claims brought
in the California Medical Association lawsuit, this lawsuit also alleges violations of ERISA, federal and state "prompt pay" regulations and certain common law claims. In October 2000, the
federal Judicial Panel on Multidistrict Litigation issued an order consolidating the California Medical Association lawsuit, theShanelawsuit and
various other pending managed care class-action lawsuits against other companies before District Court Judge Federico Moreno in the Southern District of Florida for purposes of the pretrial
proceedings. In March 2001, Judge Moreno dismissed the plaintiffs' claims based on violation of the RICO Act, although the dismissal was made without prejudice to the plaintiffs' ability to
subsequently refile their claims. Judge Moreno also dismissed, with prejudice, the plaintiffs' federal prompt pay law claims. On March 26, 2001, the California Medical Association filed an
amended complaint in its lawsuit, alleging, among other things, revised RICO claims and violations of California law. A hearing on the plaintiffs' motion to certify a class was held in early
May 2001. On May 9, 2001, Judge Moreno issued an order requiring that all discovery in the litigation be completed by December 2001, with the exception of discovery related to
expert witnesses, which was to be completed by March 15, 2002. In June 2001, the federal Court of Appeals for the 11th Circuit issued a stay of Judge Moreno's discovery order, pending a
hearing before the Court of Appeals

11

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on the Company's appeal of its motion to compel arbitration (which had earlier been granted in part and denied in part by Judge Moreno). The three-judge panel for the hearing was selected in
December 2001. The hearing was held in January 2002 and, in March 2002, the Court of Appeals panel issued an opinion affirming Judge Moreno's earlier action with respect to the
motion to compel arbitration. The Company has filed a motion requesting a rehearing of the matter before the entire 11th Circuit Court of Appeals.

In
March 2002, the American Dental Association and three individual dentists filed a lawsuit in U.S. district court in Chicago against the Company and BCC. This lawsuit alleges
that WellPoint and BCC engaged in conduct that constituted a breach of contract under ERISA, trade libel and tortious interference with contractual relations and existing and prospective business
expectancies. The lawsuit seeks class-action status. The Company has filed a motion with the federal Judicial Panel on Multidistrict Litigation requesting that the proceedings in this case be
consolidated with a similar action brought against other managed care companies that has previously been consolidated with theShanelawsuit.

In
July 2001, two individual physicians seeking to represent a class of physicians, hospitals and other providers brought suit in the Circuit Court of Madison County, Illinois
against HealthLink, Inc., which is now a subsidiary of the Company as a result of the RightCHOICE transaction. The physicians allege that HealthLink breached the contracts with these physicians
by engaging in the practices of "bundling"
and "down-coding" in its processing and payment of provider claims. The relief sought includes an injunction against these practices and damages in an unspecified amount. Discovery in the
matter is currently being conducted and a hearing regarding class certification has been scheduled for December 16, 2002. A similar lawsuit was brought by physicians (including one of the
physicians in the case described above) in the same court in Madison County, Illinois, on behalf of a nationwide class of providers who contract with Blue Cross and Blue Shield plans against the Blue
Cross and Blue Shield Association and another Blue Cross Blue Shield plan. The complaint recites that it is brought against those entities and their "unnamed subsidiaries, licensees, and affiliates,"
listing a large number of Blue Cross and Blue Shield plans, including "Alliance Blue Cross Blue Shield of Missouri." The plaintiffs also allege that the plans have systematically engaged in practices
known as "short paying," "bundling," and "down-coding" in their processing and payment of subscriber claims. Blue Cross Blue Shield of Missouri has not been formally named or served as a
defendant in this suit.

Prior
to the Company's accquisition of the GBO, John Hancock Mutual Life Insurance Company ("John Hancock") entered into a number of reinsurance arrangements with respect to personal
accident insurance and the occupational accident component of workers' compensation insurance, a portion of which was originated through a pool managed by Unicover Managers, Inc. Under these
arrangements, John Hancock assumed risks as a reinsurer and transferred certain of such risks to other companies. These arrangements have become the subject of disputes, including a number of legal
proceedings to which John Hancock is a party. The Company believes that it has a number of defenses to avoid any ultimate liability with respect to these matters and believes that such liabilities
were not transferred to the Company as part of the GBO acquisition. However, if the Company were to become subject to such liabilities, the Company could suffer losses that might have a material
adverse effect on its financial condition, results of operations or cash flows.

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.

12

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8.    Business Segment Information

As of December 31, 2001, the Company's primary internal business divisions were focused on large employer group business, individual and small employer
group business, and senior and specialty business. As a result of the January 31, 2002 acquisition of RightCHOICE, the organizational structure of the Company has changed effective
February 1, 2002. As a result of these changes, the Company now has the following two reportable segments: Health Care business and Specialty business. The Health
Care segment is managed geographically and continues to provide a broad spectrum of network-based health plans, including HMOs, PPOs, POS plans, other hybrid plans and traditional indemnity products
to large and small employers and individuals. The Specialty business is maintained as a separate segment providing an array of other products, including pharmacy, dental, workers' compensation managed
care services, life insurance, preventive care, disability insurance and behavioral health. Corporate includes net investment income, general and administrative expense and interest expense not
allocable to the reportable segments.

The
following tables present segment information for the Health Care and Specialty segments for the quarter ended March 31, 2002 and 2001, respectively, as if the Company's new
organizational structure had been effective on January 1, 2001.

Quarter Ended March 31, 2002

|                                      |  | Health
Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|
|Premium revenue                       |  | $           | 3,575,725 |           | $ | 122,934   |  | $           
|Management services revenue           |  |             | 153,716   |           |   | 30,721    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 3,729,441 |           |   | 153,655   |  |             
|Segment net income (loss)             |  | $           | 145,652   |           | $ | 4,276     |  | $           
|                                      |  |             |           |           |   |           |  |             
|Segment assets                        |  | $           | 7,383,732 |           | $ | 592,801   |  | $           
|                                      |  |             |           |           |   |           |  |             

Quarter Ended March 31, 2001

|                                      |  | Health
Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|
|Premium revenue                       |  | $           | 2,332,080 |           | $ | 101,048   |  | $           
|Management services revenue           |  |             | 100,818   |           |   | 28,706    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 2,432,898 |           |   | 129,754   |  |             
|Segment net income                    |  | $           | 90,460    |           | $ | 5,767     |  | $           
|                                      |  |             |           |           |   |           |  |             
|Segment assets                        |  | $           | 3,520,398 |           | $ | 602,460   |  | $           
|                                      |  |             |           |           |   |           |  |             

9.    Hedging Activities

The Company maintains an interest rate risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations
caused by interest rate volatility. The Company's goal is to maintain a balance between fixed and floating interest rates on its long-term debt.

