During the three years ended December 31, 2001, Coventry completed several business combinations and membership purchases. The Company’s business combinations are all accounted for using the purchase method of accounting, and, accordingly, the operating results of each acquisition have been included in the Company’s consolidated financial statements since their effective date of acquisition. The purchase price for each business combination was allocated to the assets, including the identifiable intangible assets, and liabilities based on estimated fair values. The excess of the purchase price over the net identifiable assets acquired was allocated to goodwill. Prior to December 31, 2001, goodwill was amortized over a useful life of 25 to 35 years. In accordance with SFAS No. 142, the Company will no longer amortize goodwill. The purchase price of the Company’s membership purchases was allocated to identifiable intangible assets and is being amortized over a useful life of five to fifteen years.

The following table summarizes all business combinations and membership purchases for the three years ended December 31, 2001 (in thousands):

Business Combinations	Effective Date	Market	Purchase Price

Carelink Health Plans (“Carelink”)	October 1, 1999	West Virginia	$ 8,400
PrimeONE, Inc. (“PrimeONE”)	February 1, 2000	West Virginia	$ 4,332
Maxicare Louisiana, Inc. (“Maxicare”)	August 1, 2000	Louisiana	$ 3,541
WellPath Community Health Plans (“WellPath”)	October 2, 2000	North Carolina	$ 21,244
Blue Ridge Health Alliance, Inc. (“Blue Ridge”)	September 1, 2001	Virginia	$ 14,850
Membership Purchases
Kaiser Foundation Health Plan of North Carolina (“Kaiser - NC”)	November 1, 1999	North Carolina	$ 2,100
Prudential Health Care Plan, Inc. (“Prudential”) ⁽¹⁾	February 1, 2000	St. Louis	$ 956
Health Partners of the Midwest (“Health Partners”)	January 1, 2001	St. Louis	$ 4,864
Kaiser Foundation Health Plan of Kansas City, Inc. (“Kaiser - KC”)	April 2, 2001	Kansas City	See Note (2)
(1) The Prudential acquisition included Medicaid membership only. (2) The final Kaiser – KC purchase price will be determined following a one year transition period.

The following unaudited pro-forma condensed consolidated results of operations assumes the acquisitions of Carelink, PrimeONE, Maxicare, and WellPath health plans occurred on January 1, 1999 and 2000 (in thousands, except per share data). Blue Ridge was excluded from this pro-forma due to immateriality.

In the fourth quarter of 1999, Coventry notified the Indiana Department of Insurance of its intention to close its subsidiary, Coventry Health Care of Indiana, Inc. The Indiana health plan did not operate profitably or demonstrate good prospects for future growth. Although closing the plan did not have a substantial effect on consolidated earnings, it did allow Coventry to focus resources and management attention on its other markets. Coventry’s transition plan gave employers and members ample time to obtain health care coverage through one of the many other companies operating in Indiana. Effective December 23, 2001, the Company’s license to operate the Indiana health plan had been withdrawn from the state. As a result of the cost associated with exiting the Indiana market, Coventry recorded a reserve of $2.0 million in the fourth quarter of 1999, of which substantially all has been expended as of December 31, 2001.

	2000	1999

	(unaudited)
Operating revenues	$2,798,818	$2,486,506
Net earnings	47,495	28,690
Earnings per share, basic	0.80	0.49
Earnings per share, diluted	0.72	0.46