A.M. Best Affirms Rating of Blue Cross Blue Shield of Michigan

Business Wire, Oct 4, 2006

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Blue Cross Blue Shield of Michigan (BCBSMI) (Detroit, MI) and its subsidiary, Blue Care Network of Michigan (Southfield, MI). The outlook for the rating is stable.

The rating for BCBSMI reflects its solid market position in Michigan. The company has the broadest geographies of service coverage in the state. BCBSMI, along with its subsidiary, continues to demonstrate strong operating results, with both companies contributing to reserves for the last four years. Underwriting margins have reduced slightly following the planned strategy of rate moderation; however, the margins remain above the target level. A.M. Best expects earnings to temper in 2006 as BCBSMI continues to reduce its margins and improve its favorable capitalization level. Recent business production and organic surplus growth through retained earnings have also contributed to an improved risk-adjusted capital position, along with supporting business re-investment.

Offsetting factors include BCBSMI's inability to control the individual rates. The company's status of the insurer of last resort leads to adverse selection and inability to promptly adjust rates for individual lines of business; however, A.M. Best expects results in individual lines of business to improve over the next few years. In addition, the pending 2006 launch of its new long-term care subsidiary, LifeSecure, may interfere with BCBSMI's improved capital position, as this is a new and complex line of business with substantial risks involved. Also, after the recently announced acquisition of M-Care Health Plans (Ann Arbor, MI), which is still subject to review by state and federal regulators, BCBSMI may face integration risks that are inherent with any acquisition.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> For current Best's Ratings, independent data and analysis on more than 1,050 health companies and A.M. Best groups, please visit www.ambest.com/health.> 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.