---

---

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 June 30, 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

---

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)

---

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 classCommon Stock, $0.01 par value

Outstanding at August 8, 2002145,680,559 shares


---

---

---

WellPoint Health Networks, Inc.
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2002
Table of Contents

|                                 |         |    |                                                                                       |                                                                                                  |    | PAGE
|-------------------------------- | ------- | -- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | -- | ----
|PART I.    FINANCIAL INFORMATION |         |   
|                                 | ITEM 1. |    | Financial Statements                                                                  |                                                                                                  |   
|                                 |         |    |                                                                                       | Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001                            |    | 1   
|                                 |         |    |                                                                                       | Consolidated Income Statements for the Quarter and Six Months Ended June 30, 2002 and 2001       |    | 2   
|                                 |         |    |                                                                                       | Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2002 |    | 3   
|                                 |         |    |                                                                                       | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001            |    | 4   
|                                 |         |    |                                                                                       | Notes to Consolidated Financial Statements                                                       |    | 5   
|                                 |         |    |                                                                                       | Report of Independent Accountants                                                                |    | 23  
|                                 | ITEM 2. |    | Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                  | 24
|                                 | ITEM 3. |    | Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                  | 46
|PART II.    OTHER INFORMATION    |         |   
|                                 | ITEM 1. |    | Legal Proceedings                                                                     |                                                                                                  | 48
|                                 | ITEM 2. |    | Changes in Securities and Use of Proceeds                                             |                                                                                                  | 48
|                                 | ITEM 4. |    | Submission of Matters to a Vote of Security Holders                                   |                                                                                                  | 48
|                                 | ITEM 6. |    | Exhibits and Reports on Form 8-K                                                      |                                                                                                  | 49
|SIGNATURES                       |         | 51

---

ITEM 1.Financial Statements

WellPoint Health Networks Inc.Consolidated Balance Sheets

|(In thousands, except share data)                |                                                                                                                                                      | June 30,
2002              |                                            | December 31,
2001 |          
|------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | ---------
|
|ASSETS                                           |                                                                                                                                                     
|Current Assets:                                  |                                                                                                                                                      |                            |                                            |                   |          
|                                                 | Cash and cash equivalents                                                                                                                            |                            | $                                          | 882,705           |          
|                                                 | Investment securities, at market value                                                                                                               |                            |                                            | 4,718,000         |          
|                                                 | Receivables, net                                                                                                                                     |                            |                                            | 1,303,089         |          
|                                                 | Deferred tax assets, net                                                                                                                             |                            |                                            | 141,404           |          
|                                                 | Other current assets                                                                                                                                 |                            |                                            | 123,672           |          
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      | Total Current Assets       |                                            |                   | 7,168,870
|Property and equipment, net                      |                                                                                                                                                      |                            | 341,280                                    |                   |          
|Intangible assets, net                           |                                                                                                                                                      |                            | 757,050                                    |                   |          
|Goodwill, net                                    |                                                                                                                                                      |                            | 1,690,368                                  |                   |          
|Long-term investments, at market value           |                                                                                                                                                      |                            | 131,000                                    |                   |          
|Deferred tax assets, net                         |                                                                                                                                                      |                            |                                           |                   |          
|Other non-current assets                         |                                                                                                                                                      |                            | 159,494                                    |                   |          
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      |                            | Total Assets                               |                   | $        
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|LIABILITIES AND STOCKHOLDERS' EQUITY             |                                                                                                                                                     
|Current Liabilities:                             |                                                                                                                                                      |                            |                                            |                   |          
|                                                 | Medical claims payable                                                                                                                               |                            | $                                          | 2,312,703         |          
|                                                 | Reserves for future policy benefits                                                                                                                  |                            |                                            | 80,204            |          
|                                                 | Unearned premiums                                                                                                                                    |                            |                                            | 395,665           |          
|                                                 | Accounts payable and accrued expenses                                                                                                                |                            |                                            | 1,032,724         |          
|                                                 | Experience rated and other refunds                                                                                                                   |                            |                                            | 256,480           |          
|                                                 | Income taxes payable                                                                                                                                 |                            |                                            | 57,055            |          
|                                                 | Other current liabilities                                                                                                                            |                            |                                            | 837,515           |          
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      | Total Current Liabilities  |                                            |                   | 4,972,346
|Accrued postretirement benefits                  |                                                                                                                                                      |                            | 124,319                                    |                   |          
|Reserves for future policy benefits, non-current |                                                                                                                                                      |                            | 218,974                                    |                   |          
|Long-term debt                                   |                                                                                                                                                      |                            | 1,152,013                                  |                   |          
|Deferred tax liabilities                         |                                                                                                                                                      |                            | 37,696                                     |                   |          
|Other non-current liabilities                    |                                                                                                                                                      |                            | 167,354                                    |                   |          
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      |                            | 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, 146,995,980 and 135,307,637 issued at June 30, 2002 and December 31, 2001, respectively |                            |                                            | 1,470             |          
|                                                 | Treasury stock, at cost, 1,346,975 and 7,474,305 shares at June 30, 2002 and December 31, 2001, respectively                                         |                            |                                            | (77,390           | )        
|Additional paid-in capital                       |                                                                                                                                                      |                            | 1,689,517                                  |                   |          
|Retained earnings                                |                                                                                                                                                      |                            | 1,924,021                                  |                   |          
|Accumulated other comprehensive income           |                                                                                                                                                      |                            | 37,742                                     |                   |          
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      | Total Stockholders' Equity |                                            |                   | 3,575,360
|                                                 |                                                                                                                                                      |                            |                                            |                   |          
|                                                 |                                                                                                                                                      |                            | Total Liabilities and Stockholders' Equity |                   | $        
|                                                 |                                                                                                                                                      |                            |                                            |                   |          

See the accompanying notes to the consolidated financial statements.

1

---



WellPoint Health Networks Inc.Consolidated Income Statements  (Unaudited)

|                                                                 |                                                                        | Quarter Ended
June 30, |           | Six Months Ended
June 30,
|---------------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------- | --------- | -------------------------
|
|
|Revenues:                                                        |                                                                        |                        |           |                          
|                                                                 | Premium revenue                                                        |                        | $         | 4,025,094                
|                                                                 | Management services and other revenue                                  |                        |           | 207,831                  
|                                                                 | Investment income                                                      |                        |           | 66,148                   
|                                                                 |                                                                        |                        |           |                          
|                                                                 |                                                                        |                        | 4,299,073 |                          
|Operating Expenses:                                              |                                                                        |                        |           |                          
|                                                                 | Health care services and other benefits                                |                        |           | 3,282,003                
|                                                                 | Selling expense                                                        |                        |           | 167,465                  
|                                                                 | General and administrative expense                                     |                        |           | 538,586                  
|                                                                 |                                                                        |                        |           |                          
|                                                                 |                                                                        |                        | 3,988,054 |                          
|                                                                 |                                                                        |                        |           |                          
|Operating Income                                                 |                                                                        |                        | 311,019   |                          
|                                                                 | Interest expense                                                       |                        |           | 16,973                   
|                                                                 | Other expense, net                                                     |                        |           | 13,978                   
|                                                                 |                                                                        |                        |           |                          
|Income before Provision for Income Taxes and Extraordinary Items |                                                                        |                        | 280,068   |                          
|                                                                 | Provision for income taxes                                             |                        |           | 112,105                  
|                                                                 |                                                                        |                        |           |                          
|Income before Extraordinary Items                                |                                                                        |                        | 167,963   |                          
|Extraordinary Items:                                             |                                                                        |                        |           |                          
|                                                                 | Gain from negative goodwill on acquisition                             |                        |           | 4,042                    
|                                                                 | Loss on early extinguishment of debt, net of tax benefit of $838       |                        |           | (1,258                   
|                                                                 |                                                                        |                        |           |                          
|                                                                 |                                                                        |                        | 2,784     |                          
|                                                                 |                                                                        |                        |           |                          
|Net Income                                                       |                                                                        | $                      | 170,747   |                          
|                                                                 |                                                                        |                        |           |                          
|Earnings Per Share:                                              |                                                                        |                        |           |                          
|                                                                 | Income before Extraordinary Items                                      |                        | $         | 1.16                     
|                                                                 | Extraordinary gain from negative goodwill on acquisition               |                        |           | 0.03                     
|                                                                 | Extraordinary loss on early extinguishment of debt, net of tax benefit |                        |           | (0.01                    
|                                                                 |                                                                        |                        |           |                          
|                                                                 | Net Income                                                             |                        | $         | 1.18                     
|                                                                 |                                                                        |                        |           |                          
|Earnings Per Share Assuming Full Dilution:                       |                                                                        |                        |           |                          
|                                                                 | Income before Extraordinary Items                                      |                        | $         | 1.10                     
|                                                                 | Extraordinary gain from negative goodwill on acquisition               |                        |           | 0.03                     
|                                                                 | Extraordinary loss on early extinguishment of debt, net of tax benefit |                        |           | (0.01                    
|                                                                 |                                                                        |                        |           |                          
|                                                                 | Net Income                                                             |                        | $         | 1.12                     
|                                                                 |                                                                        |                        |           |                          
|Weighted Average Shares Outstanding                              |                                                                        |                        | 144,852   |                          
|                                                                 |                                                                        |                        |           |                          
|Fully Diluted Weighted Average Shares Outstanding                |                                                                        |                        | 152,566   |                          
|                                                                 |                                                                        |                        |           |                          

See
the accompanying notes to the consolidated financial statements.

2

---

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                                       |                                        |                                                                                                        |   |              |         |  |   |       |  | (29    | ) |   | 1,571   
|Stock issued for employee stock option and stock purchase plans               |                                        |                                                                                                        |   |              |         |  |   |       |  | (2,562 | ) |   | 150,132 
|Stock repurchased, at cost                                                    |                                        |                                                                                                        |   |              |         |  |   |       |  | 2,000  |   |   | (122,265
|Stock issued in connection with acquisition of RightCHOICE Managed Care, Inc. |                                        |                                                                                                        |   |              | 2,718   |  |   | 27    |  | (5,536 | ) |   | 358,977 
|100% Stock Dividend on March 15, 2002                                         |                                        |                                                                                                        |   |              | 72,887  |  |   | 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 |   |              |         |  |   |       |  |        |   |   |         
|                                                                              |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|Total comprehensive income (loss)                                             |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|                                                                              |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         
|Balance as of June 30, 2002                                                   |                                        | $                                                                                                      |  |              | 146,996 |  | $ | 1,470 |  | 1,347  |   | $ | (77,390 
|                                                                              |                                        |                                                                                                        |   |              |         |  |   |       |  |        |   |   |         

See the accompanying notes to the consolidated financial statements.

