WellPoint expected to look for growth overseas

WellPoint Inc., the most dominant health insurer in the United States, registers as barely a pipsqueak in the rest of the
world.

But it’s only a
matter of time, say industry experts, before WellPoint plunges into foreign markets to grow sales of its health
benefits and services.

That’s true for all the same, now obvious, reasons most large U.S. companies are trying to grow overseas: The developing world,
particularly China and India, is creating a middle class many times larger than the population of the United States. That’s
hundreds of millions of people with newly disposable incomes.

It’s also true for the same reasons health care companies expect growth in the United States:
Rising numbers of people are suffering from such chronic diseases as diabetes, obesity and heart disease,
and they are spending more of their disposable money on health care.

Finally, it’s true because WellPoint’s competitors, known as managed care companies, are trying
to compensate for their slow growth in the mature U.S. market by finding new opportunities overseas.

"There’s been, in the last five years in
particular, a lot of large managed care companies getting very excited about the opportunity internationally,"
said Dhan Shapurji, a health insurance consultant at Deloitte Consulting LLP in Indianapolis and a former
vice president of strategic management and planning at WellPoint’s predecessor, Anthem Inc.

Two of the biggest international movers recently have been WellPoint competitors Aetna Inc. and
UnitedHealth Group.

UnitedHealth,
based in Minnesota, provides insurance or administrative services in India, Malaysia and the Philippines, serving
more than 800,000 health plan members. It is also part of a joint venture providing insurance in Portugal, and it is looking
to expand into China and South America.

Aetna, based in Hartford, Conn., acquired U.K.-based Goodhealth Worldwide in 2007 to grow its business in Europe, Asia and
the Middle East. Aetna also opened an office in Shanghai, China, in June.

"We’re always looking at emerging markets, like China, or mature markets, like here in London,"
said Martha Temple, president of Aetna Global Benefits, the company’s international unit.

WellPoint quietly joined the parade to China
on Jan. 1, when it partnered with three other companies to open an office in Shanghai to provide administrative
services to Chinese insurers. But unlike most of its peers, WellPoint insures no U.S. expatriates and
disclosed no other international programs or plans.

"Our highest priority is to focus on our core businesses and serve our customers in the United
States," wrote company spokeswoman Cheryl Leamon in an e-mail. But, she added, "As we continually
review our operations, there are a number of potential areas where strategic partnerships and overseas
growth opportunities would support our overall strategic plans."

WellPoint provides health care benefits to 35 million Americans, mainly through their employers,
which is more than any other U.S. health insurer. The company pulled in $61 billion in revenue last year,
posting a profit of $3.3 billion.

Because U.S. health insurers have effectively tapped out the American market, growth has come mostly by acquisitions recently.
And WellPoint has proven the best at it.

In a 12-year run that ended in 2005, the operator of the Indiana Blue Cross and Blue Shield plan acquired 13 other "Blues"
plans, vaulting itself to the top of the U.S. health insurance heap.

But business has been tougher of late. WellPoint predicts its profits will remain flat this year
and Wall Street analysts expect to see declines in the total number of people it covers.

WellPoint’s peers also are suffering, which
could spur even more efforts to expand overseas, analysts said. Insurers also are looking overseas because
that’s where more and more of their big customers are adding jobs. And they want to provide U.S.-style
health benefits to them.

"It’s the kind of slowing of domestic potential," said Shellie Stoddard, a health insurance bond analyst at Standard
& Poor’s in New York. "But it’s also the globalization of the work force."

Heading overseas

Among WellPoint’s employer-focused competitors,
the company doing the most internationally is Philadelphia-based Cigna Corp. The company put down roots
in South Korea in the 1980s and reopened an office in China in 1994. (It first entered China in 1897,
but left after the Communist takeover in 1949.)

Premiums from international customers have grown at double-digit rates the past four years even as
Cigna’s overall premiums have declined.

International premiums are now $1.8 billion, 12 percent of the company’s total.

"Cigna International is our fastest-growing
business. We see tremendous opportunity for growth internationally," Cigna CEO H. Edward Hanway
said in a written statement.

But Cigna knows the international markets are bound to get more crowded soon.

In the company’s annual report filed in February, executives said, "Cigna International expects
that the competitive environment will intensify as U.S.- and Europe-based insurance and financial services
providers pursue global expansion opportunities."

To succeed in foreign markets, companies need to learn the idiosyncrasies of the local markets,
according to insurance executives and consultants. And that takes time.

"Every market is different, has its own set of issues," Aetna’s Temple said. "Really
knowing the market and understanding it is probably the No. 1 thing."

Perhaps the most successful U.S. health insurer
in an overseas market is Georgia-based Aflac Inc. It derives 71 percent of its revenue from Japan, where
it sells supplemental insurance products to complement the government-provided health benefits. Aflac
entered Japan in 1974.

On a smaller scale, Indianapolis-based International Medical Group Inc. has built up a thriving business internationally.
It’s been at it for 18 years.

The company sells and administers individual and group insurance for travelers, American expats and foreign nationals. It
has customers and representatives in 170 countries.

IMG President Joe Brougher said he sometimes worries about coming competition from the likes of
WellPoint, which is 2,000 times larger than IMG. But other times, he welcomes it, because large companies
would boost foreigners’ awareness of American health insurance in general.

"If they go out and spend billions of dollars
of advertising, it’s going to help us," he said. "We look forward to it."

British opportunities

New markets aren’t just in the developing world. In the last 10 years, customers in the United
Kingdom have enthusiastically embraced private health insurance as a way to get faster access to some
kinds of medical care that often take months to get under its National Health Service program.

Experts see Britain as just the first of the
developed countries to ask U.S. insurers–somewhat ironically–to help them solve the same kinds of problems
the United States is grappling with: rising costs due to an aging population and rising rates of chronic
disease.

"Other geographic
areas are also having cost-control issues and demographic issues that are going to need to be managed,"
said Les Funtleyder, a health care stock analyst at Miller Tabak & Co. in New York.

In 2007, Britain OK’d three major U.S. health insurers to provide administrative and consulting
services to the local arms of its National Health Service.

They hope those companies’ expertise in disease management, care coordination and wellness can
help reduce costs.

"We
have the opportunity to bring some of our innovations around improving people’s health and wellness," said Dr. Jack Lord,
chief innovation officer at Humana Inc., based in Louisville, which is now providing services to 20 of the 150 local units
of Britain’s National Health Service.

Aetna and UnitedHealth also received approval to provide those services in the United Kingdom.

Shapurji, the Deloitte consultant, said those disease management and care coordination programs
would also be appealing to governments and health insurers in China and India, where the rates of obesity,
diabetes and other illnesses are skyrocketing.

Such a trend would play right into WellPoint’s hands. It has touted its wellness programs for
at least a decade.

"WellPoint
has been investigating opportunities in China for a number of years, and believes the Chinese market and its population
are ready to embrace private health insurance," WellPoint’s spokeswoman Leamon wrote in an e-mail.

"The size of the health-insurance-buying
public is growing rapidly, and there is a clear demand for more advanced products."