A.M. Best Affirms Ratings of Premera Blue Cross and Revises Outlook to Positive; Assigns Rating to LifeWise Health Plan of Arizona.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings (FSR) of B++ (Very Good) of Premera Blue Cross (Premera), LifeWise Health Plan of Oregon and LifeWise Assurance Company. A.M. Best has also affirmed the FSR of B+ (Very Good) of LifeWise Health Plan of Washington. The outlook on these ratings has been revised to positive. Additionally, A.M. Best has assigned an FSR of B+ (Very Good) to LifeWise Health Plan of Arizona (Seattle, WA). The outlook for this rating is stable. All companies are domiciled in Mountlake Terrace, WA, except where specified.

The positive outlook reflects the company's earnings growth and improvement in capitalization and strong market share. Premera has experienced a steady growth in operating performance over the past five years. As a result of initiatives taken and the easing of the regulatory environment with regards to the individual market in Washington, underwriting gains have more than tripled, and net income has more than doubled during this time period. Capitalization has strengthened as a result of earnings growth, which has allowed the level of risk-based capital to improve. The level of capitalization has been somewhat impacted by expansion outside of Washington. While A.M. Best recognizes the improvement in capital, Premera needs to allow the overall capitalization and risk-based capital to increase to a level that is commensurate with other Excellent-rated Blue plans in order for A.M. Best to consider a rating upgrade.

Offsetting factors include losses on certain segments and operating in a highly competitive environment. While the overall profitability of Premera has improved, the administrative services contract (ASC) segment continues to operate at a loss. A.M. Best does note that the ASC business provides the ability to spread overhead costs and the capability to gain economies of scale otherwise not recognized. Additionally, Premera operates in a highly competitive market with numerous players, including a Blue Shield plan in its core state of Washington.

Premera's effort to convert to a public company has been denied by both the states of Washington and Alaska. Premera was denied an initial appeal and is now in the process of appealing to the Washington Supreme Court. A.M. Best acknowledges that Premera currently is continuing to function as a non-profit entity, and at this time, the outcome of the conversion does not impact the rating.

The rating on LifeWise Health Plan of Arizona reflects the support of Premera and its level of capitalization. Premera has supported LifeWise Health Plan of Arizona with capital contributions in the past and is expected to continue to provide financial support, if necessary. As of year-end 2005, LifeWise Health Plan of Arizona was more than adequately capitalized in support of its business risks.

Offsetting factors include ongoing losses. LifeWise Health Plan of Arizona started writing business in 2004 and has reported underwriting and net losses for the past two years. As this company is operating as a start-up, there is the potential for losses to continue, and further capital contributions could be required.

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 www.ambest.com.