IMPORTANT LEGAL NOTICE ABOUT

BLUE CROSS CONVERSION AND ACQUISITION

On May 30, 2001, Blue Cross and Blue Shield of Kansas, Inc. ("BCBSKS") and Anthem Insurance Companies, Inc. ("Anthem BCBS") entered into an Alliance Agreement for a sponsored demutualization whereby Anthem BCBS will purchase the stock of BCBSKS (the "Acquisition") following conversion of BCBSKS from a mutual insurance company to a stock insurance company (the "Conversion").

On May 31, 2001, BCBSKS submitted a draft plan of conversion (the "Draft Plan of Conversion") to the Kansas Commissioner of Insurance (the "Commissioner") for review and comment prior to adoption of such a plan of conversion by the Board of Directors of BCBSKS.  If the proposed Conversion were approved, (1) BCBSKS would convert to a stock company, (2) the membership interests of all policyholders in BCBSKS would be extinguished, (3) those persons who are policyholders of  BCBSKS on the date the Plan is adopted by the Board of Directors of  BCBSKS ("Eligible Policyholders") would receive cash payments of (i) a Special Distribution, to the extent declared by the Board of Directors of BCBSKS, that will be no greater than the amount, if any, by which the book value of BCBSKS at the date the Conversion becomes effective (the  "Closing Book Value") exceeds $155,000,000 (the "Special Distribution"), (ii) an additional $190,000,000 (the "Initial Purchase Price"), and (iii) 30% of the excess, if any, of the Closing Book Value, after payment of the Special Distribution, over $155,000,000 (the  "Additional Purchase Price" and, all amounts together the "Purchase Price").  After payment of certain costs and satisfaction of amounts described in the Plan of Conversion, the remainder of the Purchase Price would be distributed to the Eligible Policyholders.  The conversion and acquisition will not change premiums, reduce policy benefits, guarantees or other policy obligations of BCBSKS. This proposal is subject to many additional material terms and conditions described in the Plan.

On July 27, 2001, Anthem BCBS filed a "Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer" (the "Form A"), pursuant to K.S.A. § 40-3304, seeking the Commissioner's approval of the transfer of the shares of BCBSKS, upon conversion, to Anthem BCBS.

In deciding whether to approve the proposed conversion, the Commissioner will consider a number of factors, including among others:

1 .            Whether the Plan of Conversion is complete and contains all of the information required by K.S.A. § 40-4003a(a)(1),

2 .            Whether the Plan of Conversion is fair and equitable to Policyholders,

3 .            Whether the Plan of Conversion unjustly enriches any director, officer, agent, or employee of BCBSKS, and

4 .            Whether the continued operations of the new stock insurance company would be hazardous to existing or future Policyholders or the public.

In deciding whether to approve the proposed acquisition, the Commissioner will consider a number of factors, including:

1 .            Whether the Form A is complete and contains all of the information required by law,

2 .            Whether, after the change of control described in the Form A, BCBSKS would be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed,

3 .            Whether the financial condition of Anthem BCBS might jeopardize the financial stability of BCBSKS or prejudice the interest of its Policyholders,

4 .            Whether Anthem BCBS has any plans or proposals to liquidate BCBSKS, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, that would be unfair and unreasonable to BCBSKS Policyholders and not in the public interest,

5 .            Whether the competence, experience, and integrity of those persons who would control the operation of BCBSKS after the proposed acquisition of control are such that it would not be in the interest of BCBSKS Policyholders and of the public to permit the acquisition of control, and

6 .            Whether the proposed acquisition of control is likely to be hazardous or prejudicial to the insurance-buying public.

THIS NOTICE CONTAINS IMPORTANT INFORMATION FOR BLUE CROSS POLICYHOLDERS AND OTHER INTERESTED PERSONS ON HOW TO PARTICIPATE IN THE PUBLIC HEARINGS REGARDING THE CONVERSION AND ACQUISITION.

