Cobalt Corporation Reports Third Quarter Profit.

Business Editors

MILWAUKEE--(BUSINESS WIRE)--Nov. 8, 2001

Cobalt Corporation Reports Third Quarter Profit

-- Company Exits Unprofitable Markets

-- Blue Cross Unit Reports Strong Earnings

-- American Medical Boosts Cobalt Gains

-- Company Improves Expense Ratio

Cobalt Corporation (NYSE:CBZ) reported a third quarter profit of $1.1 million or $0.03 a share, on 40.5 million shares outstanding. Total revenues for the third quarter of 2001 increased 18 percent to $425.1 million compared to the same quarter in 2000. The $1.1 million profit compares with a pro forma net loss of $30.7 million for Cobalt Corporation during the third quarter of 2000. Cobalt's Blue Cross subsidiary posted pre-tax earnings of $10.7 million for the quarter on revenues of $192.8 million. This compares to a pre-tax loss of $24.2 million on revenues of $167.5 million for the same quarter in 2000.

"We are very encouraged by these results," said Thomas R. Hefty, Cobalt Corporation's chairman, president and CEO. "This quarter exceeded expectations and was based on strong performances by most of our business units, particularly Blue Cross. In addition, the return to profitability of American Medical Security Group, Inc., of which we own 45.2 percent, was another positive development."

American Medical Security Group, Inc. (NYSE:AMZ) announced third quarter earnings of $0.25 cents a share, in line with updated guidance. American Medical Security Group, Inc., of Green Bay, Wis., markets health care benefits and insurance products to small businesses, families and individuals.

Cobalt Corporation also reported continued progress in administrative cost reduction. The administrative expense ratio for the insured medical business has improved to 9.3 percent during the third quarter, compared with 11.6 percent for the same quarter in 2000. The company is exiting unprofitable markets, and formally announced that it is withdrawing from the federal Medicare + Choice HMO effective Dec. 31, 2001 as a result of inadequate federal reimbursements for the program. The company's Compcare HMO in metropolitan Milwaukee, as part of its turnaround plan, will also exit several unprofitable blocks of business.

Cobalt Corporation is one of the leading, publicly traded managed care companies in the nation, offering a diverse portfolio of complementary insurance and managed care products to employer, individual, insurer and government customers. Cobalt Corporation serves 2.9 million lives in 50 states. For more information, visit our Web site at www.cobaltcorporation.com

Cautionary Statement: This release contains forward-looking statements with respect to the financial condition, results of operations and business of Cobalt Corporation. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. Factors that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include rising health care costs, business conditions, and competition in the managed care industry, developments in health care reform and other regulatory issues.

                          COBALT CORPORATION
                   CONSOLIDATED STATEMENTS OF INCOME
                              (UNAUDITED)

                                                      PRO FORMA(1)
                              Three months ended   Three months ended
                                  September,           September,
                                     2001                 2000
                              ------------------   ------------------
                               (In thousands, except per share data)

Revenues:
  Health services revenues:
    Premium                   $          371,882   $          321,640
    Government contract fees              32,817               18,795
    Other                                 16,970               16,632
  Investment results                       3,479                2,873
                              ------------------   ------------------
    Total revenues                       425,148              359,940

Expenses:
  Medical and other benefits             333,186              308,818
  Selling, general,
   administrative and other               89,587               78,846
  Profit sharing on joint
   ventures                                  341                  188
  Interest                                   234                  437
  Amortization of goodwill                 1,792                1,580
                              ------------------   ------------------
    Total expenses                       425,140              389,869
                              ------------------   ------------------

Operating income (loss)                        8              (29,929)
Equity in net income (loss) of
 affiliates, net of tax                    1,581                 (596)
                              ------------------   ------------------
Pre-tax income (loss)                      1,589              (30,525)
Income tax expense                           532                  178
                              ------------------   ------------------
Net income (loss)             $            1,057   $          (30,703)
                              ==================   ==================

Earnings (loss) per share:
  Basic                       $             0.03   $            (0.76)
                              ==================   ==================
  Diluted (2)                 $             0.03   $            (0.76)
                              ==================   ==================

Weighted average shares
 outstanding:
  Basic                                   40,438               40,412
                              ==================   ==================
  Diluted (2)                             40,658               40,412
                              ==================   ==================

(1) Includes the operations of the former UWS and BCBSUW with elimination of intercompany transactions, the recording of purchase accounting adjustments and the amortization of goodwill calculated as if the transaction was completed at the beginning of the reporting period.

(2) When a net loss is reported, potentially dilutive securities are not included in the calculation of earnings per share because their inclusion would have an antidilutive effect.