Innovating for a healthier tomorrow

To Our Shareholders, Customers and Communities:

At WellPoint, our mission is to improve the lives of the people we serve and the health of our communities. Simply put, we are committed to innovating for a healthier tomorrow.

Performing Today . . .
In 2011, we confronted many external challenges: rising costs, a shortage of primary care physicians, an uncertain political and regulatory environment, a shifting customer mix, and a struggling economy, to name a few. Despite these, we took important steps to strengthen our company. We added more than 900,000 medical members during the year while reducing our selling, general and administrative expenses by nearly $300 million, or more than 3 percent. Our ability to add new customers while controlling costs demonstrated the strength of our core capabilities and our emphasis on creating a more affordable operating model for our customers.

Full year 2011 net income was $2.6 billion, or $7.25 per share, including net investment gains of $92.2 million after-tax, or $0.25 per share. Excluding the net investment gains, full year 2011 adjusted net income was $7.00 per share.

While our 2011 performance exceeded expectations, a few of our business lines did not realize their full potential; in particular, we have some work to do in our Senior and State Sponsored businesses. Our Senior business fell significantly below expectations due to pricing and membership selection issues in certain markets, and our State Sponsored business fell short in part due to retroactive regulatory actions. We have taken steps to address the problems we saw with these businesses and expect to see improved financial performance from them in 2012.

Our success hinges on having a strong foundation of service, quality, and day-to-day operational excellence. Toward that end, in 2012 we plan to invest $700 million internally to further bolster this foundation and improve performance, while continuing to drive efficiency in all of our processes.

Moving forward, I’m confident that our associates’ commitment to continuous improvement will align performance with potential. By continuing to put our customers first and executing against our strategy, we expect to fulfill our 2011 road map to grow earnings per share by at least 10 percent on a compound annual basis over five years.

. . . For a Healthier Tomorrow
As in other industries, we know that consumers of health care demand and deserve more convenience, better value, and higher quality. But they currently face a system that is complex, fragmented, and difficult to navigate.

To make the health care system truly work, we must bring new thinking and tools to the marketplace. With this in mind, in 2011 we also invested strategically in innovative services and capabilities designed to boost future growth and improve health care costs and quality for our members. We expect that these game-changing investments will continue to drive success in 2012 and beyond.

• Healthier People:  A lot more goes into being healthy than just health care; keeping our members healthy means delivering affordable products that provide them with convenient access to care. It also means finding new ways to help members live healthier and have a better, more positive experience when they do need healthcare services. Our acquisition of CareMore Health Group in August positions us to deliver affordable, proactive, coordinated, and individualized health care to seniors, and we are excited about expanding this model of care to new markets in 2012.
• Healthier Customers:  We are committed to our customers and work to identify solutions that help them continue to be successful in their own businesses. Toward that end, in September we joined with two other Blue plans to take a majority ownership stake in Bloom Health—a private health insurance “exchange” that offers our customers the consistency and predictability of a defined contribution model. The Bloom solution will be fully operational in all markets in 2013. Similarly, we joined with other Blue plans to provide access to a national network of dentists in all 50 states starting in 2012. The breadth and strength of this network provides the game-changing products and competitive pricing that our customers have been asking for.
• Healthier System:  A healthy health care system is one that delivers convenient access to affordable, high-quality care to consumers. However, more than a decade of research has shown that patients receive the recommended care only about 55 percent of the time. We are committed to being a change leader and to improving health outcomes for our members through innovative new programs. For example, our Patient Safety First collaboration is designed to improve the consistency and quality of health care and save lives by reducing avoidable medical errors. In addition, we are working with IBM to deploy the first commercial application in any industry of its Watson technology. We are using Watson internally to support our nurses and clinical associates, and also teaming with physicians to help them make informed health care decisions in the field of oncology.

As we continue to innovate, invest, and expand, we will not lose sight of who we are. Most importantly, we will not lose sight of our members. They are the reason we exist, and we are dedicated to making the health care system work for them.

That’s why we’ve included member health as an accountability measure for each of our associates. And we’ve achieved results: steady improvement in member health in the five years since we instituted our Member Health Index.

I would also like to say a word of thanks to our more than 36,000 associates. Looking back at last year, I am extraordinarily proud of the people of WellPoint. I believe that it is in the most challenging times that you learn what people are really made of, and last year was not without its challenges. But our associates worked harder than ever and performed admirably for our members and for our company. Their dedication, work ethic, and commitment to serving our customers are key reasons I believe we will succeed this year and beyond.

Thank you for your confidence in our company.

Sincerely,

Angela F. Braly
Chair, President and CEO