A.M. Best: Health Insurer Upgrades Outpace Downgrades in 2004.

OLDWICK, N.J. -- A.M. Best Co. has recently completed its annual review of financial strength and credit ratings for health insurers. In 2004, the health insurance industry experienced improved operating earnings and balance sheet strength, with Best's Rating upgrades outnumbering downgrades by almost a 2 to 1 ratio.

Upgrades largely reflected improved earnings and increased organizational strength, built primarily through merger and acquisition activity. Downgrades were driven by poor operating performance caused by underwriting losses and substantial declines in capital.

A.M. Best expects the sustainability of future earnings will be challenged by a number of factors that could impact corporate revenue. These factors include resistance from employers and employees alike in accepting ongoing large premium rate hikes and likely regulatory intervention that, at the very least, will force not-for-profit insurers to keep prices down. A.M. Best does not expect these factors to adversely impact ratings in the near term; however, A.M. Best believes that the industry will be challenged over the longer term to maintain solid earnings and consistently accumulate capital--factors expected to pressure ratings over time.

A.M. Best is the leading rating agency of health insurers for assessing the financial strength and the credit quality of their obligations. A.M. Best has rating opinions on 64% of all health insurance carriers, including traditional life/health insurance companies, health maintenance organizations (HMOs), Blue Cross Blue Shield Plans and Delta Dental Plans. "Best Ratings and rating actions, which reflect A.M. Best's opinions of insurers' financial strength and hence claims paying ability, send an important message to the marketplace," says Kenneth Frino, Vice President and head of A.M. Best's health insurer rating group. "There are many different groups to which Best's Ratings provide value. It is critical for these various constituencies to have an independent perspective on the financial strength of health insurers, as this strength has been shown to have not only a material bearing on the quality of coverage insurance carriers offer, but also a significant impact on the overall quality of health care provided.

"A clear understanding of a health insurer's financial strength is an integral element in a corporation's selection of health coverage for its employees," Frino continues. "Consumers should look for a health insurer's Best's Rating as a key indicator that the company will be there to pay its claims and provide efficient service in the long term. Intermediaries who place health insurance coverage for their corporate clients have long relied on Best's ratings as an important factor in the carrier selection and placement process. Market analysts and investors also use Best's Ratings as indicators of financial strength in their ongoing analysis of health companies."

For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, please visit http://www.ambest.com/health. For information on the A.M. Best rating process, contact Kenneth Frino.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.