3

---

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

|                                                     |                                                                                                          | Six Months Ended June 30,                                                                                                  |                                          
|---------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------
|
|
|Cash flows from operating activities:                |                                                                                                          |                                                                                                                            |                                          
|                                                     | Income before extraordinary items                                                                        |                                                                                                                            | $                                        
|                                                     | Adjustments to reconcile income before extraordinary items to net cash provided by operating activities: |                                                                                                                            |                                          
|                                                     |                                                                                                          | Depreciation and amortization, net of accretion                                                                            |                                          
|                                                     |                                                                                                          | Loss on sales of assets, net                                                                                               |                                          
|                                                     |                                                                                                          | Provision (benefit) for deferred income taxes                                                                              |                                          
|                                                     |                                                                                                          | 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 due 2012 and 63/8% Notes due 2006 |                                          
|                                                     |                                                                                                          | (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                                                                        |                                          
|                                                     |                                                                                                          |                                                                                                                            |                                          
|                                                     |                                                                                                          |                                                                                                                            | Net cash used in investing activities    
|                                                     |                                                                                                          |                                                                                                                            |                                          
|Cash flows from financing activities:                |                                                                                                          |                                                                                                                            |                                          
|                                                     |                                                                                                          | Net (repayment) borrowing of long-term debt under the revolving credit facility                                            |                                          
|                                                     |                                                                                                          | Net borrowing of commercial paper                                                                                          |                                          
|                                                     |                                                                                                          | Net borrowing of long-term debt under 63/8% Notes due 2006                                                                 |                                          
|                                                     |                                                                                                          | Net borrowing of long-term debt under 63/8% Notes due 2012                                                                 |                                          
|                                                     |                                                                                                          | Cash paid on redemption of zero coupon convertible subordinated debentures                                                 |                                          
|                                                     |                                                                                                          | Proceeds from issuance of common stock                                                                                     |                                          
|                                                     |                                                                                                          | Common stock repurchased                                                                                                   |                                          
|                                                     |                                                                                                          |                                                                                                                            |                                          
|                                                     |                                                                                                          |                                                                                                                            | Net cash provided by financing activities
|                                                     |                                                                                                          |                                                                                                                            |                                          
|Net (decrease) increase in cash and cash equivalents |                                                                                                          |                                                                                                                            | (145,771                                 
|Cash and cash equivalents at beginning of period     |                                                                                                          |                                                                                                                            | 1,028,476                                
|                                                     |                                                                                                          |                                                                                                                            |                                          
|Cash and cash equivalents at end of period           |                                                                                                          | $                                                                                                                          | 882,705                                  
|                                                     |                                                                                                          |                                                                                                                            |                                          

See the accompanying notes to the consolidated financial statements.

4

---

WellPoint Health Networks, Inc.
Notes to Consolidated Financial Statements
(Unaudited)

1.    Organization

WellPoint Health Networks Inc. (the "Company" or "WellPoint") is one of the nation's largest publicly traded managed health care companies. As of
June 30, 2002, WellPoint had approximately 13.0 million medical members and approximately 45.3 million specialty members. The Company offers a broad spectrum of network-based
managed care plans. WellPoint provides these plans to the large and small employer, individual and senior markets. The Company's managed care plans include 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. 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 June 30, 2002, the results of its operations for the quarter
and six months ended June 30, 2002 and 2001, cash flows for the six months ended June 30, 2002 and 2001 and its changes in stockholders' equity for the six months ended June 30,
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 MethodistCare, Inc. ("MethodistCare") and RightCHOICE Managed Care, Inc. ("RightCHOICE") in 2002 and Cerulean Companies, Inc. ("Cerulean") in
2001.

5

---

On
April 30, 2002, the Company completed the acquisition of MethodistCare serving over 70,000 members in the Houston, Texas area. This acquisition is intended to enable UNICARE,
WellPoint's national operating unit, to expand its product line by offering HMO products along with other open-access products in MethodistCare's service area. As a result of the
acquisition, the Company recognized an extraordinary gain of $4.0 million, or $0.03 per share assuming full dilution, for both the quarter and six months ended June 30, 2002 due to an
excess of the fair value of net assets over acquisition costs.

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 approximately $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 $303.9 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 $113.8 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 $1,337.0 million includes $104.1 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" ("SFAS No. 142"), 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 or the timing of related cash flows depending upon the
expected amortization pattern over 15 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
current estimated purchase price allocation between goodwill and identifiable intangible assets is $1,070.9 million and $266.1 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.

6

---

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, RightCHOICE and MethodistCare had occurred on January 1, 2001. The pro forma
information includes the results of operations for each acquired entity for the period prior to its 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 and six months ended June 30, 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 and six months ended June 30, 2002 is presented under the requirements of SFAS No. 141, which disallows the amortization of goodwill and
other intangible assets with indefinite useful lives. For comparability purposes, the pro forma financial information for the quarter and six months ended June 30, 2001 have also been presented
under the requirements of SFAS No. 141.

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 and six months ended June 30, 2002 and 2001, nor is it necessarily indicative of future results of operations. Pro forma earnings per share is based on 144.9 million and
143.2 million weighted average shares outstanding for the quarter ended June 30, 2002 and 2001, respectively. Pro forma earnings per share assuming full dilution is based on
152.6 million and 149.3 million weighted average shares outstanding for the quarter ended June 30, 2002 and 2001, respectively. Pro forma earnings per share is based on
144.7 million and 142.9 million weighted average shares outstanding for the six months ended June 30, 2002 and 2001, respectively. Pro forma earnings per share assuming full
dilution is based on 152.2 million and 149.2 million weighted average shares outstanding for the six months ended June 30, 2002 and 2001, respectively.

|                                                     |  | Quarter Ended June 30, |           | Six Months Ended June 30,
|---------------------------------------------------- |  | ---------------------- | --------- | -------------------------
|
|Revenues                                             |  | $                      | 4,311,749 |                          
|Adjusted Pro forma Income before Extraordinary Items |  | $                      | 168,949   |                          
|Adjusted Pro forma Net Income                        |  | $                      | 171,733   |                          
|Earnings Per Share:                                  |  |                        |           |                          
|Adjusted Pro forma Income before Extraordinary Items |  | $                      | 1.17      |                          
|Adjusted Pro forma Net Income                        |  | $                      | 1.19      |                          
|Diluted Earnings Per Share:                          |  |                        |           |                          
|Adjusted Pro forma Income before Extraordinary Items |  | $                      | 1.11      |                          
|Adjusted Pro forma Net Income                        |  | $                      | 1.13      |                          

For
the quarter and six months ended June 30, 2001, the adjusted pro forma income before extraordinary items and net income includes a $13.1 million after-tax
gain resulting from MethodistCare's sale of its investment in a limited liability partnership operating in a large multi-practice medical group.

7

---

4.    Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS
No. 141"), and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). SFAS No. 141 requires all business combinations
initiated after June 30, 2001 be accounted for using the purchase method. The provisions of SFAS No. 141 also apply to all business combinations consummated after June 30, 2001.
SFAS No. 142, effective for fiscal years beginning after December 15, 2001, eliminates amortization of goodwill and other intangible assets with indefinite useful lives. Rather, these
assets are subject to the impairment tests at least annually.

The
Company adopted SFAS No. 142 on January 1, 2002 and no longer amortizes goodwill and other intangible assets with indefinite useful lives. The Company also completed
the evaluation of its goodwill and other intangible assets and determined that there was no impairment loss. The following table shows net income and earnings per share adjusted to reflect the
adoption of the non-amortization provisions of SFAS No. 142 as of the beginning of the respective periods:

|                                                                                                         |  | Three Months Ended
June 30, |         | Six Months Ended
June 30,
|-------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------------------------
|
|
|Reported net income                                                                                      |  | $                           | 170,747 |                          
|Add back: Amortization of goodwill and other intangibles with indefinite useful lives, net of tax effect |  |                             |        |                          
|                                                                                                         |  |                             |         |                          
|Adjusted net income                                                                                      |  | $                           | 170,747 |                          
|                                                                                                         |  |                             |         |                          
|Reported earnings per share                                                                              |  | $                           | 1.18    |                          
|Add back: Amortization of goodwill and other intangibles with indefinite useful lives, net of tax effect |  |                             |        |                          
|                                                                                                         |  |                             |         |                          
|Adjusted earnings per share                                                                              |  | $                           | 1.18    |                          
|                                                                                                         |  |                             |         |                          
|Reported earnings per share assuming full dilution                                                       |  | $                           | 1.12    |                          
|Add back: Amortization of goodwill and other intangibles with indefinite useful lives, net of tax effect |  |                             |        |                          
|                                                                                                         |  |                             |         |                          
|Adjusted earnings per share assuming full dilution                                                       |  | $                           | 1.12    |                          
|                                                                                                         |  |                             |         |                          

The
changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2002 are as follows:

|(In thousands)                                                 |  | Health Care |           | Specialty |   | Consolidated | 
|-------------------------------------------------------------- |  | ----------- | --------- | --------- | - | ------------ | 
|Balance as of January 1, 2002                                  |  | $           | 646,375   |           | $ | 14,971       | 
|Goodwill acquired during 2002                                  |  |             | 1,072,919 |           |   |             | 
|Final allocation of Cerulean goodwill and acquired intangibles |  |             | (47,361   | )         |   |             | 
|Reclassification from other intangible assets                  |  |             | 3,464     |           |   |             | 
|                                                               |  |             |           |           |   |              | 
|Balance as of June 30, 2002                                    |  | $           | 1,675,397 |           | $ | 14,971       | 
|                                                               |  |             |           |           |   |              | 

Upon
adoption of SFAS No. 141, the Company reclassified $3.5 million of other intangible assets to goodwill since they did not meet the criteria for recognition apart from
goodwill. The reclassification is for the assembled workforce intangible assets acquired from previous acquisitions.

