Anthem Blue Cross 2002 Annual Report Download - page 69

NOTES
to Consolidated Financial Statements (Continued)
64 Anthem, Inc. 2002 Annual Report
2000
On June 5, 2000, the Company completed its pur-
chase of substantially all of the assets and liabilities of
Associated Hospital Service of Maine, formerly d/b/a Blue
Cross and Blue Shield of Maine (“BCBS-ME”), in accor-
dance with the Asset Purchase Agreement dated July 13,
1999. The purchase price was $95.4 (including direct costs
of acquisition) and resulted in $90.5 of goodwill and other
intangible assets. Intangible assets with finite lives are
being amortized over ten years. In 2001, goodwill was
reduced by $2.1 for purchase price allocation adjustments
based on final valuation studies. This acquisition was
accounted for as a purchase and the net assets and results
of operations have been included in the Company’s con-
solidated financial statements from the purchase date. The
pro forma effects of the BCBS-ME acquisition were not
material to the Company’s consolidated results of opera-
tions for periods preceding the purchase date.
Pending Acquisition
On May 31, 2001, Anthem Insurance and Blue
Cross and Blue Shield of Kansas (“BCBS-KS”)
announced they had signed a definitive agreement pur-
suant to which BCBS-KS would become a wholly-owned
subsidiary of Anthem Insurance. Under the proposed
transaction, BCBS-KS would demutualize and convert to
a stock insurance company. The agreement calls for
Anthem Insurance to pay $190.0 in exchange for all of
the shares of BCBS-KS. On February 11, 2002, the
Kansas Insurance Commissioner disapproved the pro-
posed transaction, which had been previously approved
by the BCBS-KS policyholders in January 2002. On
February 19, 2002, the Board of Directors of BCBS-KS
voted unanimously to appeal the Kansas Insurance
Commissioner’s decision and BCBS-KS sought to have
the decision overturned in Shawnee County District
Court. The Company joined BCBS-KS in the appeal,
which was filed on March 7, 2002. On June 7, 2002, the
Shawnee County District Court ruled on the BCBS-KS
appeal. The Court ruled in favor of Anthem and BCBS-
KS, vacating the Commissioner’s decision and remanding
the matter to the Commissioner for further proceedings
not inconsistent with the Court’s order. On June 10,
2002, the Kansas Insurance Commissioner appealed the
Court’s ruling to the Kansas Supreme Court. The Kansas
Supreme Court will begin to hear oral arguments of the
parties to this case on March 5, 2003.
Divestitures
2002
During 2002, the Company divested of several small
business operations, which were no longer deemed to be
strategically aligned with objectives of the Company’s
Specialty business segment. The Company recognized an
aggregate pretax gain of $0.7 on these dispositions. The
pro forma effects of these divestitures are insignificant to
the consolidated results of operations.
2001
On May 31, 2001, Anthem Insurance and its sub-
sidiary Anthem Alliance Health Insurance Company
(“Alliance”), sold the TRICARE operations of Alliance
to a subsidiary of Humana, Inc. for $45.0. The transac-
tion, which closed on May 31, 2001, resulted in a pretax
gain on sale of subsidiary operations of $25.0, net of sell-
ing expenses.
3. Goodwill and Other Intangible Assets
A summary of the change in the carrying amount of goodwill by reportable segment for 2002 is as follows:
Midwest East West Southeast Specialty Total
Balance as of January 1, 2002 $133.6 $121.5 $ 74.9 $ — $ 8.1 $ 338.1
Goodwill acquired — 10.7 — 2,166.6 3.4 2,180.7
Adjustments — (7.0) (13.8) (11.2) (0.8) (32.8)
Goodwill related to divestitures — — — — (1.1) (1.1)
Balance as of December 31, 2002 $133.6 $125.2 $ 61.1 $2,155.4 $ 9.6 $2,484.9