BlueCross BlueShield of South Carolina

A.M. Best Affirms Ratings of BlueCross BlueShield of South Carolina

December 23, 2010

A.M. Best Contacts:

Senior Financial Analyst
(908) 439-2200, ext. 5321

Brian O'Larte—P/C
Senior Financial Analyst
(908) 439-2200, ext. 5280

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644

OLDWICK, N.J., DECEMBER 23, 2010
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Blue Cross and Blue Shield of South Carolina (BCBS SC) and its wholly owned subsidiaries, BlueChoice^® HealthPlan of South Carolina, Inc. (BlueChoice HealthPlan) and Companion Life Insurance Company (Companion Life). A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of "a-" of InStil Health Insurance Company (InStil Health). The outlook for these ratings is stable.

In addition, A.M. Best has assigned an FSR of A+ (Superior) and ICR of "aa-" to Niagara Life and Health Insurance Company (Niagara Life and Health) (Amherst, NY). The outlook assigned to both ratings is stable.

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICRs of "a" of Companion Property & Casualty Group, which consist of Companion Property and Casualty Insurance Company, and its wholly owned subsidiaries, Companion Commercial Insurance Company, Companion Specialty Insurance Company (District of Columbia), AmFed Casualty Insurance Company (Ridgeland, MS) and AmFed National Insurance Company (Ridgeland, MS). The outlook for these ratings is stable. All companies are domiciled in Columbia, S.C., unless otherwise specified.

The BCBS SC organization maintains a strong market share in its core health business line, has been continuously profitable on a consolidated basis and has well diversified revenue and earnings. BCBS SC is a market leader in the South Carolina health insurance market with the highest membership and provider networks in the state. On a consolidated basis, the BCBS SC organization has reported profitable results for more than 20 years. In addition to its core health insurance business line in South Carolina, BCBS SC offers property/casualty, group life insurance, accident and dismemberment, medical stop loss insurance as well as other ancillary products through its wholly owned insurance subsidiaries. BCBS SC further records diversified revenue and earnings from its non regulated administrative service and information technology companies.

Offsetting rating factors include BCBS SC's enrollment and premium growth is expected to continue to be challenged in the near term due to the general state of the economy. Large employer account consolidation, group disenrollment and high unemployment rates may contribute to lower levels of growth in group and individual enrollment in South Carolina and for national accounts. Competition among health insurers remains high, causing margin pressure on existing and new business. Although BCBS SC has good business diversification, the vast majority of its operations are related to the health insurance industry, and earnings could be pressured by the implementation of minimum loss ratios on individual and employer business under the federal health care reform.

The ratings of Niagara Life and Health reflect the geographic expansion of the BCBS SC organization to offer products in the New York marketplace to complement those offered by Companion Life nationally. Niagara Life and Health benefits from the experienced management staff as well as operational and financial support from Companion Life and the ultimate parent, BCBS SC.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Rating Health Insurance Companies"; "Rating Members of Insurance Groups"; "Understanding BCAR for Life and Health Insurers"; "Understanding BCAR for Property/Casualty Insurers"; "Risk Management and the Rating Process for Insurance Companies"; "Assessing Country Risk"; "Natural Catastrophe Stress Test"; "The Treatment of Terrorism Risk in the Rating Process"; and "Rating New Company Formations." Methodologies can be found at www.ambest.com/ratings/methodology.

BlueCross BlueShield of South Carolina and BlueChoice HealthPlan of South Carolina are independent licensees of the Blue Cross and Blue Shield Association.
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