On
January 31, 2002, WellPoint completed its merger with RightCHOICE as discussed in Note 3Acquisitions. As a result of the acquisition of RightCHOICE, the
Company recorded $1,070.9 million of goodwill and $266.1 million of identifiable intangible assets. The valuation process is not yet

8

---

complete and, therefore, the allocation between goodwill and other intangible assets recorded as of June 30, 2002 represents an estimate. Based on the information currently available, the
following table presents details of the acquired amortized and non-amortized intangible assets of RightCHOICE at cost as of June 30, 2002:

|(In thousands)                        |                                                            | Estimated Value               |         | Useful
Life
(in years)
|------------------------------------- | ---------------------------------------------------------- | ----------------------------- | ------- | ----------------------
|Amortized intangible assets:          |                                                            |                               |         |                       
|                                      | Provider Contracts with physicians                         |                               | $       | 4,377                 
|                                      | Customer Contracts and Related Customer Relationships      |                               |         | 90,613                
|                                      |                                                            |                               |         |                       
|Total amortized intangible assets     |                                                            |                               | 94,990  |                       
|Non-amortized intangible assets:      |                                                            |                               |         |                       
|                                      | Provider Contracts with hospitals and ancillary facilities |                               | $       | 5,072                 
|                                      | Trade Name and Service Marks                               |                               |         | 166,000               
|                                      |                                                            |                               |         |                       
|Total non-amortized intangible assets |                                                            |                               | 171,072 |                       
|                                      |                                                            |                               |         |                       
|                                      |                                                            | Total other intangible assets |         | $                     
|                                      |                                                            |                               |         |                       

The
gross carrying value, accumulated amortization and net carrying value of other intangible assets as of June 30, 2002 and December 31, 2001 are as follows (amounts in
thousands):

|As of June 30, 2002                                        |  | Gross
Carrying
Value |         | Accumulated
Amortization |   | Net
Carrying
Value |  | Amortization
Period
(in years)
|---------------------------------------------------------- |  | -------------------- | ------- | ------------------------ | - | ------------------ |  | ------------------------------
|Amortized intangible assets:                               |  |                      |         |                          |   |                    |  |                               
|Provider Contracts with physicians                         |  | $                    | 29,974  |                          | $ | 3,212              |  | $                             
|Customer Contracts and Related Customer Relationships      |  |                      | 352,699 |                          |   | 55,839             |  |                               
|Other                                                      |  |                      | 21,967  |                          |   | 6,921              |  |                               
|                                                           |  |                      |         |                          |   |                    |  |                               
|Total amortized intangible assets                          |  |                      | 404,640 |                          |   | 65,972             |  |                               
|Non-amortized intangible assets:                           |  |                      |         |                          |   |                    |  |                               
|Provider Contracts with hospitals and ancillary facilities |  |                      | 17,122  |                          |   | 98                 |  |                               
|Trade Name and Service Marks                               |  |                      | 404,000 |                          |   | 2,642              |  |                               
|                                                           |  |                      |         |                          |   |                    |  |                               
|Total non-amortized intangible assets                      |  |                      | 421,122 |                          |   | 2,740              |  |                               
|                                                           |  |                      |         |                          |   |                    |  |                               
|Total other intangible assets                              |  | $                    | 825,762 |                          | $ | 68,712             |  | $                             
|                                                           |  |                      |         |                          |   |                    |  |                               

9

---



|As of December 31, 2001                               |  | Gross
Carrying
Value |         | Accumulated
Amortization |   | Net
Carrying
Value |  | Amortization
Period
(in years)
|----------------------------------------------------- |  | -------------------- | ------- | ------------------------ | - | ------------------ |  | ------------------------------
|Amortized intangible assets:                          |  |                      |         |                          |   |                    |  |                               
|Provider Contracts                                    |  | $                    | 23,547  |                          | $ | 2,509              |  | $                             
|Customer Contracts and Related Customer Relationships |  |                      | 285,819 |                          |   | 39,285             |  |                               
|Trade Name and Service Marks                          |  |                      | 135,000 |                          |   | 2,642              |  |                               
|Other                                                 |  |                      | 38,477  |                          |   | 7,919              |  |                               
|                                                      |  |                      |         |                          |   |                    |  |                               
|Total amortized intangible assets                     |  | $                    | 482,843 |                          | $ | 52,355             |  | $                             
|                                                      |  |                      |         |                          |   |                    |  |                               

For
the three months and six months ended June 30, 2002, amortization expense relating to intangible assets was $9.6 million and $18.4 million, respectively. For the
three months and six months ended June 30, 2001, amortization expense relating to intangible assets was $17.3 million and $28.6 million, respectively. The following table presents
the Company's estimated annual amortization expense for amortized intangible assets for each of the years ending December 31, 2002, 2003, 2004, 2005 and 2006 (amounts in thousands). These
estimates were calculated based on the gross carrying value of amortized intangible assets as of June 30, 2002 using the applicable amortization period.

|For year ending December 31, 2002 |  | $ | 37,952
|--------------------------------- |  | - | ------
|For year ending December 31, 2003 |  |   | 36,258
|For year ending December 31, 2004 |  |   | 33,839
|For year ending December 31, 2005 |  |   | 31,657
|For year ending December 31, 2006 |  |   | 27,318

5.    Long-Term Debt



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 June 30, 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 and six months ended
June 30, 2002 totaled $5.7 million and $10.5 million, respectively.

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

10

---

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.



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 twelve 30-day months. At June 30, 2002, the Company had
$449.2 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 the quarter and
six months ended June 30, 2002 totaled $7.5 million and $14.9 million, respectively.

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
semi-annual 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.

In
order to mitigate interest rate fluctuations associated with its 2001 Notes, the Company, on January 15, 2002, 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 June 30,
2002, the Company recognized a fair value liability adjustment to the $450.0 million 2001 Notes of $2.4 million. (See Note 10. Hedging Activities).

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.



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, expires on March 28, 2003. Any amount

11

---

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. During the six
months ended June 30, 2002, the Company repaid its entire indebtedness under the revolving credit facility of $235.0 million at December 31, 2001, which had an effective interest
rate at the time of 2.76%. This repayment was funded in part by the Company's incurrence of short-term indebtedness described below under the heading "Commercial Paper Program."

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 senior unsecured long-term debt rating by specified rating agencies. Interest is determined using whichever of these methods is the most favorable
to the Company.

Borrowings
under the credit facility are made on a committed basis or pursuant to an auction-bid process. A facility fee based on the facility amount, regardless of
utilization, is payable quarterly. The
facility fee rate is also determined by the senior unsecured debt ratings or the leverage ratio of the Company.



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
six months ended June 30, 2002 and year ended December 31, 2001.

As
of June 30, 2002 and December 31, 2001, the Company had $151.7 million and $153.9 million (based upon the original issue price plus accrued interest),
respectively, of Debentures outstanding. The reduction in the balance from December 31, 2001 to June 30, 2002 resulted from holders exercising their option to convert the Debentures into
the Company's common stock. In lieu of delivering shares of common stock upon conversion of these Debentures, the Company elected to pay cash. During the six months ended June 30, 2002, holders
converted $5.1 million in aggregate principal amount at maturity of the Company's Debentures with a carrying value (including accrued interest) of $3.6 million. The total purchase price
paid by the Company of $5.7 million resulted in an extraordinary after-tax loss of $1.3 million, as shown on the Company's Consolidated Income Statements.

Accrued
interest related to the Debentures was $9.0 million and $7.5 million, as of June 30, 2002 and December 31, 2001, respectively.

12

---



In April 2002, the Company commenced a commercial paper program providing for the issuance of up to $1.0 billion in aggregate maturity value of
short-term indebtedness (known generally as "commercial paper"). The commercial paper is being issued by the Company without registration under the Securities Act of 1933 (the "1933 Act")
in reliance upon the exemption from registration contained in Section 4(2) of the 1933 Act. The commercial paper is issued in denominations of $100,000 or integral multiples of $1,000 in excess
thereof, will bear such interest rates, if interest-bearing, or will be sold at such discount from their face amounts, as agreed upon by the Company and the dealer or dealers acting in connection with
the commercial paper program. The commercial paper may be issued with varying maturities up to a maximum of 270 days from the date of issuance. As of June 30, 2002, outstanding
commercial paper totaled approximately $199.8 million, with an average maturity of 29 days. The weighted average yield on the outstanding commercial paper as of June 30, 2002 was
2.03%. At the time that the Company entered into the revolving credit facility in March 2001, the Company contemplated that the proceeds of any borrowings under the revolving credit facility
could be used to repay commercial paper borrowings. The Company has the intent to maintain commercial paper borrowings of at least the amount outstanding at June 30, 2002 for more than one
year. For financial reporting purposes, the commercial paper has been classified under non-current liabilities in the accompanying Consolidated Balance Sheets based on the terms of the
revolving credit facility.

13

---

6.    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
June 30, |         | Six Months Ended
June 30,
|------------------------------------------------------------------------------- |  | ---------------------- | ------- | -------------------------
|
|
|Basic Earnings Per Share Calculation:                                           |  |                        |         |                          
|Numerator                                                                       |  |                        |         |                          
|Income before extraordinary items                                               |  | $                      | 167,963 |                          
|Extraordinary gain from negative goodwill on acquisition                        |  |                        | 4,042   |                          
|Extraordinary loss on early extinguishment of debt, net of tax benefit of $838  |  |                        | (1,258  | )                        
|                                                                                |  |                        |         |                          
|Net Income                                                                      |  | $                      | 170,747 |                          
|                                                                                |  |                        |         |                          
|Denominator                                                                     |  |                        |         |                          
|Weighted average shares outstanding                                             |  |                        | 144,852 |                          
|                                                                                |  |                        |         |                          
|Earnings Per Share                                                              |  |                        |         |                          
|Income before extraordinary items                                               |  | $                      | 1.16    |                          
|Extraordinary gain from negative goodwill on acquisition                        |  |                        | 0.03    |                          
|Extraordinary loss on early extinguishment of debt, net of tax benefit          |  |                        | (0.01   | )                        
|                                                                                |  |                        |         |                          
|Net Income                                                                      |  | $                      | 1.18    |                          
|                                                                                |  |                        |         |                          
|Earnings Per Share Assuming Full Dilution Calculation:                          |  |                        |         |                          
|Numerator                                                                       |  |                        |         |                          
|Income before extraordinary items                                               |  | $                      | 167,963 |                          
|Interest expense on zero coupon convertible subordinated debentures, net of tax |  |                        | 483     |                          
|                                                                                |  |                        |         |                          
|Adjusted income before extraordinary items                                      |  |                        | 168,446 |                          
|Extraordinary gain from negative goodwill on acquisition                        |  |                        | 4,042   |                          
|Extraordinary loss on early extinguishment of debt, net of tax benefit of $838  |  |                        | (1,258  | )                        
|                                                                                |  |                        |         |                          
|Adjusted Net Income                                                             |  | $                      | 171,230 |                          
|                                                                                |  |                        |         |                          
|Denominator                                                                     |  |                        |         |                          
|Weighted average shares outstanding                                             |  |                        | 144,852 |                          
|Net effect of dilutive stock options                                            |  |                        | 4,758   |                          
|Assumed conversion of zero coupon convertible subordinated debentures           |  |                        | 2,956   |                          
|                                                                                |  |                        |         |                          
|Fully diluted weighted average shares outstanding                               |  |                        | 152,566 |                          
|                                                                                |  |                        |         |                          
|Earnings Per Share Assuming Full Dilution                                       |  |                        |         |                          
|Income before extraordinary items                                               |  | $                      | 1.10    |                          
|Extraordinary gain from negative goodwill on acquisition                        |  |                        | 0.03    |                          
|Extraordinary loss on early extinguishment of debt, net of tax benefit          |  |                        | (0.01   | )                        
|                                                                                |  |                        |         |                          
|Net Income                                                                      |  | $                      | 1.12    |                          
|                                                                                |  |                        |         |                          