By
using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates, the Company exposes itself to credit risk and market risk. Market risk is
the adverse effect on the value of a financial instrument that results from a change in currency exchange rates or

13

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interest rates. The Company manages exposure to market risk associated with interest rate and foreign exchange contracts by establishing and monitoring parameters that limit the types and degree of
market risk that may be undertaken.

The
Company uses interest rate swap agreements to manage interest rate exposures. The principal objective of such contracts is to minimize the risks and/or costs associated with
financial and investing activities. The Company does not use derivative financial instruments for speculative purposes. The counterparties to these contractual arrangements are major financial
institutions with which the Company also has other financial relationships. These counterparties expose the Company to credit loss in the event of non-performance. However, the Company
does not anticipate non-performance by the other parties.

Fair Value Hedges

In order to mitigate interest rate fluctuations associated with its $450 million aggregate principal amount at maturity of 63/8% Notes due
June 15, 2006, the Company has entered into a $200 million notional amount interest rate swap agreement. The swap agreement is a contract to exchange a fixed 63/8% rate
for a LIBOR-based floating rate. The swap agreement expires June 15, 2006. As of March 31, 2002, the Company recognized a derivative liability related to this swap agreement of
$4.1 million, which was included in other non-current liabilities of the consolidated balance sheet.

During
2001, the Company entered into foreign currency forward exchange contracts for each of the fixed maturity securities on hand denominated in foreign currencies in order to hedge
asset positions with respect to currency fluctuations related to these securities. As of December 31, 2001, however, the Company had liquidated its non-dollar foreign bond holdings
and as a result entered into a hedge to offset the remaining currency hedge. Subsequent to the implementation of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), all gains and losses from both effective and ineffective forward exchange contracts have been
reported in investment income offset by the related gains and losses on the Company's available-for-sale foreign securities.

Cash Flow Hedges

The Company uses interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt under its revolving credit facility.
The swap agreements are contracts to exchange variable-rate for fixed-rate interest payments without the exchange of the underlying notional amounts. During the quarter ended
March 31, 2002, the Company recognized a net gain of $66 thousand reported in interest expense in the consolidated income statement, which represents the total ineffectiveness of all
cash flow hedges.

As
of March 31, 2002, the Company had the following interest rate swap agreements in effect (notional amount in thousands) in addition to the swap agreement referred to under
"Fair Value Hedges":

Notional Amount

Strike Rate

Expiration Date$150,000

6.99
%
October 17, 2003$  50,000

7.06
%
October 17, 2006


As
of March 31, 2002, the Company had recognized a derivative liability related to this swap agreement of $11.2 million, which was included in other non-current
liabilities of the consolidated balance sheet.

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10.  New Pronouncements

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." The new rules change
the accounting methodology for goodwill from a model that amortizes goodwill to one which evaluates it for impairment. Amortization of goodwill, including previously recorded goodwill, ended upon
adoption of the new rules. The new rules also eliminate amortization of other intangibles with indefinite useful lives, but these assets are also subject to the impairment tests. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001. Upon adoption of SFAS No. 142 on January 1, 2002, the Company's evaluation of its goodwill and other intangible
assets resulted in no impairment loss. Amortization of goodwill and other intangibles for the quarter ended March 31, 2002 and 2001, totaled $8.8 million and $11.3 million,
respectively. SFAS No. 142 accounted for $7.1 million of the amortization decrease, partially offset by a net increase in amortization of intangible assets with definite useful lives of
$4.6 million, primarily due to recent acquisitions.

In
June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143"). SFAS
No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company will adopt SFAS No. 143 on January 1, 2003. The provisions
of SFAS No. 143 require companies to record an asset and related liability for the costs associated with the retirement of a long-lived tangible asset if a legal liability to retire
the asset exists. The Company is in the process of analyzing the provisions of SFAS No. 143; however, the effect of adoption is not expected to have a significant impact on the Company's
financial condition and results of operations.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144"). SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 on
January 1, 2002. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions," for the disposal of a
segment of business (as previously defined in that opinion). SFAS No. 144 retains the basic principles of SFAS No. 121 for long-lived assets to be disposed of by sale or held
and used and broadens discontinued operations presentation to include a component of an entity that is held for sale or that has been disposed. Components must have operations and cash flows that can
be clearly distinguished from the rest of the entity. The adoption of this standard did not have any impact on the Company's financial results.

11.  Pending Transactions

On November 20, 2001, WellPoint entered into a definitive agreement to acquire CareFirst, Inc. ("CareFirst"). CareFirst is a
not-for-profit health care company which, along with its affiliates and subsidiaries, offers a comprehensive portfolio of health insurance products, direct health care and
administrative services to approximately 3.1 million people in Maryland, Delaware, the District of Columbia and Northern Virginia. CareFirst operates through three wholly owned affiliates:
CareFirst of
Maryland, Inc., Group Hospitalization and Medical Services, Inc., doing business under the name CareFirst BlueCross BlueShield, and Blue Cross Blue Shield of Delaware. Under the terms of
the acquisition agreement, a wholly owned subsidiary of the Company will merge with and into CareFirst. As a result of the merger, the outstanding shares of common stock of CareFirst will be converted
into the right to receive an aggregate purchase price of $1.3 billion. Before the CareFirst acquisition is

15

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completed, CareFirst and its subsidiaries will convert from their current status as not-for-profit corporations into for-profit, stock corporations. As part of
this conversion, CareFirst will issue 100% of its outstanding common stock to charitable foundations established according to applicable law. The conversion will require the approval of insurance
regulators and the transaction is subject to the receipt of a private letter ruling from the IRS that the conversion of CareFirst will constitute a tax-free reorganization and that the
gain or loss recognized by the holders of CareFirst stock in the merger will not be subject to unrelated business income tax. The conversion and regulatory approval process is currently expected to
take 18 to 24 months from the date of signing of the definitive agreement. The acquisition is expected to close in 2003.

In
April 2002, the Maryland legislature adopted legislation that would, among other things, require that the consideration paid by the Company in the CareFirst transaction consist
entirely of cash, prohibit certain change-in-control payments to CareFirst management previously approved by the CareFirst's Board of Directors and delay for 90 days the
effectiveness of any decision by the Maryland Insurance Administration regarding CareFirst's for-profit conversion and consummation of the CareFirst transaction in order to allow the
Maryland legislature to review the decision. The Company is currently assessing the effects of this legislation on the proposed transaction.

16

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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 March 31, 2002, WellPoint had approximately
13.0 million medical members and approximately 40.0 million specialty members. As a result of the January 31, 2002 closing of the RightCHOICE transaction, the Company's medical
membership increased by approximately 2.2 million 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 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 also provides a broad array of specialty and other
products, including pharmacy, dental, life insurance, preventive care, disability insurance, behavioral health, COBRA and flexible benefits account administration. The Company markets its products in
California primarily under the name Blue Cross of California, in Georgia primarily under the name Blue Cross Blue Shield of Georgia, in various parts of Missouri (including the greater St. Louis area)
under the name Blue Cross Blue Shield of Missouri and in other states primarily under the name UNICARE or HealthLink. The Company holds the exclusive right in California to market its products under
the Blue Cross name and mark and in Georgia and in 85 counties in Missouri (including the greater St. Louis area) to market its products under the Blue Cross Blue Shield names and marks.

