On June 10, 2003, Standard&Poor's Ratings Services placed its 'A+' counterparty credit and financial strength ratings on Highmark Inc., which does business as Highmark BCBS and Highmark Blue Shield, on CreditWatch with negative implications. Standard&Poor's took this rating action because of Highmark's reported year-to-date operating losses as of April 30, 2003, in the Central and Western Pennsylvania regions. Standard&Poor's is concerned that continued price competition with Capital Blue Cross in the Central Pennsylvania region will adversely affect Highmark's earnings, capital, and business profile. (Prior to April 2002, Highmark and Capital Blue Cross jointly marketed and serviced 1.2 million members, which is 64% of the Central Pennsylvania market.) This concern is exacerbated by operating losses
