WellPoint'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. WellPoint's operating expenses include health care services and other benefits expenses, consisting primarily of payments for physicians, hospitals and other providers for health care and specialty products claims; selling expenses for broker and agent commissions; general and administrative expenses; interest expense; depreciation and amortization expense; and income taxes.
The Company recorded $14.5 million of nonrecurring costs for the year ended December 31, 1997, of which $8.0 million recorded in the second quarter of 1997 related primarily to the write-down of the California business segment's dental practice management operations and discontinuance of the California business segment's medical practice management operations. In addition, the Company incurred $6.5 million in the first quarter related to severance and retention payments associated with the GBO acquisition.
The Company's consolidated assets decreased by $8.3 million from $4,234.1 million as of December 31, 1997 to $4,225.8 million as of December 31, 1998. This represents a 0.2% decrease which resulted from the net impact of a number of offsetting factors such as: the sale of the workers' compensation business, which held net assets at December 31, 1997 of $209.2 million partially offset by proceeds from its sale of $101.4 million; the purchase of $193.3 million of treasury stock from available cash; the effect of the tax benefit related to the BCC tax ruling which resulted in an income tax recoverable of $95.9 million, offset by a related decrease in intangible assets of $194.5 million; and cash flow from continuing operating activities of $394.6 million. Cash and investments were $2.8 billion as of December 31, 1998, or 65.4% of total assets.
The Company has entered into foreign currency forward exchange contracts for each of the fixed maturity securities on hand as of December 31, 1998 denominated in foreign currencies in order to hedge asset positions with respect to these securities. The unrealized gains and losses from such forward exchange contracts are reflected in other comprehensive income. In addition, the Company has entered into forward exchange contracts to hedge the foreign currency risk between the trade date and the settlement date. Gains and losses from these contracts are recognized in income.
In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes the accounting and reporting standards for derivative instruments and for hedging activities. Upon adoption of SFAS No. 133, all derivatives must be recognized on the balance sheet at their then fair value. Any stand-alone deferred gains and losses remaining on the balance sheet under previous hedge accounting rules must be removed from the balance sheet and all hedging relationships must be designated anew and documented pursuant to the new accounting rules. The new standard will be effective in the first quarter of 2000. The Company is presently assessing the effect of SFAS No. 133 on the financial statements of the Company.