As
of December 31, 2001, the Company's primary internal business divisions were focused on large employer group business, individual and small employer group business, and senior
and specialty business. As a result of the January 31, 2002 acquisition of RightCHOICE, the organizational structure of the Company has changed effective February 1, 2002 to reflect the
following reportable segments: Health Care business and Specialty business.

Acquisition of RightCHOICE

On October 17, 2001, the Company entered into an Agreement and Plan of Merger with RightCHOICE, through its wholly owned subsidiary, RWP Acquisition Corp.
(See Note 3 to the Consolidated Financial Statements). On January 31, 2002, the Company completed this transaction, pursuant to which RightCHOICE became a wholly owned subsidiary of the
Company. The acquisition was valued at approximately $1.4 billion on the closing date, which was paid with $379.1 million in cash and approximately 16.5 million shares of
WellPoint common stock. RightCHOICE, through its exclusive license to use the "Blue Cross" and "Blue Shield" names and service marks, is the largest provider of managed health care benefits in the
state of Missouri based on number of members. RightCHOICE, through its HealthLink subsidiary, also provides network rental, administrative services, workers' compensation managed care services and
other non-underwritten health benefit programs. As of January 31, 2002, RightCHOICE served approximately 2.2 million medical members in Missouri, Arkansas, Illinois, Indiana,
Iowa, Kentucky and West Virginia. RightCHOICE has historically experienced a higher administrative expense ratio than the Company's core businesses due to its higher concentration of administrative
services business. Accordingly, it is expected that RightCHOICE's higher administrative expense ratios will ultimately contribute to an increase in the administrative expense ratio for the Company.

17

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Acquisition of Cerulean

On March 15, 2001, the Company completed its acquisition of Cerulean Companies, Inc. ("Cerulean"), the parent company of Blue Cross Blue Shield of
Georgia, Inc. (See Note 3 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 Employer Group
business and fewer managed care offerings. Accordingly, Cerulean's higher loss and administrative expense ratios have contributed to an increase in those ratios for the Company. The acquisition
increased the Company's Georgia medical membership by approximately 1.9 million members as of March 31, 2001. The cash purchase price was $700.0 million. As a result of the
acquisition of Cerulean, the Company incurred $134.5 million in expenses, primarily related to change in control payments to Cerulean management and transaction costs. This acquisition was
accounted for under the purchase method of accounting.

Pending Acquisition of CareFirst

On November 20, 2001, WellPoint entered into a definitive agreement to acquire CareFirst, Inc. ("CareFirst"). CareFirst is a
not-for-profit health care company which, along with its affiliates and
subsidiaries, offers a comprehensive portfolio of health insurance products, direct health care and administrative services to approximately 3.1 million people in Maryland, Delaware, the
District of Columbia and Northern Virginia. CareFirst operates through three wholly owned affiliates: CareFirst of Maryland, Inc., Group Hospitalization and Medical Services, Inc., doing
business under the name CareFirst BlueCross BlueShield, and Blue Cross Blue Shield of Delaware. Under the terms of the acquisition agreement, a wholly owned subsidiary of the Company will merge with
and into CareFirst. As a result of the merger, the outstanding shares of common stock of CareFirst will be converted into the right to receive an aggregate purchase price of $1.3 billion.
Before the CareFirst acquisition is completed, CareFirst and its subsidiaries will convert from their current status as not-for-profit corporations into for-profit,
stock corporations. As part of this conversion, CareFirst will issue 100% of its outstanding common stock to charitable foundations established according to applicable law. The conversion will require
the approval of insurance regulators and the transaction is subject to the receipt of a private letter ruling from the IRS that the conversion of CareFirst will constitute a tax-free
reorganization and that the gain or loss recognized by the holders of CareFirst stock in the merger will not be subject to unrelated business income tax. The conversion and regulatory approval process
is currently expected to take 18 to 24 months from the date of signing of the definitive agreement. The acquisition is expected to close in 2003.

In
April 2002, the Maryland legislature adopted legislation that would, among other things, require that the consideration paid by the Company in the CareFirst transaction consist
entirely of cash, prohibit certain change-in-control payments to CareFirst management previously approved by the CareFirst's Board of Directors and delay for 90 days the
effectiveness of any decision by the Maryland Insurance Administration regarding CareFirst's for-profit conversion and consummation of the CareFirst transaction in order to allow the
Maryland legislature to review the decision. The Company is currently assessing the effects of this legislation on the proposed transaction.

National Expansion and Other Recent Developments

In an effort to pursue the expansion of the Company's business outside the state of California, the Company acquired two businesses in 1996 and 1997, the Life and
Health Benefits Management Division ("MMHD") of Massachusetts Mutual Life Insurance Company and the Group Benefits Operations (the "GBO") of John Hancock Mutual Life Insurance Company. The
acquisitions of Rush

18

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Prudential Health Plans and a mail-order pharmacy which now does business as PrecisionRx in 2000 and the acquisition of Cerulean in 2001 were also components of this expansion strategy.
In 2001, the Company entered into definitive agreements to expand into the Midwest with its acquisition of RightCHOICE, which closed on January 31, 2002, and into the Mid-Atlantic
region with the pending acquisition of CareFirst, which is expected to close in 2003.

As
a result of these 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 networks of hospitals, physicians and other health care service providers, develop distribution channels for its products and
successfully
convert acquired books of business to the Company's existing information systems, which will require continued investments by the Company.

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

Legislation

Federal legislation enacted during the last several years seeks, among other things, to insure the portability of health coverage and mandates minimum maternity
hospital stays. California legislation enacted since 1999, among other things, establishes an explicit duty on managed care entities to exercise ordinary care in arranging for the provision of
medically necessary health care services and establishes a system of independent medical review. In 1997, Texas adopted legislation purporting to make managed care organizations such as the Company
liable for their failure to exercise ordinary care when making health care treatment decisions. Similar legislation has also been enacted in Georgia. These and other proposed measures may have the
effect of dramatically altering the regulation of health care and of increasing the Company's loss ratio and administrative costs or decreasing the affordability of the Company's products.

Consolidated Results of Operations

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

The
Company's results of operations for the quarter ended March 31, 2002 include its acquired operations of Cerulean for the entire quarter and operating results for RightCHOICE
for the period after January 31, 2002, its date of acquisition. The Company's consolidated results of operations for the quarter ended March 31, 2001 include the results of Cerulean for
the period from March 15, 2001, its date of acquisition.

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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.

