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A.M. Best Takes Various Rating Actions on Coventry Health Care, Inc.

October 27, 2006

A.M. Best Co. has affirmed the financial strength ratings (FSR) of B++ (Very Good) for the following subsidiaries of Coventry Health Care, Inc. (Coventry) [NYSE: CVH] (Bethesda, MD): Coventry Health & Life Insurance Company (Wilmington, DE), Carelink Health Plans, Inc (Charleston, WV), Coventry HealthCare of Georgia, Inc (Atlanta, GA), Group Health Plan Inc (Earth City, MO), HealthAmerica Pennsylvania and HealthAssurance Pennsylvania (both of Harrisburg, PA). The outlook for all the above ratings has been revised to positive from stable.

In addition, A.M. Best has upgraded the FSRs to B++ (Very Good) from B+ (Very Good) of the following subsidiaries of Coventy: Coventry HealthCare of Kansas (Wichita, KS), Personal Care Insurance of Illinois (Champaign, IL) and Southern Health Services (Richmond, VA). A.M. Best has also affirmed the FSRs of B++ (Very Good) and B+ (Very Good) of the remaining subsidiaries of Coventry. The outlook on these ratings is stable.

Concurrently, A.M. Best has assigned various issuer credit ratings (ICR) to all the subsidiaries of Coventry. The outlook for these ratings is either stable or positive. (See link below for a detailed list of the ratings.)

These rating actions reflect Coventry’s expanded geographic coverage and products offering, consistent consolidated earnings growth and improved capitalization.

Offsetting rating factors include a highly competitive Pennsylvania market and the potential that future acquisitions may increase leverage and goodwill exposure.

Coventry’s acquisition of First Health Group Corporation (First Health) has added diversification to Coventry’s product portfolio and significantly expanded its geographic reach. The consolidated financial results, both earnings and revenues, were further accelerated by Coventry’s participation in the new Medicare Part D business. The overall operating revenue increased 21% in the first six months of 2006 over the same period in 2005. The organization’s commitment to rationale pricing and stable margins has resulted in 5.9% growth in net earnings, including the impact of Medicare Part D in the beginning half of the year. Capitalization has improved at the majority of health plans, with overall risk based capital (RBC) greater than 450% at 2005 year-end compared to more than 400% a year prior. Coventry has been successful at reducing debt associated with the First Health transaction due to dividends from the insurance subsidiaries and non-regulated cash flows from the First Health operations.

Coventry reported consolidated membership gain of 3%, not including Medicare Part D, for the first six months of 2006 compared to the same period in 2005. However, A.M. Best is concerned that during the comparable timeframe, Coventry experienced a membership decline at two of its core entities–Health America Pennsylvania and Health Assurance Pennsylvania. A.M. Best believes that Coventry’s ability to maintain its market share in Pennsylvania will remain challenged by strong competitive pressure from local non-profit carriers. In addition, future acquisitions may increase leverage as well as goodwill exposure, and should a sizable acquisition occur the positive outlook may be revisited.

For a complete listing of Coventry Health Care, Inc.’s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/102702coventry.pdf.

A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best’s Web site at www.ambest.com.




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