WEISS RATINGS

Operating Losses Mount for Blue Cross/Blue Shield Plans
Weiss Downgrades 14 and Upgrades 5

PALM BEACH GARDENS, Fla., December 14, 1998 -- More than two-thirds of the nation's Blue Cross Blue Shield plans (68%) are losing money on their core underwriting operations, according to a review of first-half 1998 results by Weiss Ratings, Inc., the only independent provider of insurance company ratings and analysis. Weiss' latest review, covering 31 of the nation's 61 Blue Cross Blue Shield plans, reveals aggregate underwriting losses of $174 million during the first half of 1998. However, offsetting these losses, the 31 plans earned $770 million from investment income and capital gains, primarily in the stock market.

This comes on the heels of a similar pattern during the 12 months ending year-end 1997, when 69% of the Blues reported a losing year on their operations. In aggregate, the 61 Blue Cross Blue Shield companies lost $802 million on their underwriting, while earning $1.9 billion on their investments.

"Since most of the Blues have expanded heavily into managed care, they have been adversely affected by many of the same factors as those afflicting HMOs -- public demands for better service, rising costs, and resistance to higher premiums," commented Martin Weiss, Ph.D., chairman of Weiss Ratings, Inc. "But the stock market has been a life saver for many of these companies. What remains to be seen is how they will fare if the stock market does not continue to rise."

During 1998, Weiss has downgraded 14 Blues plans and upgraded five.

Notable downgrades include:

Company Previous
Rating
New
Rating
Associated Hospital Service of Maine C D+
Kitsap Physicians Service (Wash.) C- D+
Blue Cross Blue Shield of Arizona B- C

Among the upgrades were:

Company Previous
Rating
New
Rating
Blue Cross Blue Shield of Massachusetts E+ D
Group Hospital and Medical Services, Inc. (DC) D+ C-
Blue Cross Blue Shield of New Jersey C+ B-

Companies that lost significant sums on operations include Highmark, Inc. (Pa.) with a $191 million loss during 1997 and an additional $79 million loss during the first half of 1998; Empire Blue Cross Blue Shield (N.Y.) with a $53 million loss in 1997 and a $31 million loss during the first half of 1998; and Blue Cross Blue Shield of Michigan with a $56 million loss in 1997 and a $3 million loss during the first half of 1998.

Meanwhile, companies that bucked the industry trend and earned operating profits include Trigon Blue Cross Blue Shield (Va.), with a $36 million profit during 1997 and an additional $28 million profit during the first half of 1998, as well as Blue Cross Blue Shield of Florida with a $30 million profit in 1997 and a $31 million profit during the first half of 1998.

The Weiss ratings are based on an analysis of a company's capital, five-year historical profitability, quality of investments, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliates companies, and risk diversification.

Weiss issues safety and Y2K ratings on over 21,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks, brokers, and mutual funds. It is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, agents, and libraries.

Consumers who need more information on the financial safety of a specific company may purchase a rating or analysis directly from Weiss for as little as $15 by calling 1-800-289-9222. For more information, visit the Weiss Ratings web site at www.WeissRatings.com.

Plans With Operating Losses In 1997 and the First Half of 1998

Company State 6-Month
Underwriting
Losses Ending
06/30/98
($Million)
12-Month
Underwriting
Losses Ending
12/31/97
($Million)
Highmark.Inc. PA 79.4 191.1
Trigon Blue Cross Blue Shield of Michigan MI 2.9 56.5
Empire Blue Cross Blue Shield NY 31.1 53.6
Community Insurance Company OH 3.7 44.8
Blue Cross Blue Shield of Rhode Island RI 25.5 13.6

Plans With Operating Profits In 1997 and the First Half of 1998

Company State 6-Month
Underwriting
Profits Ending
06/30/98
($Million)
12-Month
Underwriting
Profits Ending
12/31/97
($Million)
Blue Cross Blue Shield of Florida FL 31.3 30.4
Trigon Blue Cross Blue Shield VA 27.7 35.9
Wellmark, Inc. IA 10.7 15.0
Blue Cross Blue Shield of South Carolina SC 9.1 10.8



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