Quarter Ended March 31,2002

2001Operating Revenues:Premium revenue

95.3
%
94.9
%Management services revenue

4.7
%
5.1
%100.0
%
100.0
%Operating Expenses:Health care services and other benefits (loss ratio)

80.6
%
80.8
%Selling expense

4.0
%
4.4
%General and administrative expense

14.0
%
14.0
%


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Membership

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



March 31,Percent
Change2002(e)

2001(e)CaliforniaLarge Group

4,437,222

3,868,920

14.7
%Individual and Small Group

1,576,809

1,577,566

0.0
%Senior

232,470

205,768

13.0
%Total California

6,246,501

5,652,254

10.5
%Central Region(f)MissouriLarge Group

1,320,764

29,083

N/AIndividual and Small Group

228,464

739

N/ASenior

43,585

113

N/ATotal Missouri

1,592,813

29,935

N/AIllinoisLarge Group

756,805

454,050

66.7
%Individual and Small Group

123,530

68,252

81.0
%Senior

12,653

10,758

17.6
%Total Illinois

892,988

533,060

67.5
%TexasLarge Group

340,581

336,409

1.2
%Individual and Small Group

188,905

161,590

16.9
%Senior

511

334

53.0
%Total Texas

529,997

498,333

6.4
%Other StatesLarge Group

1,655,171

1,407,639

17.6
%Individual and Small Group

92,230

78,185

18.0
%Senior

20,823

14,342

45.2
%Total Other States

1,768,224

1,500,166

17.9
%GeorgiaLarge Group

1,577,508

1,497,263

5.4
%Individual and Small Group

365,294

299,910

21.8
%Senior

70,872

78,655

-9.9
%Total Georgia

2,013,674

1,875,828

7.3
%Total Medical Membership

13,044,197

10,089,576

29.3
%ASO Membership(g)California

1,454,017

1,325,406

9.7
%Central Region

2,995,005

1,532,903

95.4
%Georgia

894,569

887,341

0.8
%Total ASO Membership

5,343,591

3,745,650

42.7
%Risk MembershipCalifornia

4,792,484

4,326,848

10.8
%Central Region

1,789,017

1,028,591

73.9
%Georgia

1,119,105

988,487

13.2
%Total Risk Membership

7,700,606

6,343,926

21.4
%Total Medical Membership

13,044,197

10,089,576

29.3
%


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Medical Membership Footnotes



As of March 31,Percent
Change2002

2001Pharmacy

27,904,746

29,663,058

(5.9
)%Dental

2,708,911

2,674,520

1.3
%Life

2,317,633

2,060,268

12.5
%Disability

526,430

552,972

(4.8
)%Behavioral Health

6,500,886

4,837,156

34.4
%


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Comparison of Results for the Quarter Ended March 31, 2002 to the Quarter Ended March 31, 2001

On March 15, 2002, WellPoint effected a two-for-one split of the Company's Common Stock. The stock split was in the form of a stock
dividend of one additional share of WellPoint Common Stock for each share held. Share and per share data for all periods presented below have been adjusted to give effect to the stock split.

The
operating results between the quarter ended March 31, 2002 compared to the quarter ended March 31, 2001 were significantly impacted by the RightCHOICE acquisition,
which was consummated on January 31, 2002 and the Cerulean acquisition, which was consummated on March 15, 2001. Specifically, the operating results for the quarter ended
March 31, 2002 included two months of RightCHOICE and three months of Cerulean operating results as compared to only 15 days of Cerulean operating results for the quarter ended
March 31, 2001.

As
discussed in Note 8, effective February 1, 2002 the Company effected a change in its organizational structure and now has two reportable segmentsHealth Care
and Specialty. The Health Care segment includes all managed care plans and managed care services. The Specialty segment includes specialty managed health care and other services. The following table
depicts premium revenue by reportable segment:

Quarter Ended March 31,2002

2001(In thousands)Health Care

$
3,575,725

$
2,332,080Specialty


122,934


101,048Consolidated

$
3,698,659

$
2,433,128


Premium
revenue increased 52.0%, or $1,265.5 million, to $3,698.7 million for the quarter ended March 31, 2002 from $2,433.1 million for the quarter ended
March 31, 2001. The increase was primarily due to $758.2 million of premium revenue increase related to the RightCHOICE and Cerulean acquisitions, representing 59.9% of the increase.
Excluding acquisitions, premium revenue would have increased 21.6% for the quarter ended March 31, 2002. The increase, excluding acquisitions, was primarily due to an increase of insured member
months of approximately 7.4% and the implementation of premium increases overall.

The
following table depicts management services revenue by business segment:

Quarter Ended March 31,2002

2001(In thousands)Health Care

$
153,716

$
100,818Specialty


30,721


28,706Consolidated

$
184,437

$
129,524


Management
services revenue increased 42.4%, or $54.9 million, to $184.4 million for the quarter ended March 31, 2002 from $129.5 million for the quarter
ended March 31, 2001. The increase was due to $59.2 million of management services revenue from the RightCHOICE and Cerulean acquisitions, but partially offset by a $4.3 million
decrease in the existing business due to medical membership loss in the Company's Central Region and specialty membership loss related to the Company's pharmacy benefit management business.

Investment
income was $59.9 million for the quarter ended March 31, 2002 compared to $52.8 million for the quarter ended March 31, 2001, an increase of
$7.1 million or 13.5%. The increase was primarily due to lower net realized losses in the first quarter of 2002 of $1.2 million as compared

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to net realized losses in 2001 of $7.1 million. Also, net investment expenses increased by $1.3 million in 2002 due primarily to higher investment manager fees. Net investment income,
after considering the impact of net realized losses and investment expenses, increased $2.5 million or 4.2% in 2002 over 2001 as a result of higher average investment balances during the first
quarter 2002 versus the first quarter of 2001.

The
loss ratio attributable to the Health Care segment was 81.0% for the first quarter ended March 31, 2002 compared to 81.3% for the same quarter in 2001. The loss ratio
attributable to the Specialty segment was 69.6% for the first quarter ended March 31, 2002 compared to 68.7% for the same quarter in 2001. The RightCHOICE business has a lower loss ratio than
the Company's core businesses. However, the Cerulean business continues to experience a higher loss ratio than the Company's core businesses due to its higher percentage of its Large Employer Group
business and fewer managed care offerings. Excluding RightCHOICE and Cerulean, the loss ratio for both segments combined decreased to 79.9% for the quarter ended March 31, 2002 from 80.7% for
the quarter ended March 31, 2001. The health care services and other benefits expense includes an estimate of claims incurred during the period but which have not been reported to the Company.
This estimate is actuarially determined based on a variety of factors and is inherently subject to a number of higher variable circumstances. Consequently, the actual results could differ materially
from the amount recorded in the consolidated financial statements.

