Weiss Ratings


50% of HMOs Financially Strong as Profitability Continues
Industry Earns $5.8 Billion in First Half of 2004

JUPITER, Fla., February 7, 2005 — Fifty percent of the nation's HMOs1 are considered financially strong, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks. Based on second quarter 2004 data, the percentage of insurers receiving a Weiss rating of A (Excellent) or B (Good) has risen to 50 percent, a marked contrast from year-end 1998, when only 20.8 percent of HMOs received high ratings.

Large insurers receiving ratings in this range include:

Company

Headquarters

Total Assets ($Bil)

Weiss

Safety Rating

Kaiser Foundation Health Plan Inc.

Oakland, Calif.

20.5

B

Blue Cross of California

Thousand Oaks, Calif.

4.8

A

Highmark, Inc.

Camp Hill, Penn.

4.1

B-

Blue Cross Blue Shield of Mich.

Detroit, Mich.

3.9

B

California Physicians Service2

San Francisco, Calif.

2.6

A-

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

Meanwhile, the number of HMOs receiving weak ratings has declined by more than half, from nearly 40 percent at year-end 1998 to only 16.8 percent today.

Large companies rated weak by Weiss include:

Company

Headquarters

Total Assets ($Mil)

Weiss

Safety Rating

Well Care HMO Inc.

Tampa, Fla.

162.6

D+

Heritage Provider Network Inc.

Reseda, Calif.

141.1

D+

Qual Choice Health Plan Inc.

Cleveland, Ohio

115.8

D+

Humana Health Plans of PR

San Juan, P.R.

107.5

D+

Universal Care

Signal Hill, Calif.

90.9

E+

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

"Since the late 90s, the industry has substantially strengthened its financial position due to insurers' improved earnings and, in turn, strong capitalization," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "However, despite overall industry strength, many companies have been unable to improve operating margins or raise capital levels and thus continue to harbor risk to consumers."

Industry Posts $5.8 Billion Profit

HMOs reported a $5.76 billion profit for the first half of 2004, representing a $1.4 billion, or 31.9 percent, increase over the $4.37 billion earned during the first half of 2003. HMOs reporting the largest year-over-year increases in earnings3 were:

Company

Headquarters

Weiss Safety Rating

Total Assets

($Bil)

Net Profit (Loss)

2nd Qtr

2004

($Mil)

2nd Qtr 2003

($Mil)

$

Change

Highmark Inc.

Camp Hill, Penn.

B-

4.1

103.3

(61.6)

164.9

Capital Advantage Ins. Co.

Harrisburg, Penn.

C-

.5

(12.9)

(76.1)

63.1

California Physicians Service

San Francisco, Calif.

A-

2.6

233.6

170.6

63.0

Blue Cross of California

Thousand Oaks, Calif.

A

4.8

261.7

210.7

51.1

Blue Cross Blue Shield of Ga.

Atlanta, Ga.

A

1.0

107.3

62.1

45.1

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

Notable Upgrades and Downgrades

Of the 510 HMOs reviewed by Weiss using second quarter 2004 data, 111 companies were upgraded, while only 12 were downgraded. Notable upgrades include:

•Firstguard Health Plan Inc. (Kansas City, Mo.) from C+ to B-
•Humana Health Plan Inc. (Louisville, Ky.) from C+ to B-
•Neighborhood Health Plan (Boston, Mass.) from D to C-

Notable downgrades include:

•Americas Health Choice Medical Plans (Vero Beach, Fla.) from C to D+
•Americhoice of New Jersey, Inc. (Newark, N.J.) from B- to C+
•Amil International Texas Inc. (Austin, Texas) from D+ to E

The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted 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 affiliate companies, and risk diversification.

Weiss Ratings, Inc. reviews more than 8,000 stocks daily, including all those traded on the New York Stock Exchange, the American Stock Exchange, and Nasdaq. Weiss also issues investment ratings on more than 12,000 mutual funds, covering equity, fixed-income, and closed-end funds, and provides financial safety ratings on more than 15,000 financial institutions, including banks and insurance companies. It is the only major rating agency that receives no direct or indirect compensation from the companies it rates for issuing its ratings. Revenues are derived strictly from sales of its products and custom research solutions to consumers, institutions, businesses, libraries, and governmental agencies. Ratings and analyses, consumer financial and investment guides, and other products are available for purchase through www.weissratings.com or by calling 800-289-9222.

1Analysis based on insurers that filed a NAIC Health Statement or a California Health Care Service Plan statement. Other insurers offer health insurance but are not included in this analysis. Please refer to Weiss Ratings' Life & Health releases for additional health insurance studies and/or companies at www.WeissRatings.com.

2DBA = Blue Shield of California

3In reviewing HMOs' earnings, Weiss found that as a result of regulatory changes, the $832 million increase posted by Kaiser Foundation Health Plan represents nearly 54 percent of the industry's quarterly earnings increase. Excluding Kaiser, HMOs' profits increased only 15 percent in the second quarter. For this reason, Kaiser has been excluded from the above table.

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