A Year of Challenge and Opportunity
The employee benefits industry faced several challenges and opportunities in 1998. Many HMOs and commercial carriers experienced huge financial losses. In fact, some of the larger health carriers dropped out of the market because they couldn¹t compete profitably. Meanwhile, national debate on Social Security reinforced the need for individual responsibility in retirement planning. And more competitors entered the 401(k) market.

Stability and Growth
Despite these conditions, Great-West Life & Annuity Insurance Company increased both its medical and its 401(k) plan membership and met its financial performance expectations. We also concluded the largest acquisition in our history. In July we acquired Anthem Health & Life Insurance Company (AH&L) from Anthem, Inc. This acquisition increased our medical membership by 450,000-bringing our total membership to 2.3 million customers nationwide and placing us among the top health carriers in the United States.

Consistent Focus
While change is a constant, and we constantly adapt to change, our success comes through our ability to stay focused. We market an employee benefits package which has competitive managed health care at its core. Our managed care is now provided in all 50 states through our wholly owned One Health Plan subsidiaries. Our health programs are offered on a self-funded basis. We call this arrangement preferred funding. With it, we combine the health care savings from our provider contracts with the additional cash flow from preferred funding, and return greater savings to our customers. As traditional, fully insured premium rates increase, these unique, preferred funding arrangements are becoming increasingly popular.

Service Enhancement
The Employee Benefits Division doesn't stop once a customer enrolls with us. We're also an innovative leader in delivering service to that customer. Through our web site at www.gwla.com/benefits, customers can find current information on physicians and health plans. They can also manage their entire 401(k) plan on-line. These tools let our customers communicate with us around the clock. Enhancements for 1999 include the ability to enroll, change membership records, and change physicians -- all through our web site.

Initiatives for a Healthier Tomorrow
Our service initiatives extend beyond enrollment and administration. Because we view our role in health care delivery as more than just paying for care, we also worked diligently in 1998 to involve customers in our diabetes and asthma disease management programs and our preventive health programs for children and women. Next year, we'll expand our quality improvement initiatives to include a program for cardiac patients and a preventive health program for men. By focusing on health education and mailing reminders on preventive health screenings, we¹re helping to ensure a healthy tomorrow for all of our customers.