Selling
expense consists of commissions paid to outside brokers and agents representing the Company. The selling expense ratio for the quarter ended March 31, 2002 decreased to
4.0% compared to 4.4% for the quarter ended March 31, 2001. The RightCHOICE business has a lower selling expense ratio than the Company's core businesses. The acquired Cerulean business has
traditionally experienced a lower selling expense ratio due primarily to its lower percentage of Individual and Small Employer Group business. Excluding RightCHOICE and Cerulean, the selling expense
ratio would have decreased slightly to 4.3% for the quarter ended March 31, 2002 from 4.4% for the same quarter in 2001.

The
administrative expense ratio remained constant at 14.0% for the quarters ended March 31, 2002 and 2001. The acquired RightCHOICE business experienced a higher administrative
expense ratio than the Company's core businesses in the first quarter of 2002 due to integration expenses along with certain other transaction-related expenses. Excluding RightCHOICE and Cerulean, the
administrative expense ratio decreased slightly to 13.9% in the first quarter of 2002 compared to 14.0% a year ago.

Interest
expense increased $8.3 million to $16.5 million for the quarter ended March 31, 2002, compared to $8.2 million for the quarter ended March 31,
2001. The increase in interest expense was related to the higher average debt balance for the quarter ended March 31, 2002 in comparison to the quarter ended March 31, 2001, primarily
due to the RightCHOICE acquisition. The weighted average interest rate for all debt for the quarter ended March 31, 2002, including the fees associated with the Company's borrowings and
interest rate swap agreements, was 6.4%.

Other
expense decreased $2.4 million to $10.9 million for the quarter ended March 31, 2002, compared to $13.3 million for the quarter ended March 31,
2001. The decrease resulted from lower amortization of goodwill and other intangible assets due to the implementation of SFAS No. 142, which accounted for $7.1 million of the
amortization decrease. Partially offsetting this decrease was an increase in amortization of intangible assets with definite useful lives of $4.6 million, primarily due to recent acquisitions.

The
Company's net income for the quarter ended March 31, 2002 was $141.1 million, compared to $96.5 million for the quarter ended March 31, 2001. Earnings per
share totaled $1.01 and $0.77 for the quarter ended March 31, 2002 and 2001, respectively. Earnings per share assuming full dilution totaled $0.97 and $0.74 for the quarter ended
March 31, 2002 and 2001, respectively.

24

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Earnings per share for the quarter ended March 31, 2002 is based upon weighted average shares outstanding of 139.1 million shares, excluding potential common stock, and
145.9 million shares, assuming full dilution. Earnings per share for the quarter ended March 31, 2001 is based on 126.0 million shares, excluding potential common stock, and
131.4 million shares, assuming full dilution. The increase in weighted average shares outstanding primarily resulted from the issuance of shares related to the RightCHOICE acquisition and
Company's employee stock option and purchase plans.

Financial Condition

The Company's consolidated assets increased by $2,332.2 million, or 31.2%, to $9,804.3 million as of March 31, 2002 from
$7,472.1 million as of December 31, 2001. The increase in total assets was primarily due to the acquisition of RightCHOICE, which accounted for $2,014.9 million or 86.4% of the
increase. Excluding RightCHOICE, the increase in total assets was primarily due to growth in cash and investments of $110.0 million or 34.7% and an increase in receivables of
$148.8 million, or 46.9%. Cash and investments totaled $5.5 billion as of March 31, 2002, or 55.6% of total assets.

Overall
claims liabilities increased $300.9 million, or 13.6%, to $2,520.7 million as of March 31, 2002 from $2,219.8 as of December 31, 2001. This increase
is due to the RightCHOICE acquisition of $156.5 million and an increase in the claims liabilities associated with the Company's core businesses of $144.4 million.

As
of March 31, 2002, the Company's long-term indebtedness was $1,173.6 million, of which $154.7 million was related to the Company's Zero Coupon
Convertible Subordinated Debentures (the "Debentures"), $225.0 million was related to the Company's revolving credit facility, $445.0 million was related to the Company's
63/8% Notes due 2006, net of fair value adjustment, and $348.9 million was related to the Company's 63/8% Notes due 2012. (See Note 4 to the Consolidated
Financial Statements). The 63/8% Notes due 2012, with an aggregate principal amount at maturity of $350.0 million, was issued to finance the RightCHOICE acquisition.

Stockholders'
equity totaled $3,285.8 million as of March 31, 2002, an increase of $1,153.2 million from $2,132.6 million as of December 31, 2001. The
increase was primarily due to the issuance of Company's Common Stock of $1,109.1 million in connection with the RightCHOICE acquisition, net income of $141.1 million for the quarter
ended March 31, 2002 and $67.0 million of net proceeds from the reissuance of treasury stock related to the Company's employee 401(k), stock option and stock
purchase plans. Partially offsetting these increases were the repurchase of two million shares of its common stock for $122.3 million and a decrease in unrealized gains on investment securities
of $41.7 million, net of taxes.

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, repayment and repurchases of long-term debt, interest expense, broker and agent commissions, administrative expenses, common
stock repurchases and capital expenditures. In addition to the foregoing, other uses of cash include costs of provider networks and systems development, and costs associated with 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 safety and preservation of capital, sufficient liquidity to meet cash flow needs, the integration of investment strategy with the business operations and objectives of the Company, and
attainment of a competitive after-tax total return.

25

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The
Company's strategy for achieving its investment goals is broad diversification of its investments, both across and within asset classes. As of March 31, 2002, the Company's
investment portfolio consisted primarily of investment grade fixed-maturity securities. The Company's portfolio also included large capitalization and small capitalization domestic equities, foreign
equities, tax-exempt municipal bonds where the after-tax return is higher than the comparable taxable securities, and a small amount of non-investment grade debt
securities. The fixed-income assets include both short and long-duration securities with an attempt to match the Company's funding needs. The investment policy contains limitations
regarding concentration in individual securities and industries and generally prohibits speculative and leveraged investments. 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.

Cash
flow provided by operating activities was $298.0 million for the quarter ended March 31, 2002, compared with $148.8 million for the quarter ended
March 31, 2001. Cash flow from operations for the quarter ended March 31, 2002 was due primarily to net income of $141.1 million and an increase in medical claims payable of
$138.7 million due to membership growth and higher provider contract rates.

Net
cash used in investing activities for the quarter ended March 31, 2002 totaled $793.1 million, compared with $520.5 million for the quarter ended
March 31, 2001. The cash used in the first quarter
of 2002 was attributable primarily to the purchase of investments of $1.7 billion, and of property and equipment, net of sales proceeds, of $24.9 million and the purchase of RightCHOICE
net of acquired cash of $311.0 million. Proceeds from investments sold and matured totaled $1.2 billion, partially offsetting the aforementioned purchases.

