Anthem Blue Cross 2002 Annual Report Download - page 57

MANAGEMENT’S DISCUSSION AND ANALYSIS
of Financial Condition and Results of Operations (Continued)
52 Anthem, Inc. 2002 Annual Report
Liquidity—Year Ended December 31, 2001
Compared to Year Ended December 31, 2000
Net cash flow provided by operating activities was
$654.6 million for the year ended December 31, 2001, and
$684.5 million for the year ended December 31, 2000, a
decrease of $29.9 million, or 4%. In both 2001 and 2000,
net cash flow provided by operating activities was impacted
by better balance sheet management resulting from the
conversion of certain operating assets, such as receivables
and investments in non-strategic assets, to cash. As the
continuing focus on balance sheet management began in
early 2000, our cash flow provided by operating activities
in 2000 was unusually high. During 2001, demutualization
expenses of $27.6 million were incurred relating to our
conversion to a stockholder owned company. Also during
2001, incentive compensation payments were made which
had been accrued over the previous three years. Neither of
these items occurred during 2000.
Net cash used in investing activities was $498.1 mil-
lion for the year ended December 31, 2001, and $761.1
million for the year ended December 31, 2000, a decrease
of $263.0 million, or 35%. The table below outlines
where the changes between the two years occurred:
Decrease in purchases of subsidiaries $ 81.0
Increase in proceeds from sales of subsidiaries 39.6
Decrease in net purchases of investments 146.9
Decrease in net purchases and proceeds
from sale of property and equipment (4.5)
Total decrease in cash used
in investing activities $263.0
The decrease in purchase of subsidiaries reflects the
cash used to purchase BCBS-ME in 2000, which did not
occur again in 2001. The increase in proceeds from sale of
subsidiaries resulted from the sale of our TRICARE opera-
tions in 2001. The decreased net purchase of investments
was primarily a result of our direction to investment
mangers to maintain greater liquidity at December 31,
2001 as compared to December 31, 2000. The slight
decline in the purchase of property and equipment
reflects the sale of our TRICARE operations, which had
minimum property additions in 2001 as compared to the
prior year, and higher levels of purchases for furniture and
capitalized software in 2000.
Net cash provided by financing activities was $46.6
million for the year ended December 31, 2001, and $75.5
million for the year ended December 31, 2000, a decrease
of $28.9 million, or 38%.
The $46.6 million of cash provided by financing
activities in 2001 included net proceeds received from our
initial public offering, after making payments to eligible
statutory members.
On November 2, 2001, Anthem Insurance Companies,
Inc. (“Anthem Insurance”) converted from a mutual insur-
ance company to a stock insurance company in a process
known as a demutualization. Effective with the demutual-
ization, Anthem, Inc. (“Anthem”) completed an initial
public offering of 55.2 million shares of common stock at
an initial public offering price of $36.00 per share. The
shares issued in the initial public offering are in addition to
48.1 million shares of common stock (which will ulti-
mately vary slightly as all distribution issues are finalized)
distributed to eligible statutory members in the demutual-
ization. Concurrent with our initial public offering of com-
mon stock, we issued 4.6 million 6.00% Equity Security
Units at $50.00 per unit.
After an underwriting discount and other offering
expenses, net proceeds from our common stock offering were
approximately $1,890.4 million (excluding demutualization
expenses of $27.6 million). After underwriting discount and
expenses, net proceeds from our Units offering were approx-
imately $219.8 million. In December 2001, proceeds from
our common stock and Units offerings in the amount of
$2,063.6 million were used to fund payments to eligible
statutory members of Anthem Insurance who received cash
instead of common stock in our demutualization.
Our 2000 financing activities of $75.5 million con-
sisted of $295.9 million net proceeds received from the
issuance of $300.0 million of surplus notes on a discounted
basis, less $220.4 million repayment of bank debt.
Financial Condition
We maintained a strong financial condition and liq-
uidity position, with consolidated cash and investments
of $6.6 billion at December 31, 2002. Total cash and
investments increased by $2.2 billion since December 31,
2001, primarily resulting from our acquisition of Trigon
and strong cash flows from operations, partially offset by
cash used for stock repurchases.