A.M. Best Affirms Ratings of Blue Cross and Blue Shield of Minnesota and Downgrades Ratings of MII Life; Revises Outlook to Negative

Business Wire, June 13, 2007

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and assigned issuer credit ratings (ICR) of "a" to Blue Cross and Blue Shield of Minnesota (BCBSM) and its wholly owned subsidiary, HMO Minnesota (d/b/a Blue Plus) (both of Eagan, MN). A.M. Best has also affirmed the FSR of A- (Excellent) and assigned an ICR of "a-" to BCBSM's affiliate, FirstSolutions (f/k/a First Plan of Minnesota) (Duluth, MN). Concurrently, A.M. Best has downgraded the FSR to A- (Excellent) from A (Excellent) and assigned an ICR of "a-" to MII Life, Inc (MII Life) (Eagan, MN). The outlook for the FSRs has been revised to negative from stable, and the outlook assigned to the ICRs is negative.

The revised outlook reflects the strong underwriting challenges facing BCBSM. The large group commercial business is being targeted by national insurers that are combining their efforts to acquire business using more aggressive pricing strategies in Minnesota. BCBSM has countered by enriching products and services with no additional or minimal price increases.

Health care inflation is increasing at a higher trend than the company's overall pricing, and BCBSM has sustained three consecutive years of weakened underwriting performance. The company believes that it is sufficiently capitalized to withstand these challenges by the competition and has managed near break-even net income in 2006. There has been a noticeable negative impact on capital as premium leverage has somewhat risen, but investment income and the appreciation in unrealized gains provides a strong and sufficient hedge against any uncomfortable increase in premium leverage. However, the organization is vulnerable to investment market fluctuation, particularly its equity holding, which has been expanded over the past few years.

MII Life has faced a number of challenges over the past several years. Despite its favorable capital position, the company's traditional insurance products did not perform as expected. Consequently, at the end of 2006, MII Life sold much of its traditional life and disability business and exited the long-term care business altogether due to performance related issues. Going forward, MII Life will concentrate its marketing efforts on spending accounts and medical stop-loss businesses.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.