A.M. Best Takes Various Rating Actions on Blue Cross & Blue Shield of Florida and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has upgraded the debt rating to "a-" from "bbb+" for the $149 million 8.25% surplus notes due 2011 of Blue Cross and Blue Shield of Florida, Inc. (BCBSFL) (Jacksonville, FL). A.M. Best has also upgraded the issuer credit rating (ICR) to "a+" from "a" of BCBSFL and assigned an ICR of "a+" to its subsidiary, Health Options, Inc (HOI). Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) of BCBSFL and HOI. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and assigned an ICR of "a-" to Capital Health Plan (Tallahassee, FL), a controlled subsidiary of BCBSFL. All ratings have a stable outlook.

The rating upgrade reflects BCBSFL's increasingly favorable operating performance, timely business development initiatives and strengthened risk-based capital position. Successive years of favorable operating results and the expected accumulation of risk-based capital have significantly raised the organization's ability to service debt and to fund operational initiatives. The company also maintains a favorable coverage ratio.

The organization has benefited steadily from technological advances that increased operating capacity and enhanced auto-adjudication, resulting in lower administrative costs. Overall performance is not only influenced by steady underwriting gains but improved investment returns. A steady increase in membership growth helps to ensure top line revenue growth. However, changes in customer product preferences have driven an evolution in product mix to a lowered insurance risk profile, and moderated price increases have slowed the growth in underwriting gains. This lowered risk has triggered the release of dividends from risk bearing subsidiaries to the parent, producing statutory net investment income and overall net income at historical highs. A.M. Best anticipates steady membership growth and consistent premium development, along with continued favorable operating results for BCBSFL. The company's risk-based capital is approaching the top quartile of performers in the health care marketplace.

BCBSFL is organized into three broad business units: Health Business, Specialty Business and Government Business. BCBSFL differentiates itself through its statewide distribution force and statewide provider network. Insurance buyers are also attracted to the "Blue Brand," which generates a significant national presence and also helps to ensure a stake hold of almost one-third of the insurable market in Florida, more than doubling the market share of its nearest competitor.

BCBSFL's very strong market position, creative product development, proactive technological application to claim administration, provider integration and customer edification is relied upon to help form health care policy on a local as well as a national basis, while delivering strong earnings and building capital beyond the excellent level.

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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.