14

---

7.    Comprehensive Income

The following summarizes comprehensive income reclassification adjustments for the six months ended June 30, 2002 and 2001:

|                                                                                                                                   |  | Six Months Ended June 30, |        
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------
|
|
|Investment Securities:                                                                                                             |  |                           |        
|Net holding (loss) gain on investment securities arising during the period, net of tax benefit (expense) of $9,394 and $(11,361)   |  | $                         | (14,364
|Reclassification adjustment for realized gain (loss) on investment securities, net of tax (expense) benefit of $(3,607) and $4,238 |  |                           | 5,410  
|                                                                                                                                   |  |                           |        
|                                                                                                                                   |  |                           | (8,954 
|                                                                                                                                   |  |                           |        
|Fair Value Hedges:                                                                                                                 |  |                           |        
|Holding loss related to foreign exchange transactions, net of tax benefit of $363                                                  |  |                           |       
|Transition adjustment, net of tax expense of $167                                                                                  |  |                           |       
|Reclassification adjustment related to foreign exchange gain on investment securities, net of tax expense of $31                   |  |                           |       
|                                                                                                                                   |  |                           |        
|                                                                                                                                   |  |                           |       
|Cash Flow Hedges:                                                                                                                  |  |                           |        
|Holding gain related to swap transactions, net of tax expense of $111 and $893                                                     |  |                           | 160    
|Transition adjustment, net of tax benefit of $4,442                                                                                |  |                           |       
|                                                                                                                                   |  |                           |        
|                                                                                                                                   |  |                           | 160    
|                                                                                                                                   |  |                           |        
|Net (loss) gain recognized in other comprehensive income, net of tax benefit (expense) of $5,676 and $(2,397)                      |  | $                         | (8,794 
|                                                                                                                                   |  |                           |        

8.    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

15

---

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 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 filed a motion requesting a rehearing of the matter before the entire 11thCircuit Court of Appeals, which
motion was denied by the 11th Circuit Court of Appeals in June 2002. On July 29, 2002, Judge Moreno issued an order providing that discovery in the case would be allowed to
re-commence on September 30, 2002.

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 filed a motion (which was granted in July 2002) 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 the Shanelawsuit.

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 acquisition 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

16

---

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.

9.    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 and six months ended June 30, 2002 and 2001, respectively, as if the
Company's new organizational structure had been effective on January 1, 2001.

17

---

Quarter Ended June 30, 2002

|(In thousands)                        |  | Health Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|Premium revenue                       |  | $           | 3,898,013 |           | $ | 127,081   |  | $           
|Management services revenue           |  |             | 170,240   |           |   | 37,591    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 4,068,253 |           |   | 164,672   |  |             
|Segment net income (loss)             |  | $           | 166,747   |           | $ | 5,222     |  | $           
|                                      |  |             |           |           |   |           |  |             
|Segment assets                        |  | $           | 7,656,269 |           | $ | 588,377   |  | $           
|                                      |  |             |           |           |   |           |  |             

Quarter Ended June 30, 2001

|(In thousands)                        |  | Health Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|Premium revenue                       |  | $           | 2,802,730 |           | $ | 123,337   |  | $           
|Management services revenue           |  |             | 132,543   |           |   | 25,948    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 2,935,273 |           |   | 149,285   |  |             
|Segment net income                    |  | $           | 94,943    |           | $ | 3,902     |  | $           
|                                      |  |             |           |           |   |           |  |             
|Segment assets                        |  | $           | 4,864,803 |           | $ | 657,259   |  | $           
|                                      |  |             |           |           |   |           |  |             

Six Months Ended June 30, 2002

|(In thousands)                        |  | Health Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|Premium revenue                       |  | $           | 7,473,738 |           | $ | 250,015   |  | $           
|Management services revenue           |  |             | 323,956   |           |   | 68,312    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 7,797,694 |           |   | 318,327   |  |             
|Segment net income (loss)             |  | $           | 312,399   |           | $ | 9,498     |  | $           
|                                      |  |             |           |           |   |           |  |             

Six Months Ended June 30, 2001

|(In thousands)                        |  | Health Care |           | Specialty |   | Corporate |  | Consolidated
|------------------------------------- |  | ----------- | --------- | --------- | - | --------- |  | ------------
|Premium revenue                       |  | $           | 5,134,810 |           | $ | 224,385   |  | $           
|Management services revenue           |  |             | 233,361   |           |   | 54,654    |  |             
|                                      |  |             |           |           |   |           |  |             
|Total revenue from external customers |  |             | 5,368,171 |           |   | 279,039   |  |             
|Segment net income                    |  | $           | 185,403   |           | $ | 9,669     |  | $           
|                                      |  |             |           |           |   |           |  |             

10.  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 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

18

---

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. As of June 30, 2002, the Company reported a net
derivative liability of $11.4 million of which a derivative liability of $13.8 million was related to the cash flow hedges and a derivative asset of $2.4 million was related to
the fair value hedge.



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, on January 15, 2002, 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. For the six months ended June 30, 2002, the Company recognized $2.8 million of
income from this swap which was recorded as a reduction to interest expense. As of June 30, 2002, the Company recognized a derivative asset of $2.4 million related to this swap
agreement.

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. Both hedges expired during the quarter ended June 30, 2002. 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.



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 six months
ended June 30, 2002, the Company recognized a net loss of approximately $8,000 reported in interest expense in the Consolidated Income Statements, which represents the total ineffectiveness of
all cash flow hedges.

As
of June 30, 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 June 30, 2002, the Company had recognized a derivative liability related to these swap agreements of $13.8 million, which was included in other
non-current liabilities of the Consolidated Balance Sheets.

19

---

11.  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 June 30, 2002 and 2001, totaled $9.6 million and $17.3 million,
respectively. Amortization of goodwill and other intangibles for the six months ended June 30, 2002 and 2001, totaled $18.4 million and $28.6 million, respectively. SFAS
No. 142 accounted for $11.2 million of the amortization decrease for the quarter ended June 30, 2002, partially offset by a net increase in amortization of intangible assets with
definite useful lives of $3.5 million, primarily due to recent acquisitions. SFAS No. 142 accounted for $18.3 million of the amortization decrease for the six months ended
June 30, 2002, partially offset by a net increase in amortization of intangible assets with definite useful lives of $8.1 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.

In
May 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB statements No. 4, 44 and 64, Amendment of FASB statement
No. 13 and Technical Corrections as of April 2002," ("SFAS No. 145"). With the rescission of SFAS No. 4, gains and losses from the extinguishment of debt should be
classified as extraordinary items only if they meet the criteria in 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 ("APB Opinion No. 30"). Applying the provisions of APB Opinion No. 30 will distinguish transactions that are
part of an entity's recurring operations from those that are unusual or infrequent

20

---

or that meet the criteria for classification as an extraordinary item. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 shall be applied for fiscal years beginning
after May 15, 2002. The Company has determined that the extinguishment of debt under its Zero Coupon Convertible Subordinated Debentures does not meet the requirements of unusual or infrequent
and therefore would not be included as an extraordinary item with the rescission of SFAS No. 4. The Company does not believe the other provisions within SFAS No. 145 will have a material
effect on the Company's financial statements.

In
July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
No. 146"). SFAS No. 146 replaces current accounting literature and requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not
believe the adoption of SFAS No. 146 will have a material effect on the Company's financial statements.

12.  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 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. The Maryland Insurance Administration has engaged an
independent consultant to provide a preliminary valuation analysis regarding CareFirst, which the Company currently expects will be completed during the third quarter of 2002. Once this analysis has
been received, the Company also expects to assess the analysis' impact on the proposed transaction.

21

---

13.  Related Party Transactions

In December 2000, the Company formed The WellPoint Foundation ("Foundation"), a non-profit organization exempt from federal taxation under
Section 501(c)(3) of the Internal Revenue Code. The purpose of the Foundation is to improve the health and well-being of individuals in the communities served by the Company. The Foundation
Board of Directors is comprised solely of persons who are
also officers of the Company. For the quarter and six months ended June 30, 2002, the Company contributed $15.0 million and $30.0 million, respectively, to the Foundation on a
committed basis. No commitments were made to the Foundation for the quarter and six months ended June 30, 2001. The Company had an outstanding commitment payable to the Foundation of
$15 million as of June 30, 2002 and December 31, 2001. These commitments were paid in the subsequent quarter for each respective period. The Company has no legal obligations for
any future commitments to the Foundation.

