Blue Cross & Blue Shield of Mississippi Rated A- By A.M. Best.

OLDWICK, N.J.--(BUSINESS WIRE)--June 1, 1999--

A.M. Best Co. on Tuesday assigned an A- rating to Blue Cross & Blue Shield of Mississippi, Jackson, Miss.

The rating reflects the company's strong market position, good capitalization and improving profitability. The rating also applies to the company's subsidiary Bluebonnet Life Insurance Co.

Blue Cross & Blue Shield of Mississippi is the largest provider of health coverage in the state, serving more than 500,000 people through its statewide provider networks. A.M. Best acknowledges the company's strong, mutually beneficial relationships with a significant portion of health care providers in the state. The company contracts with 78% of the physicians and all of the acute-care hospitals in the state, which enables it to obtain favorable pricing for services purchased on behalf of groups and individuals.

By offering a broad spectrum of products, the company has maintained its current market share and achieved gains in net enrollment. It also performs administrative services and processes claims for other Blue Cross & Blue Shield plans and for certain other programs, such as Medicare. A.M. Best believes that the company is well positioned to protect its market dominance in Mississippi.

Profitability improved in 1998 after poor performance in 1996 and 1997. Claims cost trends in late 1996 and early 1997 were significantly higher than anticipated, contributing to the adverse results.

Improvement in 1998 reflected the company's success in lowering its medical loss ratios by redefining benefit offerings and by shifting reimbursement rates from an inpatient to outpatient basis. Increasing electronic submission of claims and greater online access by providers has helped lower administrative costs. In general, the company has taken the necessary steps to support strong financial performance while strengthening its market position. A.M. Best expects Blue Cross & Blue Shield of Mississippi to continue generating favorable operating results for the next few years.

The company increased its premium revenue by adding members--contract enrollment has increased about 64% since 1996--and by increasing premium rates for both new and existing business. The State of Mississippi Health Insurance Plans contract, which constituted a majority of the enrollment increase, was awarded to the company for a five-year period beginning Jan. 1, 1998.

Blue Cross & Blue Shield of Mississippi provides administrative and other services to more than 53,000 individuals through self-funded programs. This segment represents about 15% of total enrollment, increasing more than 40% since 1996. The company also pays claims for more than 25,000 federal employees and their dependants for an administrative fee, which represents more than 7% of total enrollment. Blue Cross & Blue Shield of Mississippi has been increasing administrative charges to the point where these programs have become marginally profitable.

Individuals and small groups are the "bread and butter" of the company and a major contributor to earnings. The individual and small group segments have always been profitable and despite enrollment losses through which the company weeded out its unprofitable business, it has produced an underwriting gain. Although Blue Cross & Blue Shield of Mississippi is currently showing a profit in the segment, A.M. Best notes that, given declining enrollment, the company, may face challenges maintaining its current level of profitability.

The rating of Bluebonnet Life reflects the company's status as a strategic subsidiary of Blue Cross & Blue Shield of Mississippi, the historically profitable statutory earnings generated by its core group life insurance line, the conservative nature of its investment portfolio and the adequate capital level currently in place. Offsetting these factors are the company's modest premium growth and limited scope of operations.

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 www.ambest.com.