A.M. Best Special Report: Health Insurers Report Enrollment and Revenue Growth.

OLDWICK, N.J. -- In the first half of 2006, dominant health insurance carriers reported strong revenue growth due to the new Medicare Part D prescription drug benefit and continued growth of medical membership, according to a special report by the A.M. Best Co. Margins were compressed by an uptick in the medical cost ratios for the first half of 2006. This increase is attributed largely to higher medical cost ratios for the Medicare Part D products and the timing of the benefit expenditures for this product. The loss ratio for the Medicare Part D products should stabilize as premiums earned catch up to benefit payments.

Total revenue increased by 16.3% to almost $15.5 billion. This improvement was driven by a 16.4% increase in premium revenue and a 19.9% increase in investment income. The growth in investment income can be attributed to the improving interest rate environment. The increase in premium revenue is being driven by membership growth, particularly the Medicare Part D product.

Enrollment for the new Medicare Part D product stood at almost 12 million for the nine participating publicly-traded health carriers shown in this report as of June 2006.

Medical membership, excluding Medicare Part D, for the 12 publicly-traded health carriers increased by 4.3% or 4.3 million members. On a percentage basis, the plans with the largest year-over-year growth rates were plans that had significant growth in Managed Medicaid memberships.

On average, net income decreased 1.3% to $396 million. This decline is mainly due to higher medical expenses and the inclusion of $349 million from discontinued operations in Cigna Corp.'s first-half 2005 net income, which are excluded in 2006 earnings.

Medical expenses increased an average of 90 basis points from 81.1% to 82%. Year-over-year increases in medical cost ratios were reported by two-thirds of the publicly-traded health insurers and almost 90% of the publicly-traded plans offering Medicare Part D products.

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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.