A.M. Best Upgrades and Assigns Ratings to Premera Blue Cross and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength ratings (FSR) to A- (Excellent) from B++ (Good) and assigned issuer credit ratings (ICR) of "a-" to Premera Blue Cross (Premera), LifeWise Health Plan of Oregon, Inc. and LifeWise Assurance Company. A.M. Best has also upgraded the FSR to B++ (Good) from B+ (Good) and assigned an ICR of "bbb" to LifeWise Health Plan of Washington. Additionally, A.M. Best has affirmed the FSR of B+ (Good) and assigned an ICR of "bbb-" to LifeWise Health Plan of Arizona, Inc. (LW-AZ) (Seattle, WA). The outlook for all ratings has been revised to stable from positive, except for the ratings for LW-AZ, which are stable. All companies are domiciled in Mountlake Terrace, WA, except where specified.

The ratings of Premera reflect its strong market share, consistent improvement in operating performance and significant growth in capitalization. Offsetting rating factors include reduction in fully insured membership, growing competitive pressure in both the Oregon and Washington markets and losses on certain business segments.

Premera continues to maintain a leading position in the service area, with market share of 30% in Washington and 60% in Alaska. The company has demonstrated membership growth and consistent improvement in operating performance over the past five years. Following strong earnings, capital and surplus has continued to grow, allowing the level of risk-based capital to strengthen.

While Premera has experienced overall enrollment growth, the share of fully insured membership has declined, and the administrative service contract (ASC) segment expanded from 28% in 2003 to 42% in 2006. The increased competitive pressure on individual and small group market may lead to further reductions in fully insured membership.

LW-AZ started writing business in 2004 and has reported underwriting and net losses for the past three years. However, A.M. Best acknowledges that Premera's improved capitalization is sufficient to support LW-AZ's start-up operation, and further capital contributions to the company may be required.

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

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.