A.M. Best Assigns Rating to Coventry Health Care, Inc.'s New Senior Notes; Removes Ratings From Under Review.

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bb+" to Coventry Health Care, Inc.'s (Coventry) (Bethesda, MD) (NYSE: CVH) $500 million of senior unsecured notes to be issued in two tranches of $250 million each, which will mature in 2012 and 2015. In addition, A.M. Best has removed from under review the debt rating on Coventry's $170.5 million of 8.125% senior unsecured notes due 2012 and the issuer credit rating of "bb+". Concurrently, Coventry's financial strength ratings have been affirmed and removed from under review negative. (See link below for detailed listing). The rating outlook on the debt ratings and issuer credit rating remains negative. The rating outlook on the financial strength ratings is stable.

These rating actions follow A.M. Best's review of the financing and integration strategy for the pending First Health Group Corporation acquisition. The negative outlook reflects the expectation of a slightly weaker holding company at the time of the acquisition. Coventry's debt-to-capital ratio is expected to increase above 35%, and goodwill to equity is expected to grow to more than 80% as a result of this transaction. However, A.M. Best expects Coventry's debt-to-capital ratio to decrease below 25%, and goodwill to equity to decline below 70% by year-end 2005. A.M. Best will be monitoring the quality and liquidity of Coventry's balance sheet, as well as the integration of the First Health acquisition.

The stable outlook on the financial strength ratings reflects the improved level of capitalization and earnings at the insurance subsidiaries. The Coventry organization has had strong earnings growth for the past several years, with net income tripling from 2001 to 2003, with much of the improvement achieved from the turnaround of poor performing acquisitions. However, A.M. Best does expect the earnings trend to moderate as most of these acquisitions have been integrated and become profitable. Coventry is committed to maintaining a minimum 250% of risk-based capital (RBC) at each entity and 300% in aggregate, with actual consolidated RBC approaching 400% at year-end 2004.

For a complete listing of Coventry's financial strength, debt and issuer credit ratings, please visit http://www.ambest.com/press/011401coventry.pdf.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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.

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.