Net
cash provided by financing activities totaled $283.7 million in the first quarter of 2002 compared with $525.2 million for the quarter ended March 31, 2001. The
net cash provided in the first quarter of 2002 was primarily related to additional debt incurred to finance the RightCHOICE acquisition of $350.0 million, in addition to the receipt of proceeds
from the issuance of stock related to the Company's employee stock option and purchase programs of $67.0 million less $122.3 million in Company stock repurchases. During the first
quarter of 2002, the Company decreased indebtedness under its revolving credit facility by $10.0 million.

Effective
as of March 30, 2001, the Company entered into two new unsecured revolving credit facilities allowing aggregate indebtedness of $1.0 billion. Upon execution of
these facilities, the Company terminated its prior $1.0 billion unsecured revolving facility. Borrowings under these facilities (which are generally referred to collectively in this Quarterly
Report on Form 10-Q as the Company's "revolving 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 then-current rating of the Company's unsecured long-term debt by specified rating agencies. One facility, which provides
for borrowings of up to $750.0 million, expires as of March 30, 2006, although it may be extended for up to two additional one-year periods under certain circumstances. The
other facility, which provides for borrowings of up to $250.0 million, originally expired as of March 30, 2002. In March 2002, the Company amended this facility to provide for an
expiration date of March 28, 2003. Any amount outstanding under this facility as of March 28, 2003 may be converted into a one-year term loan at the option of the Company.
Borrowings under the facilities are made on a committed basis or, in the case of the $750.0 million facility, pursuant to an auction bid process. The $750.0 million facility also
contains sublimits for letters of credit and "swingline" loans. Each credit agreement requires the Company to maintain certain financial ratios and contains restrictive convenants, including
restrictions on the occurrence of additional indebtedness and the granting of certain liens, limitations on acquisitions and investments and limitations on changes in control (See Note 4 to the
Consolidated Financial Statements). The total amount outstanding under these facilities was $225.0 million as of March 31, 2002.

26

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As
a part of a hedging strategy to limit its exposure to variable interest rate increases, the Company entered into interest rate swap agreements in order to reduce the volatility of
interest expense resulting from changes in interest rates. The swap agreements are contracts to exchange variable-rate interest payments (weighted average rate for the quarter ended
March 31, 2002 of 2.26%) for fixed-rate interest payments (weighted average rate for the quarter ended March 31, 2002 of 7.42%) without the exchange of the underlying
notional amounts. As of September 30, 2001, the Company had entered into $200.0 million of fixed rate swap agreements, which consisted of a $150.0 million notional amount swap
agreement at 6.99% maturing on October 17, 2003 and a $50.0 million notional amount swap agreement at 7.06% maturing on October 17, 2006.

In
order to mitigate interest rate fluctuations associated with its $450 million aggregate principal amount at maturity of 63/8% Notes due June 15, 2006, the
Company has entered into a $200 million notional amount interest rate swap agreement. The swap agreement is a contract to exchange a fixed 63/8% rate for a LIBOR-based floating
rate (weighted average variable rate of 6.05% for the quarter ended March 31, 2002).

During
2001, the Company entered into foreign currency forward exchange contracts for each of the fixed maturity securities on hand denominated in foreign currencies in order to hedge
asset positions with respect to currency fluctuations related to these securities. As of December 31, 2001, however, the Company had liquidated its non-dollar foreign bond holdings
and as result entered into a hedge to offset the remaining currency hedge. Subsequent to the implementation of SFAS No. 133, all gains and losses from both effective and ineffective forward
exchange contracts have been reported in investment income offset by the related gains and losses on the Company's available-for-sale foreign securities.

Certain
of the Company's subsidiaries are required to maintain minimum capital requirements prescribed by various regulatory agencies, including the California Department of Managed
Health Care and the Departments of Insurance in various states. As of March 31, 2002 (or the most recent date with respect to which compliance is required), those subsidiaries of the Company
were in compliance with all minimum capital requirements.

On
June 15, 2001, the Company issued $450.0 million aggregate principal amount at maturity of 63/8% Notes due June 15, 2006 (the "2001 Notes"). The
net proceeds of this offering totaled approximately $449.0 million. The net proceeds from the sale of the 2001 Notes were used for repayment of indebtedness under the Company's revolving credit
facilities, which indirectly financed a portion of the Cerulean acquisition. The 2001 Notes bear interest at a rate of 63/8% per annum, payable semi-annually in arrears on
June 15 and December 15 of each year commencing December 15, 2001. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

The
2001 Notes may be redeemed, in whole or in part, at the Company's option at any time. The redemption price for any 2001 Notes redeemed will be equal to the greater of the following
amounts: 1) 100% of the principal amount of the 2001 Notes being redeemed on the redemption date; and 2) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2001 Notes being redeemed on that redemption date (not including any portion of any payments of interest accrued to the redemption date) discounted to the redemption date on a
semiannual basis at the Treasury rate as determined by the Reference Treasury Dealer (Salomon Smith Barney Inc. or UBS Warburg LLC or their respective successors), plus 25 basis points. In each
case, the redemption price will also include accrued and unpaid interest on the 2001 Notes to the redemption date.

With
the anticipated acquisition of RightCHOICE on January 31, 2002, the Company on January 16, 2002 issued $350.0 million aggregate principal amount at maturity of
63/8% Note due January 15, 2012 (the "2002 Notes"). The net proceeds of this offering totaled approximately $348.9 million. The 2002 Notes bear interest at a rate of
63/8% per annum, payable semi-annually in

27

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arrears on January 15 and July 15 of each year commencing July 15, 2002. Interest is computed on the basis of a 360-day year of twelve 30-day months.

The
2002 Notes may be redeemed, in whole or in part, at the Company's option at any time. The redemption price for any 2002 Notes redeemed will be equal to the greater of the following
amounts: 1) 100% of the principal amount of the 2002 Notes being redeemed on the redemption date; and 2) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2002 Notes being redeemed on that redemption date (not including any portion of any payments of interest accrued to the redemption date) discounted to the redemption date on a
semiannual basis at the Treasury rate as determined by the Reference Treasury Dealer (J.P. Morgan Securities Inc. or Deutsche Banc Alex. Brown or their respective successors), plus 25 basis
points. In each case, the redemption price will also include accrued and unpaid interest on the 2002 Notes to the redemption date.

The
2001 and 2002 Notes are unsecured obligations and rank equally with all of the Company's existing and future senior unsecured indebtedness. All existing and future liabilities of the
Company's subsidiaries are and will be effectively senior to the 2001 and 2002 Notes. The indenture governing the 2001 and 2002 Notes contains a covenant that limits the Company's ability and that of
the Company's subsidiaries to create liens on Company property or assets to secure certain indebtedness without also securing the 2001 and 2002 Notes.