14.  Extraordinary Items

During the quarter ended June 30, 2002, the Company recorded two extraordinary items, a gain related to the acquisition of MethodistCare, which was due to
an excess of the fair value of net assets over acquisition costs and a loss related to the early redemption of certain of the Debentures. The acquisition on April 30, 2002 of MethodistCare
resulted in an extraordinary gain of $4.0 million, or $0.03 per share assuming full dilution, for both the quarter and six months ended June 30, 2002. During the second quarter of 2002,
Debenture holders converted $5.1 million in aggregate principal amount at maturity of the Debentures with a carrying value (including accrued interest) of $3.6 million. The total
purchase price paid by the Company of $5.7 million resulted in an extraordinary loss of $2.1 million, net of tax expense totaling $1.3 million, or $0.01 per share assuming full
dilution, for both the quarter and six months ended June 30, 2002.

15.  Subsequent Events

In July 2002, one of the Company's wholly owned subsidiaries, Blue Cross of California ("BCC"), agreed to pay $9.25 million to the U.S. Treasury to
settle allegations brought by a former employee under the Civil False Claims Act against BCC in its former role as a Medicare Part A fiscal intermediary. Under the settlement, BCC expressly
denied the allegations made by the plaintiff.

Part A
fiscal intermediaries act as third-party administrators of claims filed by hospitals, nursing homes and certain other health care providers for medical services rendered to
Medicare-eligible individuals. The lawsuit alleged that in the 1990s, BCC incorrectly entered dates into a tracking system that monitored the process of auditing cost reports submitted by health care
providers to BCC.

The
Company was sued in its capacity as the parent organization of BCC. The settlement agreement contains no allegations that the Company engaged in any wrongdoing. The settlement did
not have a material adverse impact on the Company's statement of financial position and results of operations.

22

---

Report of Independent Accountants

To
the Stockholders and Board of Directors
WellPoint Health Networks Inc.

We
have reviewed the accompanying consolidated balance sheet of WellPoint Health Networks Inc. and its subsidiaries ("the Company") as of June 30, 2002, and the related
consolidated income statements for each of the three-month and six-month periods ended June 30, 2002 and 2001, and the related consolidated statement of changes in stockholders'
equity for the six month period ended June 30, 2002 and the consolidated statements of cash flows for the six month periods ended June 30, 2002 and 2001. These financial statements are
the responsibility of the Company's management.

We
conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally
of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based
on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.

We
previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2001, and the
related consolidated income statement and consolidated change in stockholders' equity and cash flows for the year then ended (not presented herein), and in our report dated January 31, 2002
except for Note 3 as to which the date is March 15, 2002, and Note 22 as to which the date is March 18, 2002, we expressed an unqualified opinion on those consolidated
financial statements. Our report included an explanatory paragraph, that effective January 1, 1999, the Company changed its method of accounting for start-up costs. In our opinion,
the information set forth in the accompanying consolidated balance sheet information as of December 31,
2001, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.



/s/
PricewaterhouseCoopers LLP

Los
Angeles, California
July 23, 2002

23

---



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

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

General

The Company is one of the nation's largest publicly traded managed health care companies. As of June 30, 2002, WellPoint had approximately
13.0 million medical members and approximately 45.3 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.



On April 30, 2002, the Company completed the acquisition of MethodistCare (See Note 3 to the Consolidated Financial Statements), serving over 70,000
members in the Houston, Texas area.



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

24

---

experienced a higher administrative expense ratio than the Company's core businesses due to its higher concentration of administrative services business. For the quarter and six months ended
June 30, 2002, the RightCHOICE business experienced a higher administrative expense ratio than the Company's core businesses.



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 also 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.



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 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. The Maryland Insurance Administration has engaged an
independent consultant to provide a preliminary valuation analysis

25

---

regarding CareFirst, which the Company currently expects will be completed during the third quarter of 2002. Once this analysis has been received, the Company also expects to assess the analysis'
impact on the proposed transaction.



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 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. On April 30, 2002, the Company completed its acquisition of MethodistCare.

As
a result of these various 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.



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;

26

---

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 June 30, 2002 include its acquired operations of Cerulean and RightCHOICE for the full quarter and operating results for
MethodistCare for the period from April 30, 2002, its date of acquisition. The Company's consolidated results of operations for the six months ended June 30, 2002 include six months of
earnings for Cerulean, five months of earnings for RightCHOICE and two months of earnings for MethodistCare. The results of operations for the quarter ended June 30, 2001 include a full quarter
of earnings for Cerulean and the results of operations for the six months ended June 30, 2001 include the results of Cerulean for the period from March 15, 2001, its date of acquisition.

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

|                    |                                                      | Quarter Ended
June 30, |      | Six Months Ended
June 30, |     
|------------------- | ---------------------------------------------------- | ---------------------- | ---- | ------------------------- | ----
|
|Operating Revenues: |                                                      |                        |      |                           |     
|                    | Premium revenue                                      |                        | 95.1 | %                         | 94.9
|                    | Management services revenue                          |                        | 4.9  | %                         | 5.1 
|                    |                                                      |                        |      |                           |     
|                    |                                                      | 100.0                  | %    | 100.0                     | %   
|Operating Expenses: |                                                      |                        |      |                           |     
|                    | Health care services and other benefits (loss ratio) |                        | 81.5 | %                         | 81.6
|                    | Selling expense                                      |                        | 4.0  | %                         | 4.0 
|                    | General and administrative expense                   |                        | 12.7 | %                         | 14.0

27

---

Membership

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



|                         |          | June 30,                   |                    |            |          
|------------------------ | -------- | -------------------------- | ------------------ | ---------- | ---------
|
|
|California               |          |                            |                    |            |          
|                         |          | Large Group                |                    | 4,492,189  |          
|                         |          | Individual and Small Group |                    | 1,607,429  |          
|                         |          | Senior                     |                    | 237,505    |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total California   |            | 6,337,123
|                         |          |                            |                    |            |          
|Central Region (f)       |          |                            |                    |            |          
|                         | Missouri |                            |                    |            |          
|                         |          | Large Group                |                    | 1,146,113  |          
|                         |          | Individual and Small Group |                    | 232,340    |          
|                         |          | Senior                     |                    | 43,056     |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total Missouri     |            | 1,421,509
|                         |          |                            |                    |            |          
|                         | Illinois |                            |                    |            |          
|                         |          | Large Group                |                    | 746,843    |          
|                         |          | Individual and Small Group |                    | 120,832    |          
|                         |          | Senior                     |                    | 12,589     |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total Illinois     |            | 880,264  
|                         |          |                            |                    |            |          
|                         | Texas    |                            |                    |            |          
|                         |          | Large Group                |                    | 381,785    |          
|                         |          | Individual and Small Group |                    | 196,291    |          
|                         |          | Senior                     |                    | 521        |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total Texas        |            | 578,597  
|                         |          |                            |                    |            |          
|Other States             |          |                            |                    |            |          
|                         |          | Large Group                |                    | 1,665,506  |          
|                         |          | Individual and Small Group |                    | 92,088     |          
|                         |          | Senior                     |                    | 21,907     |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total Other States |            | 1,779,501
|                         |          |                            |                    |            |          
|Georgia                  |          |                            |                    |            |          
|                         |          | Large Group                |                    | 1,583,767  |          
|                         |          | Individual and Small Group |                    | 391,211    |          
|                         |          | Senior                     |                    | 70,396     |          
|                         |          |                            |                    |            |          
|                         |          |                            | Total Georgia      |            | 2,045,374
|                         |          |                            |                    |            |          
|Total Medical Membership |          | 13,042,368                 |                    | 10,156,082 |          
|                         |          |                            |                    |            |          
|ASO Membership (g)       |          |                            |                    |            |          
|                         |          | California                 |                    | 1,446,309  |          
|                         |          | Central Region             |                    | 2,800,553  |          
|                         |          | Georgia                    |                    | 875,697    |          
|                         |          |                            |                    |            |          
|Total ASO Membership     |          | 5,122,559                  |                    | 3,741,819  |          
|Risk Membership          |          |                            |                    |            |          
|                         |          | California                 |                    | 4,890,814  |          
|                         |          | Central Region             |                    | 1,859,318  |          
|                         |          | Georgia                    |                    | 1,169,677  |          
|                         |          |                            |                    |            |          
|Total Risk Membership    |          | 7,919,809                  |                    | 6,414,263  |          
|                         |          |                            |                    |            |          
|Total Medical Membership |          | 13,042,368                 |                    | 10,156,082 |          
|                         |          |                            |                    |            |          

28

---

Medical Membership Footnotes

June
30, 2002 have also been adjusted to eliminate approximately 135,449 shared members that are enrolled in UNICARE plans using the HealthLink networks. Finally, the Company has also excluded certain
members participating in a national Blue Cross and Blue Shield Association program that were previously included as medical members by RightCHOICE. There were approximately 125,344 and 85,472 members
in this program in the former RightCHOICE business as of June 30, 2002 and June 30, 2001, respectively.



June 30,Percent
Change2002

2001Pharmacy

32,912,985

30,471,062

8.0
%Dental

2,704,078

2,675,216

1.1
%Life

2,366,670

2,114,968

11.9
%Disability

517,811

544,705

-4.9
%Behavioral Health

6,813,440

5,004,274

36.2
%


29

---

Comparison of Results for the Quarter Ended June 30, 2002 to the Quarter Ended June 30, 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 for the quarter ended June 30, 2002 compared to the quarter ended June 30, 2001 were significantly affected by the RightCHOICE acquisition, which was
consummated on January 31, 2002.

As
discussed in Note 9 to the Consolidated Financial Statements, 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 June 30,(In thousands)2002

2001Health Care

$
3,898,013

$
2,802,730Specialty


127,081


123,337Consolidated

$
4,025,094

$
2,926,067


Premium
revenue increased 37.6%, or $1,099.0 million, to $4,025.1 million for the quarter ended June 30, 2002 from $2,926.1 million for the quarter ended
June 30, 2001. The increase was primarily due to $312.1 million of premium revenue related to the RightCHOICE acquisition, representing 28.4% of the increase. Of the
$312.1 million increase related to the RightCHOICE acquisition, $311.3 million was attributable to the Health Care segment and $0.8 million to the Specialty segment. Excluding the
RightCHOICE acquisition, premium revenue would have increased 26.9% for the quarter ended June 30, 2002. The increase, excluding the RightCHOICE acquisition, was primarily due to an increase of
insured member months of approximately 9.1% and the implementation of premium increases overall.

