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Fitch Comments on HCSC/Blue Cross Blue Shield of Oklahoma Discussions.

CHICAGO -- Health Care Service Corp. (HCSC) and Blue Cross Blue Shield of Oklahoma (BCBS-OK) announced yesterday that the two companies have entered into discussions related to a possible affiliation. Should an affiliation result from theses talks, Fitch Ratings does not expect it to affect Fitch's 'A-' rating on HCSC's senior unsecured notes.

At Sept. 30, 2004, BCBS-OK reported enrollment of approximately 517,000, which amounts to approximately 5% of HCSC's enrollment of 9.6 million. For BCBS-OK, the primary benefit of affiliation would be the scale economies associated with becoming part of a much larger entity. The company would also benefit from HCSC's very strong capital profile.

For HCSC, an affiliation with BCBS-OK would enlarge its regional presence in the southern U.S. In addition to Illinois, the company currently operates Blue Cross Blue Shield plans in both Texas and New Mexico, both of which are contiguous to Oklahoma.

Any agreement between the two companies would require regulatory approval before an affiliation could occur. Fitch expects that regulatory hurdles would be less challenging if approval for an affiliation is ultimately sought, as neither company is publicly traded.

Chicago-based HCSC is the fifth largest health insurer in the U.S., as measured by total enrollment, with membership of approximately 9.6 million at Sept. 30, 2004. The company holds exclusive rights to use the Blue Cross and Blue Shield name and trademark in Illinois, Texas, and New Mexico. The company offers a broad range of health insurance and managed care products and services to the group and individual market segments, primarily in its three core states. In addition, the company offers group term and individual life, disability income, and several other financial products and services through its life insurance subsidiaries. For the first nine months of 2004, the company reported statutory net operating gain of $685 million on revenue of $7.2 billion.
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Publication:Business Wire
Geographic Code:1USA
Date:Dec 15, 2004
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