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

Factors That May Affect Future Results of Operations

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

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

28

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In
connection with the RightCHOICE and Cerulean transactions, the Company incurred significant additional indebtedness to fund the cash payments made to the acquired companies'
stockholders. In addition, the Company currently expects to incur additional indebtedness to fund some or all of the cash payments to be made in connection with the pending CareFirst transaction. This
existing or new indebtedness may result in a significant percentage of the Company's cash flow being applied to the payment of interest, and there can be no assurance that the Company's operations
will generate sufficient future cash flow to service this indebtedness. The Company's current indebtedness, as well as any indebtedness that the Company may incur in the future (such as indebtedness
incurred to fund repurchases of its Common Stock or to fund the CareFirst or other transactions), may adversely affect the Company's ability to finance its operations and could limit the Company's
ability to pursue business opportunities that may be in the best interests of the Company and its stockholders.

Completion
of the Company's pending transaction with CareFirst is subject to the satisfaction of a number of conditions, including approval of the insurance regulators in each of
Maryland, Delaware and the District of Columbia. In addition, one of CareFirst's operating affiliates must have its federal charter amended or repealed by the United States Congress (subject to
presidential approval) and must obtain approval from the Washington D.C. Corporation Counsel. There can be no assurances that the required approvals will be obtained. If all conditions to closing are
not met on or before November 20, 2004, each of WellPoint and CareFirst will have the right to terminate the CareFirst Merger Agreement. As a result, there can be no assurances that the
transaction will be consummated.

As
a condition to approval of the transaction, regulatory agencies may seek to impose requirements or limitations on the way that the combined company conducts it business. Although
neither WellPoint nor CareFirst is obligated to agree to any material requirements or limitations in order to obtain approval, if either or both companies were to agree to any such conditions, such
requirements or limitations or additional costs associated therewith could adversely affect WellPoint's ability to integrate the operations of CareFirst with those of WellPoint. Accordingly, a
material adverse effect on WellPoint's revenue, results of operations and cash flows following the CareFirst transaction could result.

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

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

29

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

In
June 2000, the California Medical Association filed a lawsuit in U.S. district court in San Francisco against BCC. The lawsuit alleges that BCC violated the RICO Act through
various misrepresentations to and inappropriate actions against health care providers. In late 1999, a number of class-action lawsuits were brought against several of the Company's competitors
alleging, among other things, various misrepresentations regarding their health plans and breaches of fiduciary obligations to health plan members. In August 2000, the Company was added as a
party toShane v. Humana, et al., a class-action lawsuit brought on behalf of health care providers nationwide. In addition to the RICO claims brought
in the California Medical Association lawsuit, this lawsuit also alleges violations of ERISA, federal and state "prompt pay" regulations and certain common law claims. In October 2000, the
federal Judicial Panel on Multidistrict Litigation issued an order consolidating the California Medical Association lawsuit, theShanelawsuit and
various other pending managed care class-action lawsuits against other companies before District Court Judge Federico Moreno in the Southern District of
Florida for purposes of the pretrial proceedings. In March 2001, Judge Moreno dismissed the plaintiffs' claims based on violation of the RICO Act, although the dismissal was made without
prejudice to the plaintiffs' ability to subsequently refile their claims. Judge Moreno also dismissed, with prejudice, the plaintiffs' federal prompt pay law claims. On March 26, 2001, the
California Medical Association filed an amended complaint in its lawsuit, alleging, among other things, revised RICO claims and violations of California law. A hearing on the plaintiffs' motion to
certify a class was held in early May 2001. On May 9, 2001, Judge Moreno issued an order requiring that all discovery in the litigation be completed by December 2001, with the
exception of discovery related to expert witnesses, which was to be completed by March 15, 2002. In June 2001, the federal Court of Appeals for the 11th Circuit issued a stay of Judge
Moreno's discovery order, pending a hearing before the Court of Appeals on the Company's appeal of its motion to compel arbitration (which had earlier been granted in part and denied in part by Judge
Moreno). The three-judge panel for the hearing was selected in December 2001. The hearing was held in January 2002 and, in March 2002, the Court of Appeals panel issued an opinion
affirming Judge Moreno's earlier action with respect to the motion to compel arbitration. The Company has filed a motion requesting a rehearing of the matter before the entire 11th
Circuit Court of Appeals.

In
March 2002, the American Dental Association and three individual dentists filed a lawsuit in U.S. district court in Chicago against the Company and BCC. This lawsuit alleges
that WellPoint and BCC engaged in conduct that constituted a breach of contract under ERISA, trade libel and tortious interference with contractual relations and existing and prospective business
expectancies. The lawsuit seeks class-action status. 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 has filed a motion with the federal Judicial Panel on Multidistrict Litigation requesting that the proceedings in this case be consolidated
with a similar action brought against other managed care companies that has previously been consolidated with theShanelawsuit.

In
July 2001, two individual physicians seeking to represent a class of physicians, hospitals and other providers brought suit in the Circuit Court of Madison County, Illinois
against HealthLink, Inc., which is now a subsidiary of the Company as a result of the RightCHOICE transaction. The physicians

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allege that HealthLink breached the contracts with these physicians by engaging in the practices of "bundling" and "down-coding" in its processing and payment of provider claims. The
relief sought includes an injunction against these practices and damages in an unspecified amount. Discovery in the matter is currently being conducted and a hearing regarding class certification has
been scheduled for December 16, 2002. A similar lawsuit was brought by physicians (including one of the physicians in the case described above) in the same court in Madison County, Illinois, on
behalf of a nationwide class of providers who contract with Blue Cross and Blue Shield plans against the Blue Cross and Blue Shield Association and another Blue Cross Blue Shield plan. The complaint
recites that it is brought against those entities and their "unnamed subsidiaries, licensees, and affiliates," listing a large number of Blue Cross and Blue Shield plans, including "Alliance Blue
Cross Blue Shield of Missouri." The plaintiffs also allege that the plans have systematically engaged in practices known as "short paying," "bundling," and "down-coding" in their
processing and payment of subscriber claims. Blue Cross Blue Shield of Missouri has not been formally named or served as a defendant in this suit.

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 renegotiations 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, both inside and outside California, 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 (including competition from market entrants
offering Internet-based products and services), could adversely affect the Company's financial condition, cash flows or results of operations.

As
a result of the Company's 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 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

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

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

The
Company's operations are dependent on retaining existing employees, attracting additional qualified employees and achieving productivity gains from the Company's investment in
technology. The Company faces intense competition for qualified information technology personnel and other skilled professionals. There can be no assurances that an inability to retain existing
employees or attract additional employees will not have a material adverse effect on the Company's results of operations.