The
following table depicts management services revenue by business segment:

Quarter Ended June 30,(In thousands)2002

2001Health Care

$
170,240

$
132,543Specialty


37,591


25,948Consolidated

$
207,831

$
158,491


Management
services revenue increased 31.1%, or $49.3 million, to $207.8 million for the quarter ended June 30, 2002 from $158.5 million for the quarter ended
June 30, 2001. The increase was due to $38.0 million of management services revenue from the RightCHOICE acquisition. Of the $38.0 million increase related to the RightCHOICE
acquisition, $35.3 million was attributable to the Health Care segment and $2.7 million to the Specialty segment. Excluding the RightCHOICE acquisition, management services revenue would
have increased 7.2% for the quarter ended June 30, 2002. The increase was due to an increase in pharmacy benefit management services revenues of $7.0 million and the implementation of
price increases overall.

Investment
income was $66.1 million for the quarter ended June 30, 2002 compared to $60.8 million for the quarter ended June 30, 2001, an increase of
$5.3 million or 8.7%. Gross investment income increased by $6.5 million or 10.5% in 2002 over 2001 as a result of higher average

30

---

investment balances for the quarter ended June 30, 2002 versus the quarter ended June 30, 2001. As a partial offset to this increase, net investment expenses increased by
$1.2 million for the quarter ended June 30, 2002, due primarily to higher investment manager fees. Net realized losses remained relatively unchanged from the quarter ended
June 30, 2001 to quarter ended June 30, 2002.

The
loss ratio for the quarter ended June 30, 2002 was 81.5% compared to 81.6% for the same quarter in 2001. The loss ratio attributable to the Health Care segment was 81.8% for
the quarter ended June 30, 2002 compared to 82.0% for the same quarter in 2001. The loss ratio attributable to the Specialty segment was 72.9% for the quarter ended June 30, 2002
compared to 73.9% for the same quarter in 2001. The RightCHOICE business has a lower loss ratio than the Company's core businesses. Excluding RightCHOICE, the loss ratio for both segments combined
remained constant at 81.6% for the quarters ended June 30, 2002 and 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 remained constant at 4.0% for the quarters ended
June 30, 2002 and 2001. The RightCHOICE business has a slightly lower selling expense ratio of 3.9% than the Company's core businesses. The exclusion of RightCHOICE had no impact on the
Company's selling expense ratio for the quarter ended June 30, 2002.

The
administrative expense ratio decreased to 12.7% for the quarter ended June 30, 2002 from 14.0% for the quarter ended June 30, 2001. The acquired RightCHOICE business
experienced a higher administrative expense ratio than the Company's core businesses for the quarter ended June 30, 2002, due to integration expenses along with certain other
transaction-related expenses. Excluding RightCHOICE, the administrative expense ratio decreased to 12.5% in the second quarter of 2002 compared to 14.0% in the second quarter of 2001, due to merger
synergies and fixed administrative costs spread over a larger membership base.

Interest
expense increased $3.4 million to $17.0 million for the quarter ended June 30, 2002, compared to $13.6 million for the quarter ended June 30,
2001. The increase in interest expense was related to the higher average debt balance for the quarter ended June 30, 2002 in comparison to the quarter ended June 30, 2001, primarily due
to the RightCHOICE acquisition. The weighted average interest rate for all debt for the quarter ended June 30, 2002, including the fees associated with the Company's borrowings and interest
rate swap agreements, was 5.9%.

Other
expense decreased $4.6 million to $14.0 million for the quarter ended June 30, 2002, compared to $18.6 million for the quarter ended June 30,
2001. The decrease resulted from lower amortization of goodwill and other intangible assets due to the implementation of SFAS No. 142, which accounted for $11.2 million of the
amortization decrease. This decrease was partially offset by the following items: i) an increase in amortization of intangible assets with definite useful lives of $3.5 million,
primarily due to recent acquisitions, ii) an increase in losses on the disposition of fixed assets of $1.3 million and iii) an increase in operating expenses of
$1.6 million from an insurance general agency subsidiary owned by the Company.

The
Company's net income for the quarter ended June 30, 2002 was $170.7 million, compared to $99.9 million for the quarter ended June 30, 2001. Net income for
the quarter ended June 30, 2002 includes a net gain for two extraordinary items, a gain related to the acquisition of MethodistCare partially offset by a loss on early redemption of debt. The
extraordinary gain amounted to $4.0 million, or $0.03 per diluted share, and was due to an excess of the fair value of net assets over acquisition costs. The extraordinary loss was
$1.3 million, net of tax, or $0.01 per diluted share, which resulted

31

---

from the early redemption of the Company's Zero Coupon Convertible Subordinated Debentures (the "Debentures").

Earnings
per share including the extraordinary items totaled $1.18 for the quarter ended June 30, 2002 and $0.79 for the quarter ended June 30, 2001. Earnings per share
assuming full dilution including the extraordinary items totaled $1.12 for the quarter ended June 30, 2002 and $0.76 for the quarter ended June 30, 2001.

Earnings
per share for the quarter ended June 30, 2002 is based upon weighted average shares outstanding of 144.9 million shares, excluding potential common stock, and
152.6 million shares, assuming full dilution. Earnings per share for the quarter ended June 30, 2001 is based on 126.7 million shares, excluding potential common stock, and
131.6 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.

Comparison of Results for the Six Months Ended June 30, 2002 to the Six Months Ended June 30, 2001

The following table depicts premium revenue by reportable segment:

Six Months Ended June 30,(In thousands)2002

2001Health Care

$
7,473,738

$
5,134,810Specialty


250,015


224,385Consolidated

$
7,723,753

$
5,359,195


Premium
revenue increased 44.1%, or $2,364.6 million, to $7,723.8 million for the six months ended June 30, 2002 from $5,359.2 million for the six months
ended June 30, 2001. The increase was primarily due to $1,216.4 million of premium revenue related to the RightCHOICE and Cerulean acquisitions, representing 51.4% of the increase. Of
the $1,216.4 million increase related to the RightCHOICE and Cerulean acquisitions, $1,192.4 million was attributable to the Health Care segment and $24.0 million to the Specialty
segment. Excluding acquisitions, premium revenue would have increased 24.3% for the six months ended June 30, 2002. The increase, excluding acquisitions, was primarily due to an increase of
insured member months of approximately 7.6% and the implementation of premium increases overall.

The
following table depicts management services revenue by business segment:

Six Months Ended June 30,(In thousands)2002

2001Health Care

$
323,956

$
233,361Specialty


68,312


54,654Consolidated

$
392,268

$
288,015


Management
services revenue increased 36.2%, or $104.3 million, to $392.3 million for the six months ended June 30, 2002 from $288.0 million for the six
months ended June 30, 2001. The increase was due to $102.1 million of management services revenue from the RightCHOICE and Cerulean acquisitions. Of the $102.1 million increase
related to the RightCHOICE and Cerulean acquisitions, $98.6 million was attributable to the Health Care segment and $3.5 million to the Specialty segment. Excluding acquisitions,
management services revenue would have increased 0.9% for the six months ended June 30, 2002.

32

---

Investment
income was $126.1 million for the six months ended June 30, 2002 compared to $113.6 million for the six months ended June 30, 2001, an increase of
$12.5 million or 11.0%. Gross investment income increased $9.2 million or 7.4% in 2002 over 2001 as a result of higher average investment balances during the six months ended
June 30, 2002 versus the six months ended June 30, 2001. Lower net realized losses for the six months ended June 30, 2002 of $1.4 million as compared to net realized losses
in 2001 of $7.1 million also contributed to the increase. As a partial offset to these increases, net investment expenses increased by $2.4 million for the six months ended
June 30, 2002, due primarily to higher investment manager fees.

The
loss ratio for the six months ended June 30, 2002 was 81.1% compared to 81.2% for the same period in 2001. The loss ratio attributable to the Health Care segment was 81.4% for
the six months ended June 30, 2002 compared to 81.7% for the same period in 2001. The loss ratio attributable to the Specialty segment was 71.3% for the six months ended June 30, 2002
compared to 71.6% for the same period in 2001. The RightCHOICE business has a lower loss ratio than the Company's core businesses while the acquired Cerulean business has experienced a higher loss
ratio than the Company's core businesses due to its higher percentage of large employer group business and fewer managed care offerings. Excluding the RightCHOICE and Cerulean acquisitions, the loss
ratio for both segments combined would have been 80.2% for the six months ended June 30, 2002 and 80.6% for the same period in 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.

The
selling expense ratio for the six months ended June 30, 2002 decreased to 4.0% compared to 4.2% for the six months ended June 30, 2001. The acquired Cerulean business
has experienced a lower selling expense ratio due primarily to its lower percentage of individual and small employer group business. The acquired RightCHOICE business also experienced a slightly lower
selling expense ratio than the
Company's core businesses. Excluding acquisitions, the selling expense ratio would have decreased slightly to 4.3% for the six months ended June 30, 2002 from 4.4% for the same period in 2001.

The
administrative expense ratio decreased to 13.3% for the six months ended June 30, 2002 from 14.0% for the six months ended June 30, 2001. The acquired RightCHOICE
business experienced a higher administrative expense ratio than the Company's core businesses for the six months ended June 30, 2002 due to integration expenses along with certain other
transaction-related expenses. Excluding acquisitions, the administrative expense ratio decreased to 13.0% in the six months ended June 30, 2002 compared to 14.0% a year ago, due to merger
synergies and fixed administrative costs spread over a larger membership base.

Interest
expense increased $11.8 million to $33.5 million for the six months ended June 30, 2002, compared to $21.7 million for the six months ended
June 30, 2001. The increase in interest expense was related to the higher average debt balance for the six months ended June 30, 2002 in comparison to the six months ended
June 30, 2001, primarily due to the RightCHOICE acquisition. The weighted average interest rate for all debt for the six months ended June 30, 2002, including the fees associated with
the Company's borrowings and interest rate swap agreements, was 5.9%.

Other
expense decreased $7.0 million to $24.9 million for the six months ended June 30, 2002, compared to $31.9 million for the six months ended
June 30, 2001. The decrease resulted from lower amortization of goodwill and other intangible assets due to the implementation of SFAS No. 142, which accounted for $18.4 million
of the amortization decrease. This decrease was partially offset by the following items: i) an increase in amortization of intangible assets with definite useful lives of $8.1 million,
primarily due to recent acquisitions, ii) an increase in losses on the disposition of fixed

33

---

assets of $2.1 million and iii) an increase in operating expenses of $2.6 million from an insurance general agency subsidiary owned by the Company.

