A.M. Best Special Report: Blues Plans Grow and Strengthen.

OLDWICK, N.J. -- Blue Cross Blue Shield companies continued to produce favorable earnings for the first six months of 2006. While overall earnings remained positive, the largest growth in underwriting and net income was reported by the for profit, public companies. These companies reported an average underwriting gain of $133.9 million and net income of $109.2 million for the first six months of 2006, which represents a growth rate of 26.8% for underwriting and 30.6% for net income, according to a special report from A.M. Best Co.

The Blue Cross Blue Shield plans as a group have remained successful in generating growth in earnings, improved capitalization and gains in membership. Overall earnings for the plans have remained favorable as a result of declining medical cost trends combined with lower administrative expense ratios driven by technological improvements and synergies from mergers and acquisitions. This trend has allowed the capitalization at the plans to strengthen.

Total net premiums written by the Blue Cross Blue Shield plans increased by 5.6% in 2005. The largest increase, 7.8%, was seen by the for profit public companies, and the smallest percentage, 4.5%, was observed by the nonprofit companies.

Health care expense ratios have remained fairly stable over the past few years, increasing 60 basis points between 2003 and 2005, as a result of lower cost trends. The slight uptick was expected, as a ratio of 83.7% is considered low.

The health care expense ratio at the public, for profit companies decreased by 30 basis points in 2005 but was a full percentage point higher than the health care expense ratio in 2003. The current level of 81.8% still is considered on the low end. The health care expense ratio at the nonpublic, for profit companies is the highest and has experienced the largest increase among the group at 250 basis points in the past three years. The 2005 ratio was 85%. This higher ratio was driven by three companies in the group with ratios exceeding 85%.

The selling, general and administrative (SG&A) expense ratio overall has declined 90 basis points over the past three years to 10.7% in 2005.

Underwriting gains among the publicly traded plans have experienced positive trends over the past few years vs. the nonpublic for profits and nonprofit plans. The for profit public companies experienced an increase of 28% in underwriting gains over 2004 results, with an average underwriting gain of $247.2 million in 2005.

Net income remains favorable on average across the groups, with an overall average of $133 million in 2005.

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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.