Prior
to the Company's accquisition of the GBO, John Hancock Mutual Life Insurance Company ("John Hancock") entered into a number of reinsurance arrangements with respect to personal
accident insurance and the occupational accident component of workers' compensation insurance, a portion of which was originated through a pool managed by Unicover Managers, Inc. Under these
arrangements, John Hancock assumed risks as a reinsurer and transferred certain of such risks to other companies. These arrangements have become the subject of disputes, including a number of legal
proceedings to which John Hancock is a party. The Company believes that it has a number of defenses to avoid any ultimate liability with respect to these matters and believes that such liabilities
were not transferred to the Company as part of the GBO acquisition. However, if the Company were to become subject to such liabilities, the Company could suffer losses that might have a material
adverse effect on its financial condition, results of operations or cash flows.

In
December 2000, a wholly owned subsidiary of the Company completed its acquisition of certain mail order pharmaceutical service assets and now conducts business as a mail order
pharmacy. The pharmacy business is subject to extensive federal, state and local regulations which are in many instances different from those under which the Company's core health plan business
currently operates. The failure to properly adhere to these and other applicable regulations could result in the imposition of civil and criminal penalties, which could adversely affect the Company's
results of operations or financial condition. In addition, pharmacies are exposed to risks inherent in the packaging and distribution of pharmaceuticals and other health care products. Although the
Company intends to maintain professional liability and errors and omissions liability insurance, there can be no assurances that the coverage limits under such insurance programs will be adequate to
protect against future claims or that the Company will be able to maintain insurance on acceptable terms in the future.

Following
the terrorist attacks of September 11, 2001, there have been various incidents of suspected bioterrorist activity in the United States. To date, these incidents have
resulted in related

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isolated incidents of illness and death. However, federal and state law enforcement officials have issued public warnings about additional potential terrorist activity involving biological weapons.
If the United States were to experience more widespread bioterrorist attacks, the Company's covered medical expenses could rise and the Company could experience a material adverse effect on its
results of operations, financial condition and cash flow.

On
April 22, 2002, one of the Company's wholly owned subsidiaries acting as a pharmacy benefit management business under the tradename WellPoint Pharmacy Management received an
administrative subpoena duces tecum issued by the U.S. Attorney's Office in Boston Massachuetts. The Company does not believe that its pharmacy benefit management business is presently a target of
investigation by the U.S. Attorney. The subpoena appears to focus primarily on WellPoint Pharmacy Management's relationship with TAP Pharmaceuticals, including TAP's drugs Lupron and Prevacid. The
Company believes that it is in compliance in all material respects with all laws and regulations applicable to the pharmacy benefit management business, and it intends to cooperate with the subpoena.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from that disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

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PART II OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K



|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  |  | Amended and Restated Agreement and Plan of Merger dated as of November 29, 2000, by and among Cerulean Companies, Inc., the Registrant and Water Polo Acquisition Corp., incorporated by reference to Exhibit 2.01 of the Registrant's
Current Report on Form 8-K dated March 15, 2001                                         
|2.03  |  | Agreement and Plan of Merger dated as of October 17, 2001 by and among the Registrant, RightCHOICE Managed Care, Inc. and RWP Acquisition Corp., incorporated by reference to Exhibit 2.01 to the Registrant's Registration Statement on
Form S-4 (Registration No. 333-73382)                                                 
|2.04  |  | Agreement and Plan of Merger dated as of November 20, 2001 by and among the Registrant, CareFirst, Inc. and Congress Acquisition Corp., incorporated by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated
November 20, 2001                                                                       
|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                                                                                                                                
|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 March 31, 2000.                       
|4.05  |  | Amended and Restated Indenture dated as of June 8, 2001 by and between the Registrant and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.05 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001.                                                                   
|4.06  |  | Form of 63/8% Note due 2006, incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated June 12, 2001.                                                                                                                                                                                      
|4.07  |  | Form of 63/8% Note due 2012, incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated January 12, 2002.                                                                                                                                                                                   
|10.01 |  | First Amendment to 364-Day Credit Agreement dated as of March 29, 2002, by and among the Registrant, the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, and JPMorgan, a division of Chase Securities,
 Inc., as syndication agent.                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                

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|10.02 |  | RightCHOICE Managed Care, Inc. 2001 Stock Incentive Plan, incorporated by reference to Exhibit 10 to the Registration Statement on Form S-8 (Registration No. 333-62898) of RightCHOICE Managed Care, Inc.                                                 
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.03 |  | RightCHOICE Managed Care, Inc. 1994 Equity Incentive Plan, incorporated by reference to Exhibit 4(c) of the Post-Effective Amendment No. 2 on Form S-8 to Registration Statement on Form S-4 (Registration
No. 333-34750) of RightCHOICE Managed Care, Inc.
|10.04 |  | RightCHOICE Managed Care, Inc. Nonemployee Directors' Stock Option Plan, incorporated by reference to Exhibit 10.18 to the Registration Statement on Form S-1 (Registration No. 333-77798) of RightCHOICE Managed Care, Inc., a
Missouri corporation.      
|10.05 |  | RightCHOICE Managed Care, Inc. Executive Deferred Compensation Plan, incorporated by reference to Exhibit 4(c) of the Registration Statement on Form S-8 (Registration No. 333-51336) of RightCHOICE Managed Care, Inc.                                    
|10.06 |  | RightCHOICE Managed Care, Inc. Supplemental Executive Retirement Plan, as restated effective as of October 10, 2001.                                                                                                                                       
|10.07 |  | Letter agreement dated February 4, 2002 between the Registrant and John A. O'Rourke.                                                                                                                                                                       
|10.08 |  | Amendment No. 1 to RightCHOICE Managed Care, Inc. Executive Deferred Compensation Plan.                                                                                                                                                                    



On
January 11, 2002, the Company filed a Current Report on Form 8-K which reported that the Company had signed a definitive agreement with RightCHOICE Managed
Care, Inc. ("RightCHOICE") to merge in a transaction valued at approximately $1.3 billion, or $66.00 per share, for RightCHOICE Common Stock. The Current Report on
Form 8-K incorporated by reference audited consolidated financial statements of RightCHOICE as of and for the years ended December 31, 1998, 1999 and 2000, unaudited
consolidated financial statements of RightCHOICE for the nine months ended September 30, 2000 and 2001 and unaudited pro forma financial statements of WellPoint and RightCHOICE as of
September 30, 2001 and for the nine months ended September 30, 2001 and the 12 months ended December 31, 2000.

On
January 16, 2002, the Company filed a Current Report on Form 8-K which reported that the Company had entered into an underwriting agreement for the issuance
of $350.0 million in aggregate principal amount of the Company's 63/8% Notes Due 2012.

On
February 8, 2002, the Company filed a Current Report on Form 8-K which reported that the Company had completed its acquisition of RightCHOICE. The Current
Report on Form 8-K incorporated by reference the historical and pro forma financial statements referred to in the paragraph describing the Current Report on
Form 8-K filed January 11, 2002.

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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: May 13, 2002 |  | By:                                     
|                   |  |                                         
|Date: May 13, 2002 |  | By:                                     
|                   |  |                                         
|Date: May 13, 2002 |  | By:                                     

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