WELLPOINT'S ACQUISITIONS SWELL COMPANY FIRM EXPANDS TO SOUTHEAST.

Byline: Evan Pondel Staff Writer

WellPoint Health Networks Inc.'s $1.3 billion acquisition of CareFirst BlueCross BlueShield, is a mere piece to a broader puzzle that propels the managed-care giant's standing in the U.S. healthcare market.

In one month, Thousand Oaks-based WellPoint has announced two separate deals that have changed the hemstitching of the company's expansion efforts outside of California. With the addition of St. Louis-based Right Choice, parent of BlueCross and BlueShield of Missouri, and Maryland-based CareFirst, WellPoint's total medical membership will swell to around 16.9 million. Aetna, the nation's leading health care company has about 17.5 million medical members.

``Looking at what WellPoint and others are doing is like taking a jigsaw puzzle of the U.S. and piecing together the entire map,'' said Charles Boorady, analyst with Goldman Sachs in New York.

Through the purchase of CareFirst, WellPoint will have a presence in Maryland, the District of Columbia and northern Virginia.

Steven Larsen, head of the Maryland Insurance Administration, told The Associated Press on Wednesday that he and counterparts in Delaware and the District of Columbia could take up to a year to examine the proposed acquisition. A similar review is taking place in Georgia where, in March, WellPoint acquired Blue Cross and Blue Shield of Georgia, again furthering the company's outreach in the South.

``The Southeast, demographically, is growing better than the rest of the U.S. and there are not as many parts of the country where there are as many meaningful blue plans,'' Boorady said.

Of the three deals WellPoint has inked since March, all of them involve BlueCross BlueShield Plans. With WellPoint's strategy poised to diversify the company, Blue plans are attractive because of consumer recognition and longevity.

``It's not that WellPoint is exclusively targeting Blues, it's that they have emerged as the buyer of choice and because Blues have higher brand awareness. And, most of the Blue plans dominate the market they're in,'' said Lori Price, managing director at J.P. Morgan in New York.

When WellPoint agreed to buy RightChoice in October, absorbing about 2.8 million members, the company purchased the largest managed care company in Missouri, opening the door to a potentially lucrative market.

But for Leonard Schaeffer, chairman and chief executive officer of WellPoint, acquisitions aren't absolutely imperative to the company's success.

``We have been known as a company that does very few acquisitions,'' he said during a conference call Wednesday. ``We only do a transaction when we see an opportunity to increase value.''

And tapping new markets not only broadens WellPoint's membership base, it strengthens the company's ability to avert risk. John Szabo, an analyst with CIBC World Markets Corp., said if WellPoint only focused its attention on California, the company would pigeon hole itself.

``The company does have nationwide footprint, but it's not as deep as it is in California,'' he said. ``These transactions they're making represents a big positive because it reduces their risk profile through geographic diversification.''

Another managed-care company that's paralleling WellPoint's quest for geographic diversity is Indianapolis-based Anthem. The company provides coverage primarily under the BlueCross and Blue Shield names to more than 7 million people in Colorado, Connecticut, Indiana, Maine and New Hampshire.

``They're WellPoint's biggest competition when it comes to consolidation of Blue plans,'' Szabo said.

Still, WellPoint's membership base is more half the size of Anthem. And, if WellPoint continues to bid for companies with the same frequency displayed this year, the managed-care giant could box Aetna out the No. 1 slot in the nation.

``If you look at their track record it suggest a company that has leadership in the sector and it's only a matter of time until they are the largest in the arena,'' Szabo said.

The company's quarterly result appear on target after reporting net income for the third quarter of $108.4 million, or $1.64 per share, compared with $89.5 million, or $1.38 per share, in the same period a year ago. Revenues were up 37.9 percent to $3.2 billion.

WellPoint's stock also reflects a favorable impression on Wall Street as it closed Wednesday at $119.07, just shy of the 52-week high of 120.50.

``WellPoint stock has been down, up, down, up, and my view is this acquisition will make a lot of sense'' on Wall Street, Boorady said.

CAPTION(S):

box

Box:

WELLPOINT

Daily News