[December 19, 2012]

A.M. Best Affirms Ratings of Health Care Service Corporation and Its Affiliates

A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Health Care Service Corporation, a Mutual Legal Reserve Company (d/b/a Blue Cross Blue Shield of Illinois/Texas/New Mexico/Oklahoma) (HCSC), its affiliates, Health Care Service Corporation-Texas HMO Line of Business, Health Care Service Corporation-Illinois HMO Line of Business, HCSC Insurance Services Company and GHS Health Maintenance Organization (GHS HMO) (Tulsa, OK). Concurrently, A.M. Best has affirmed the debt rating of "a+" on $500 million 4.70% senior unsecured notes due 2021 issued by HCSC.

A.M. Best also has revised the outlook to stable from negative and affirmed the FSR of A+ (Superior) and ICR of "aa-" of Dearborn National Life Insurance Company (DNL) (Downers Grove, IL) and its subsidiary, Dearborn National Life Insurance Company of New York (formerly Fort Dearborn Life Insurance Company of New York) (Pittsford, NY).

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a" of Colorado Bankers Life Insurance Company (CBL) (Greenwood Village, CO), a subsidiary of DNL. The outlook for the above ratings is stable.

The ratings of HCSC and its affiliates reflect their continued trend of favorable earnings and strong net income, their well-established market presence in their respective markets, as well as leading market shares, well-diversified core and complementary product offerings and a high level of risk-adjusted capital. HCSC's business is well diersified regionally operating as the Blue Cross Blue Shield plan in four states. Additionally, in 2012, HCSC announced its intent to affiliate with Blue Cross and Blue Shield of Montana, which could further diversify its business geographically if the partnership is consummated as planned. HCSC's favorable underwriting earnings have remained very strong and have contributed to consistent surplus growth and strong capital levels on an absolute and risk-adjusted basis.

HCSC may be challenged to grow its business organically in the near term under current economic conditions. Unemployment, although improving, remains high and employer groups continue to be pressured to contain cost, resulting in a low level of hiring and pressure on funding of employee benefits. Moreover, HCSC operates in competitive markets, where strong national competitors compete for large national employer groups. These factors may limit enrollment growth opportunities for HCSC. Additionally, regulatory changes continue to impact the operating environment for HCSC's core health insurance business due to the continued implementation of all aspects of the Patient Protection & Affordable Care Act (PPACA). HCSC is making significant investments to adjust its operations to meet the emerging market needs and requirements under PPACA.

The revised outlook from negative to stable for Dearborn National reflects its strategic role to provide life and ancillary products to complement the health products offered by HCSC in order to offer a comprehensive product portfolio to employer groups and individuals.

Positive rating movement on HCSC's ratings could occur if it continues to maintain its favorable earnings trends across all of its business lines and grows its market presence while continuing to grow its already strong capital levels. Conversely, negative rating movement could occur if the organization is negatively affected by PPACA, if it attempts to aggressively grow in any non-core business lines or is unfavorably affected by regulatory changes in its primary states.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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