A.M. Best Assigns Rating to Coventry Health Care, Inc. Senior Unsecured Notes

Business Wire, August 24, 2007

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bb+" to $400 million 6.3% senior unsecured notes, which will mature in 2014, to Coventry Health Care, Inc. (Coventry) (Bethesda, MD) (NYSE: CVH). The rating outlook is stable. All remaining ratings of Coventry and its subsidiaries are unchanged.

The proceeds will be used for general corporate purposes, which may include the financing of the acquisition of Vista Healthplans, Inc. (Vista) (Sunrise, FL), expected to close in October 2007, subject to regulatory approvals. As a result of this offering, Coventry's financial leverage is expected to increase from its current level of 25% to approximately 32%, which is slightly above industry norms. A.M. Best expects Coventry to bring the debt/capital ratio below 30% during 2008. Coventry was successful at reducing debt associated with the First Health Group Corporation (First Health) transaction in 2005-2006 and the lowering of its debt/capital ratio. Coventry generates sound financial returns and has strong liquidity with earnings before interest taxes, depreciation and amortization (EBITDA) coverage at approximately 18 times at year-end 2006. Coventry's financial flexibility is supported by good dividend capacity from its subsidiaries plus non-regulated cash flows from its First Health operations. Coventry's commitment to rational pricing and stable margins has resulted in 12% growth in net earnings in 2006 and improved capitalization in the majority of its health plans.

Offsetting rating factors include the membership decline of Coventry's health plans and increased goodwill exposure following the Vista acquisition. Following membership losses in several highly competitive markets, Coventry's commercial group risk enrollment declined 2.6%, while overall health plan medical membership experienced a 0.9% decrease as of December 31, 2006 compared to 2005. During the first six months of 2007, commercial group risk membership experienced a further 4.6% decline compared to year-end 2006. In addition, as of year-end 2006, the ratio of goodwill and intangibles to total equity was just below 70%, but it is expected to be approximately 99% after the Vista acquisition is completed.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.