A.M. Best Rating 2008

RATING AFFIRMED

A.M. Best Company has affirmed the financial strength rating of QCA Health Plan, Inc., d.b.a. QualChoice of B (Good) and the issuer credit rating to bb+. The outlook for both ratings has been revised to positive from stable.

The objective of Best’s rating system is to provide an opinion of an insurer’s financial strength and ability to meet ongoing obligations to policyholders. The assigned rating is derived from an in-depth evaluation of a company’s balance sheet strength, operating performance and business profile as compared to Best’s quantitative and qualitative standards. An important component of the evaluation process requires an interactive exchange of information with the insurance company’s management.

RATING RATIONAL

The revised rating outlook reflects strong capitalization, consistent operating margins and reorganization of management functions that have led to significant cost savings for the health plan. QCA has continued to improve its risk-based capital (RBC). Conversion of surplus notes and interest to preferred stock in 2006, along with stable underwriting and investment returns have driven improved capitalization according to Best’s Capital Adequacy Ratio (BCAR). QCA finished 2007 with a strong operating margin consistent with prior years, despite a decline in membership. Earnings improvement also is due to the restructuring of management functions, which has led to administrative cost savings in excess of $2 million in 2007.

COMPANY OUTLOOK

Our strategy of diligent underwriting and adequate pricing has proven successful and allowed QualChoice to achieve stable positive operating results. We are very pleased that A.M. Best has affirmed our financial strength rating and has upgraded our ratings outlook to positive. The improved ratings outlook indicates that our financial and market trends are favorable and confirms that QualChoice is on the right track. We will continue to follow the success factors that have worked for us in the past. Our focus will be to leverage this success and continue to grow our membership levels. Key operational elements that are considered cornerstones of anticipated continuing success are our QCARE program, a state of the art population health management system, our new benefit plan designs, an expanded sales force, and leading edge technology resources. These elements combine to make QualChoice an excellent choice to serve employers’ health plan needs throughout the state.