The insurer financial strength rating on Highmark Inc. (d/b/a Highmark BCBS&Highmark Blue Shield) (Highmark) is based on the company's strong but variable earnings, extremely strong capitalization and liquidity, market leadership in western Pennsylvania, diversified business profile, and historically strong but diminished competitive position in central Pennsylvania. Partially offsetting these positive factors are its status as the insurer of last resort and the challenging regulatory environment. Highmark's earnings profile is strong based on a Standard&Poor's earnings adequacy ratio (EAR) of 158% at year-end 2003, an increase from 142% in 2002, but a decline from 184% in 2001. Consolidated pretax GAAP earnings increased to $100.6 million in 2003 from a pretax loss of $128.7 million in 2002 from
