A.M. Best Raises Rating of Blue Cross of California to "A" -Excellent- From "A-".

OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 3, 1998--A.M. Best Co. has raised the "A-" (Excellent) rating of Blue Cross of California, Thousand Oaks, Calif., to "A" (Excellent). The rating increase reflects the company's strong and expanding position in the small group and individual health market in California, its consistently good profitability, reduced financial leverage, diversified product portfolio and strong system capabilities.

Offsetting these strengths is the parent company's acquisition strategy, which, when implemented, could increase the company's financial leverage. A.M. Best is also concerned about the company's geographic concentration of earnings in the California market and the parent company's pending acquisition and integration of the Cerulean Cos., Inc. (Blue Cross Blue Shield of Georgia).

Blue Cross of California maintains the number two position market position in California, with an 18% share that has steadily increased from 11% in 1990. Through its broad portfolio of products--ranging from tightly managed HMO products to PPO coverages and traditional products--the company is expected to maintain its current position. A.M. Best believes this market position provides substantial competitive advantages for providing access to healthcare providers and in controlling medical costs and utilization. Through various affiliated companies, the company also offers a wide range of specialty products, such as pharmacy management, mental health, disability, life and dental products. This diversification allows for a full replacement strategy, which enhances client retention and contributes to the organization's good profitability.

The company maintains a strong niche in the small and individual health market. Despite strong and increasing competition in the California market, consolidated enrollment has continued to increase.

WellPoint Health Networks Inc., the parent of Blue Cross of California, has reduced its financial leverage position over the last two years from a high debt-to-capital ratio of 54% in May 1996 to an expected year-end ratio of 20% in 1998. However, A.M. Best believes the company will continue to pursue its active acquisition strategy to enhance its position within its core markets. A.M. Best also believes that this acquisition strategy, while deliberate and focused, could increase the overall financial leverage position, which is at a three-year low. The rating reflects A.M. Best's expectation that WellPoint will continue to increase its presence outside of its core California market, thus decreasing the company's reliance on one market for the bulk of earnings. A.M. Best also expects that WellPoint will maintain its financial leverage at acceptable levels for its subsidiary, Blue Cross of California, to maintain its "A" rating. A.M. Best believes the earnings capacity of the combined companies will be sufficient to reasonably service the existing and forecast level of debt, which includes the pending acquisition of the Cerulean Cos. later in 1998 or early 1999.

A.M. Best also raised the rating of BC Life & Health to "A" (Excellent) from "A-" (Excellent). The rating reflects the close integration of the two California companies and the supporting role the life company has in the organization. A.M. Best also affirmed the "A-" (Excellent) rating of UNICARE Life & Health. The rating reflects the company's ongoing challenges of integrating its previous acquisitions of the Mass Mutual and John Hancock books of business, as well as developing and expanding profitable growth outside of the California market. A.M. Best believes UNICARE will find it difficult to implement the managed-care techniques that have proved successful in California outside of the California market.

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