The
Company's net income for the six months ended June 30, 2002 was $311.8 million, compared to $196.4 million for the six months ended June 30, 2001. Net
income for the six months ended June 30, 2002 includes a net gain for two extraordinary items, a gain related to the acquisition of MethodistCare partially offset by a loss on early redemption
of debt. The extraordinary gain amounted to $4.0 million, or $0.03 per diluted share, and was due to an excess of the fair value of net assets over acquisition costs. The extraordinary loss was
$1.3 million, net of tax, or $0.01 per diluted share, which resulted from the early redemption of certain of the Debentures.

Earnings
per share including the extraordinary items totaled $2.20 for the six months ended June 30, 2002 and $1.55 for the six months ended June 30, 2001. Earnings per
share assuming full dilution including the extraordinary items totaled $2.10 for the six months ended June 30, 2002 and $1.50 for the six months ended June 30, 2001.

Earnings
per share for the six months ended June 30, 2002 is based upon weighted average shares outstanding of 142.0 million shares, excluding potential common stock, and
149.2 million shares, assuming full dilution. Earnings per share for the six months ended June 30, 2001 is based on 126.3 million shares, excluding potential common stock, and
131.5 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.

34

---

Financial Condition

The Company's consolidated assets increased by $2,776.0 million, or 37.2%, to $10,248.1 million as of June 30, 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 $2,015.0 million or 72.6% of the
increase. Excluding RightCHOICE, the increase in total assets was primarily due to growth in cash and investments of $388.4 million and an increase in receivables of $309.9 million. Cash
and investments totaled $5.7 billion as of June 30, 2002, or 55.9% of total assets.

Overall
claims liabilities increased $392.1 million, or 17.7%, to $2,611.9 million as of June 30, 2002 from $2,219.8 million as of December 31, 2001. This
increase is due to claims liabilities associated with the RightCHOICE acquisition of $156.5 million and an increase in the claims liabilities associated with the Company's core businesses of
$235.6 million.

As
of June 30, 2002, the Company's long-term indebtedness was $1,152.0 million, of which $151.7 million was related to the Debentures,
$451.6 million was related to the Company's 63/8% Notes due 2006, which includes a fair value adjustment of $2.4 million, $348.9 million was related to the Company's
63/8% Notes due 2012 and $199.8 million of commercial paper. The 63/8% Notes due 2012, with an aggregate principal amount at maturity of $350.0 million,
were issued to finance the RightCHOICE acquisition. The Company's revolving credit facility indebtedness of $235.0 million at December 31, 2001 was repaid during the six months ended
June 30, 2002 with $200.0 million obtained through the commercial paper program and operating cash of $35.0 million. (See Note 5 to the Consolidated Financial Statements).

Stockholders'
equity totaled $3,575.4 million as of June 30, 2002, an increase of $1,442.8 million from $2,132.6 million as of December 31, 2001. The
increase was primarily due to the issuance of the Company's Common Stock of $1,109.1 million in connection with the RightCHOICE acquisition, net income of $311.8 million for the six
months ended June 30, 2002 and a $152.9 million net increase from the reissuance of treasury stock related to the Company's employee 401(k) Plan, 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 of $8.7 million, net of taxes,
due primarily to investment securities.

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.

The
Company's strategy for achieving its investment goals is broad diversification of its investments, both across and within asset classes. As of June 30, 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 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.

35

---

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 $596.6 million for the six months ended June 30, 2002, compared with $280.3 million for the six months ended
June 30, 2001. Cash flow from operations for the six months ended June 30, 2002 was due primarily to net income before extraordinary items of $309.1 million, an increase in
medical claims payable of $200.2 million due to membership growth and higher provider contract rates and an increase in accounts payable and accrued expenses of $145.7 million resulting
from the timing of liability payments. Partially offsetting these increases was a decrease in receivables of $104.9 million due to revenue growth and timing of cash receipts.

Net
cash used in investing activities for the six months ended June 30, 2002 totaled $1,035.2 million, compared with $657.4 million for the six months ended
June 30, 2001. The cash used in the six months ended June 30, 2002 was attributable primarily to the purchase of investments of $3.3 billion, and of property and equipment, net of
sales proceeds, of $51.5 million and the purchases of RightCHOICE and MethodistCare, net of acquired cash, of $347.6 million. Proceeds from investments sold and matured totaled
$2.6 billion, partially offsetting the aforementioned purchases.

Net
cash provided by financing activities totaled $292.9 million for the six months ended June 30, 2002 compared with $575.2 million for the six months ended
June 30, 2001. The net cash provided in the six months ended June 30, 2002 was primarily related to additional debt of $350.0 million incurred to finance the RightCHOICE
acquisition, in addition to the receipt of proceeds of $107.2 million from the issuance of stock related to the Company's employee stock option and purchase programs less $122.3 million
in Company stock repurchases. During the six months ended June 30, 2002, the Company repaid its entire indebtedness under the revolving credit facility of $235.0 million at
December 31, 2001. The net borrowings of commercial paper totaled $199.8 million for the six months ended June 30, 2002. The net proceeds of this commercial paper program and
operating cash were used to repay the 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 senior 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 5 to the Consolidated Financial Statements). As mentioned above, during the six months ended June 30, 2002 the Company repaid its entire outstanding revolving credit facility
balance at December 31, 2001 of $235.0 million.

36

---

In
April 2002, the Company commenced a commercial paper program providing for the issuance of up to $1.0 billion in aggregate maturity value of short-term
indebtedness (known generally as "commercial paper"). The commercial paper is being issued by the Company without registration under the 1933 Act in reliance upon the exemption from registration
contained in Section 4(2) of the 1933 Act. The commercial paper is issued in denominations of $100,000 or integral multiples of $1,000 in excess thereof, will bear such interest rates, if
interest-bearing, or will be sold at such discount from their face amounts, as agreed upon by the Company and the dealer or dealers acting in connection with the commercial paper program. The
commercial paper may be issued with varying maturities up to a maximum of 270 days from the date of issuance. The commercial paper ranks equally with all other unsecured and unsubordinated
indebtedness of the Company. As of June 30, 2002, the outstanding commercial paper borrowings totaled $199.8 million with various maturity dates and had interest rates
ranging from 2.00% to 2.08%. The weighted average yield on the outstanding commercial paper as of June 30, 2002 was 2.03%.

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 six months ended
June 30, 2002 of 2.25%) for fixed-rate interest payments (weighted average rate for the six months ended June 30, 2002 of 7.37%) 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
"2001 Notes"), the Company, on January 15, 2002 entered into a $200 million notional amount interest rate swap agreement which matures on June 15, 2006. The swap agreement is a
contract to exchange a fixed 63/8% rate for a LIBOR-based floating rate (weighted average variable rate of 5.96% for the six months ended June 30, 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 June 30, 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 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:

37

---

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% Notes 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 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, commercial paper program or through public or private financing sources, will be sufficient to fund continuing operations and expected capital requirements for the foreseeable future.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make a variety of
estimates and assumptions. These estimates and assumptions affect, among other things, the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts
of revenues and expenses. Actual results can differ from the amounts previously estimated, which were based on the information available at the time the estimates were made.

The
critical accounting policies described below are those that the Company believes are important to the portrayal of the Company's financial condition and results, and which require
management to make difficult, subjective and/or complex judgments. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is
unknown. The Company believes that critical accounting policies include medical claims payable, reserves for future policy benefits and intangible assets and goodwill.

38

---



Medical claims payable includes claims in process and a provision for the Company's estimate of incurred but not reported claims. Such estimates are developed
using actuarial principles and assumptions which consider, among other things, contractual requirements, historical utilization trends and payment patterns, medical inflation, product mix,
seasonality, membership and other relevant factors. Claim processing expenses are also accrued based on an estimate of expenses necessary to process such claims. Such reserves are continually
monitored and reviewed with any adjustments reflected in current operations. Capitation costs represent monthly fees paid one month in advance to physicians, certain other medical service providers
and hospitals in the Company's HMO networks as retainers for providing continuing medical care. The Company maintains various programs that provide incentives to physicians, certain other medical
service providers and hospitals participating in its HMO networks through the use of risk-sharing agreements and other programs. Payments under such agreements are made based on the
providers' performance in controlling health care costs while providing quality health care. Expenses related to these programs, which are based in part on estimates, are recorded in the period in
which the related services are rendered. Management believes that its reserves for medical claims payable are adequate to satisfy its ultimate claim liability. However, these estimates are inherently
subject to a number of highly variable circumstances. Consequently, the actual results could differ materially from the amount recorded in the consolidated financial statements.

The
Company's future results of operations will depend in part on its ability to predict and control health care costs through underwriting criteria, utilization management, product
design and negotiation of favorable provider and hospital contracts. WellPoint's ability to contain such costs may be adversely
affected by changes in utilization rates, demographic characteristics, the regulatory environment, health care practices, inflation, new technologies, clusters of high-cost cases,
continued consolidation of physician, hospital and other provider groups, acts of terrorism and bioterrorism or other catastrophes, including war, and numerous other factors. The inability to mitigate
any or all of the above-listed or other factors may adversely affect the Company's future profitability.



The estimated reserves for future policy benefits relate to life and disability insurance policies written in connection with health care contracts. Reserves for
future life benefit coverage are based on projections of past experience. Reserves for future policy and contract benefits for certain long-term disability products and group
paid-up life products are based upon interest, mortality and morbidity assumptions from published actuarial tables, modified based upon the Company's experience. Reserves are continually
monitored and reviewed, and as settlements are made or reserves adjusted, differences are reflected in current operations. The current portion of reserves for future policy benefits relates to the
portion of such reserves which management expects to pay within one year. Management believes that its reserves for future policy benefits are adequate to satisfy its ultimate benefit liability.
However, these estimates are inherently subject to a number of highly variable circumstances. Consequently, the actual results could differ materially from the amount recorded in the consolidated
financial statements.



The Company has made several acquisitions in the past several years that included a significant amount of intangible assets and goodwill. Under generally accepted
accounting principles in effect through December 31, 2001, these assets were amortized over their useful lives, and were tested periodically to determine if they were recoverable from operating
earnings on an undiscounted basis over their useful lives.