Interested persons will have the opportunity to offer comments on the proposed transactions at Public Comment Meetings to be held throughout the state .  The Commissioner will hold one or more public comment meetings at which any person may make oral or written statements or comment upon the proposed conversion and acquisition without being required to become a formal legal party in the proceeding.  Although BCBSKS and Anthem BCBS may attend and make introductory comments, no formal evidence will be taken at the public comment meetings and neither persons offering statements or comment nor the parties will be permitted to examine witnesses.  Provided however, any person who desires his or her statement or comment to become a part of the formal record for the Hearings described below, must present such statement or comment under oath and may be cross-examined by the parties.  It is not necessary to hire an attorney in order to participate in the public comment meetings.  In addition, pursuant to K.S.A. § 40-4004, the Commissioner has ordered that formal evidentiary hearings on the Plan of Conversion ("Conversion Hearing") and the Form A (the "Form A Hearing" and together with the Conversion Hearing, the "Hearings") be held commencing at a date to be specified in a subsequent Order.

Any person may make oral or written statements or comment upon the proposed conversion and acquisition at the Hearings to be included in the formal record for the Hearings.  Notice of the formal evidentiary Hearings will be mailed by first class mail to Eligible Policyholders and will be published in selected publications in the State of Kansas.  The notice will set forth the procedure for making oral and written statements or comments and be accompanied by other information relevant to the Hearings, in the form approved by the Commissioner.

Certain persons may become formal legal Parties.  In addition, any person who believes his or her legal rights, duties, privileges, immunities, or other legal interests may be affected substantially by the Plan of Conversion and/or the Form A may, pursuant to K.S.A. § 77-521, petition for intervention in the proceedings as a legal party.  A petition to intervene must be submitted in writing to the Commissioner, with copies mailed to BCBSKS and Anthem BCBS, at the following addresses, no later than September 24, 2001:

Kathleen Sebelius, Commissioner of Insurance

Kansas Insurance Department

420 S.W. 9th Street

Topeka, Kansas  66612-1678

Blue Cross and Blue Shield of Kansas, Inc.

1133 S.W. Topeka Blvd.,

Topeka, Kansas  66629-0001

Anthem Blue Cross and Blue Shield Insurance Companies, Inc.

120 Monument Circle

Indianapolis, Indiana  46204-4903

Policyholders and other members of the public do not need to intervene in order to offer written or oral statements at the Public Comment Meetings or the Hearings.  Any petition to intervene first made after September 24, 2001, may be denied in its entirety or approved only upon substantial restrictions in order to avoid disruption and delay to the proceeding.  Submission of a petition to intervene on or prior to September 24, 2001, does not in itself qualify the petitioner for intervention to any extent, or without limitation on participation, such determinations being dependent on the particulars of the petition.  A petition to intervene must set forth a brief and plain statement of facts demonstrating that the petitioner's legal rights, duties, privileges, immunities, or other legal interests may be substantially affected by the proceedings or that the petitioner qualifies as an intervener under any provision of law.  Under applicable law, in granting a petition to intervene, the Commissioner may impose conditions upon any intervener's participation in the proceedings, either at the time that intervention is granted or at any subsequent time.  Any person whose petition to intervene in the Conversion Hearing is granted shall also be allowed to intervene to the same extent as a Party in the Form A Hearing, whether or not petition was made for intervention in the latter hearing.  Any person whose petition to intervene in the Form A Hearing is granted shall also be allowed to intervene to the same extent as a Party in the Conversion Hearing.  The granting of a petition to intervene shall not obligate the petitioner to participate in the proceedings.

In addition to the approval of the Commissioner, the Plan of Conversion must be approved by the Eligible Policyholders at a Special Meeting.  BCBSKS will mail notice to all Eligible Policyholders of the Special Meeting, setting forth the reasons for the vote and the place, the day, and the hour of the Special Meeting.  The notice will be accompanied by a form of written proxy allowing the Eligible Policyholder to vote for or against the Plan of Conversion and will contain information relevant to the Special Meeting, including a copy of the Plan of Conversion (with a summary of the Exhibits thereto) and certain other required information as approved by the Commissioner.  At that time, BCBSKS will supply its policyholders with additional telephone numbers and an additional web site address from which to obtain additional information.

For more information about the proposed Conversion and Acquisition, you may call BCBSKS at 800-432-3990 and the Kansas Insurance Department at 800-432-2484.  You may also visit the following Internet web site:  www.bcbsks.com.