The
Company evaluates whether events or circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of goodwill and other
identifiable

39

---

intangible assets. Impairment of an intangible asset is triggered when the estimated future undiscounted cash flows (excluding interest charges) do not exceed the carrying amount of the intangible
asset and related goodwill. If the events or circumstances indicate that the remaining balance of the intangible asset and goodwill may be permanently impaired, such potential impairment will be
measured based upon the difference between the carrying amount of the intangible asset and goodwill and the fair value of such asset determined using the estimated future discounted cash flows
(excluding interest charges) generated from the use and ultimate disposition of the respective acquired entity.

Effective
January 1, 2002, intangible assets and goodwill are accounted for under SFAS No. 142, "Goodwill and Other Intangible Assets." The new rules eliminate amortization
of goodwill and other intangibles with indefinite lives, but these assets are subject to the impairment tests. (See "New Accounting Pronouncements" and Note 11 to the Consolidated Financial
Statements for a more complete discussion of the Company's intangible assets and goodwill). Management is required to make assumptions and estimates, such as the discount factor, in determining
estimated fair value. Such estimated fair values might produce significantly different results if other reasonable assumptions and estimates were to be used.

40

---



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.

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

41

---

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.

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

42

---

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 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 filed a motion requesting a rehearing of the matter before the entire
11thCircuit Court of Appeals, which motion was denied by the 11th Circuit Court of Appeals in June 2002. On July 29, 2002, Judge Moreno issued an order
providing that discovery in the case would be allowed to re-commence on September 30, 2002.

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 filed a motion (which was granted in July 2002) 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.

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. In recent years, 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

43

---

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 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.

One
of the Company's wholly owned subsidiaries operates as a pharmacy benefit manager ("PBM") under the trade name WellPoint Pharmacy Management. The PBM industry faces a number of risks
and uncertainties in addition to those facing the Company's health plan business. Such risks and uncertainties include the application of federal and state anti-remuneration laws
(generally known as "anti-kickback" laws), whether PBMs operate as fiduciaries under the Employee Retirement Income Security Act of 1974 ("ERISA") and are in compliance with their
fiduciary obligations under ERISA in connection with the development and implementation of items such as formularies, preferred drug listings and therapeutic intervention programs, and potential
liability regarding the use of patient identifiable medical information. In addition, a number of federal and state legislative proposals are being considered that could affect a variety of PBM
industry practices, such as the receipt of rebates from pharmaceutical manufacturers. The Company believes that its PBM business is currently being conducted in compliance in all material respects
with applicable legal requirements. However, there can be no assurance that the Company's PBM business will not be subject to challenge under various laws and regulations, or that any such challenge
will not have a material adverse effect upon the Company's results of operations or financial condition. In addition, future legislative enactments affecting the PBM

44

---

industry could also have a material adverse effect upon the Company's results of operations and financial condition.

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 acquisition 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 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.

In
April and May 2002, one of the Company's wholly owned subsidiaries acting as a pharmacy benefit management business under the tradename WellPoint Pharmacy Management received
two administrative subpoenas duces tecum issued by the U.S. Attorney's Office in Boston Massachusetts. The Company does not believe that its pharmacy benefit management business is presently a target
of

45

---

investigation by the U.S. Attorney. The subpoenas appear to focus primarily on WellPoint Pharmacy Management's relationship with TAP Pharmaceuticals, including TAP's drugs Lupron and Prevacid. The
Company has responded to the subpoenas by producing certain requested documents. The Company believes that it is in compliance in all material respects with all laws and regulations applicable to the
pharmacy benefit management business.

As
a result of the general economic downturn throughout the country, California is currently experiencing a significant state budget deficit. California legislators are exploring a
variety of alternatives to address this situation. In order to address the budget shortfall, there may be proposed a reduction in the fixed per member per month payments received by Medi-Cal managed
care providers such as the Company. Alternatively, state legislators may seek to impose greater state taxes. Any significant reduction in payments received by the Company in connection with its
Medi-Cal managed care business could have a material adverse effect on the Company's results of operations or financial condition. Additionally, any increase in state taxes could prolong or exacerbate
the state's economic downturn, which could in turn have a material adverse effect on the Company results of operations or financial condition.

Review by Independent Accountants

With respect to the unaudited consolidated financial information of WellPoint Health Networks Inc. for the three-month and six-month periods ended June 30,
2002 and 2001, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that they have applied limited procedures in accordance with professional standards for a review of such information.
However, their separate report dated July 23, 2002 appearing herein, states that they did not audit and they do not express an opinion on that unaudited consolidated financial information.
Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers is not subject to
the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited consolidated financial information because that report is not a "report" or a "part" of
the registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Act.

ITEM 3.Quantitative and Qualitative Disclosures About Market Risk

The
Company is exposed to market rate risks associated with its investments and borrowings. Market risk represents the risk of loss in value of a financial instrument resulting from
changes in interest rates and equity prices. The Company regularly evaluates its assets and liabilities as well as the appropriateness of investments relative to its internal investment guidelines.

As
of June 30, 2002, the Company's investment securities at market value totaled $4.7 billion, of which 90.0% was invested in fixed income securities with intermediate
durations and the remaining 10.0% in equity securities. The Company has evaluated the net impact to the fair value of its fixed income investments from a hypothetical change in all interest rates of
100, 200 and 300 basis points ("bps"). In doing so, optionality was addressed through Monte Carlo simulation of the price behavior of securities with embedded options. In addressing prepayments on
mortgage-backed securities, the model follows the normal market practice of estimating a non-interest rate sensitive component (primarily related to relocations) and an
interest-sensitive component (primarily related to refinancings) separately. The model is based on statistical techniques applied to historical prepayment and market data, and then
incorporates forward-looking mortgage market research and judgments about future prepayment behavior. Changes in the fair value of the investment portfolio are reflected in the balance sheet through
stockholders' equity. Assuming increases of 100, 200 and 300 bps in market interest rates, the fair value of the Company's investment in fixed maturities as of June 30, 2002 would have
decreased by $146.3 million, $290.1 million and $427.4 million, respectively.

46

---

As
of June 30, 2002, the Company's equity securities were comprised primarily of domestic stocks. Assuming an immediate decrease of 10% in market value, as of June 30,
2002, the hypothetical loss in fair value of stockholders' equity is estimated to be approximately $47.1 million.

The
Company has from time to time entered into interest rate swap agreements primarily by exchanging the floating debt payments due under its outstanding indebtedness for fixed rate
payments. The Company has also entered into interest rate swap agreement by exchanging the fixed payments due under the 2001 Notes for a LIBOR-based floating rate. The Company believes that this
allows it to better anticipate its interest payments while helping to manage the asset-liability relationship. As of June 30, 2002, assuming increases of 100, 200 and 300 bps in market interest
rates, the fair value of the interest rate swap agreements would have, on a net basis, increased by $4.3 million and $1.1 million, and decreased by $2.0 million, respectively.

47

---



PART II    OTHER INFORMATION

ITEM 1.Legal Proceedings

See
"Factors That May Affect Future Results of Operations" for a discussion of various pending legal matters involving the Company. The Company's Annual Report on Form 10-K/A for
the year ended December 31, 2001 also contains a discussions of various pending legal matters.

ITEM 2.Changes in Securities and Use of Proceeds

In
June 2002, the Company inadvertently sold approximately 4,900 shares without registration under the Securities Act of 1933 to certain of its employees participating in the Blue
Cross Blue Shield of Missouri 401(k) Savings Program. These shares were sold for an aggregate of approximately $428,000.

ITEM 4.Submission of Matters to a Vote of Security Holders

On
June 27, 2002, the annual meeting of stockholders of the Company was held. The agenda items for such meeting are shown below along with the vote of the Company's Common Stock
with respect to such agenda items.

Class III Nominees:Nominee:

W. Toliver Besson
Votes FOR: 119,348,904
Votes WITHHELD AUTHORITY: 5,553,909Nominee:

Julie A. Hill
Votes FOR: 123,217,638
Votes WITHHELD AUTHORITY: 1,685,175Nominee:

Leonard D. Schaeffer
Votes FOR: 123,217,638
Votes WITHHELD AUTHORITY: 1,685,175


Class II Nominee:Nominee:

Jane G. Pisano
Votes FOR: 122,594,441
Votes WITHHELD AUTHORITY: 2,308,372


The
terms of Roger E. Birk, Sheila P. Burke, William H.T. Bush, Warren Y. Jobe and Elizabeth A. Sanders continued after the meeting.

Votes FOR:

117,655,318Votes AGAINST:

6,716,145Votes WITHHELD AUTHORITY:

531,350Broker non-votes:

0


48

---

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, 19962.02

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, 20012.03

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, 20013.01

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. 333-907914.01

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. 001-130834.02

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.


49

---

10.01

Amendment to the WellPoint 401(k) Retirement Savings Plan effective as of April 30, 200215.01

Letter regarding unaudited interim financial information99.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 135099.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350




On
April 10, 2002, the Company filed a Current Report on Form 8-K which reported that the Company had received a letter from the Internal Revenue Service (the
"IRS") notifiying the Company that a private letter ruling received by the Company on September 1998 would not be revoked on a retroactive basis. Previously, in March 2002, the Company
had received a letter from the IRS notifying the Company that the IRS was considering revoking the September 1998 private letter ruling. The letter further stated that the IRS was withdrawing
the private letter ruling and that the Company could no longer rely on the private letter ruling. In March 2002, the Company had submitted a written request for relief from retroactive affect
of the revocation under Section 7805(b) of the Internal Revenue Code.

On
May 3, 2002, the Company filed a Current Report on Form 8-K disclosing the medical membership of the Company as of December 31, 1999 and 2000, as of
each calendar quarter end in the year ended December 31, 2001 and as of March 31, 2002. As a result of the Company's acquisition of RightCHOICE Managed Care, Inc. in
January 2002 and in order to reflect consistent membership numbers across the Company's various operating subsidiaries, the Company had adopted certain revisions to its medical membership
accounting methodology.

50

---

SIGNATURES

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

|                      |  | WELLPOINT HEALTH NETWORKS INC.Registrant
|--------------------- |  | ----------------------------------------
|                      |  |                                         
|Date: August 13, 2002 |  | By:                                     
|                      |  |                                         
|Date: August 13, 2002 |  | By:                                     
|                      |  |                                         
|Date: August 13, 2002 |  | By:                                     

51

---

QuickLinks