<br />
Blue Cross Blue Shield of<br />
Michigan and Subsidiaries<br />
Consolidated Financial Statements<br />
as of and for the Years Ended<br />
December 31, 2007 and 2006,<br />
and Independent Auditors' Report<br />
ded December 31, 2007 and 2006, and Independent Auditors'<br />
port<br />
nsolidated Financial Statements as of and for the YearsBlue Cross<br />
Blue Shield<br />
of Michigan<br />
Blue Cross Blue Shield of<br />
Michigan and Subsidiaries<br />
Consolidated Financial Statements<br />
as of and for the Years Ended<br />
December 31, 2007 and 2006,<br />
and Independent Auditors' Report<br />
<br />
Discussion of Financial Results<br />
In spite of significant underwriting losses incurred in the Corporation's health sector, Blue Cross Blue Shield<br />
of Michigan (the “Company”) and its subsidiaries (collectively, the “Corporation”) contributed $152.2 million<br />
to subscribers' reserves in 2007 compared to $210.1 million in 2006 du<a title="Financial Statements page 1" href="http://viewer.zmags.com/publication/103950e7?page=1"> Blue Cross Blue Shield of Michigan and Subsidiari</a>
<a title="Financial Statements page 2" href="http://viewer.zmags.com/publication/103950e7?page=2"> Discussion of Financial Results In spite of sign</a>
<a title="Financial Statements page 3" href="http://viewer.zmags.com/publication/103950e7?page=3"> Management Statement of Responsibility The manag</a>
<a title="Financial Statements page 4" href="http://viewer.zmags.com/publication/103950e7?page=4"> Independent Auditors' Report To the Board of Dir</a>
<a title="Financial Statements page 5" href="http://viewer.zmags.com/publication/103950e7?page=5"> Blue Cross Blue Shield of Michigan and Subsidiari</a>
<a title="Financial Statements page 6" href="http://viewer.zmags.com/publication/103950e7?page=6"> Blue Cross Blue Shield of Michigan and Subsidiari</a>
<a title="Financial Statements page 7" href="http://viewer.zmags.com/publication/103950e7?page=7"> Blue Cross Blue Shield of Michigan and Subsidiari</a>
<a title="Financial Statements page 8" href="http://viewer.zmags.com/publication/103950e7?page=8"> Blue Cross Blue Shield of Michigan and Subsidiari</a>
<a title="Financial Statements page 9" href="http://viewer.zmags.com/publication/103950e7?page=9"> security held as available-for-sale, an impairmen</a>
<a title="Financial Statements page 10" href="http://viewer.zmags.com/publication/103950e7?page=10"> to groups either as cash refunds or future rate r</a>
<a title="Financial Statements page 11" href="http://viewer.zmags.com/publication/103950e7?page=11"> Prescription Drug Benefits Under Medicare Part D </a>
<a title="Financial Statements page 12" href="http://viewer.zmags.com/publication/103950e7?page=12"> Adoption of New Accounting Standards — In Septemb</a>
<a title="Financial Statements page 13" href="http://viewer.zmags.com/publication/103950e7?page=13"> expensed as incurred and restructuring costs cont</a>
<a title="Financial Statements page 14" href="http://viewer.zmags.com/publication/103950e7?page=14"> The excess of cost over the fair value of net ass</a>
<a title="Financial Statements page 15" href="http://viewer.zmags.com/publication/103950e7?page=15"> The following table, at December 31, 2007, summar</a>
<a title="Financial Statements page 16" href="http://viewer.zmags.com/publication/103950e7?page=16"> 3. Cash Equivalents and Investments Cash equival</a>
<a title="Financial Statements page 17" href="http://viewer.zmags.com/publication/103950e7?page=17"> The amortized cost and estimated fair values of a</a>
<a title="Financial Statements page 18" href="http://viewer.zmags.com/publication/103950e7?page=18"> The Corporation, in the normal course of business</a>
<a title="Financial Statements page 19" href="http://viewer.zmags.com/publication/103950e7?page=19"> 5. Receivables – Net Receivables outstanding at </a>
<a title="Financial Statements page 20" href="http://viewer.zmags.com/publication/103950e7?page=20"> Goodwill from the purchase of subsidiaries, at De</a>
<a title="Financial Statements page 21" href="http://viewer.zmags.com/publication/103950e7?page=21"> all cost method investments as of December 31, 20</a>
<a title="Financial Statements page 22" href="http://viewer.zmags.com/publication/103950e7?page=22"> 10. Reinsurance Accident Fund reinsures certain </a>
<a title="Financial Statements page 23" href="http://viewer.zmags.com/publication/103950e7?page=23"> The reinsurance recoverables at December 31, 2007</a>
<a title="Financial Statements page 24" href="http://viewer.zmags.com/publication/103950e7?page=24"> 11. Premium Deficiency Reserves Premium deficien</a>
<a title="Financial Statements page 25" href="http://viewer.zmags.com/publication/103950e7?page=25"> Defined Benefit Plans — Substantially, all employ</a>
<a title="Financial Statements page 26" href="http://viewer.zmags.com/publication/103950e7?page=26"> The discount rate used in determining the actuari</a>
<a title="Financial Statements page 27" href="http://viewer.zmags.com/publication/103950e7?page=27"> The amounts recognized in the balance sheet at De</a>
<a title="Financial Statements page 28" href="http://viewer.zmags.com/publication/103950e7?page=28"> The Corporation's postretirement health care plan</a>
<a title="Financial Statements page 29" href="http://viewer.zmags.com/publication/103950e7?page=29"> The amounts recognized in the balance sheet at De</a>
<a title="Financial Statements page 30" href="http://viewer.zmags.com/publication/103950e7?page=30"> interest rate provisions that are reset every thr</a>
<a title="Financial Statements page 31" href="http://viewer.zmags.com/publication/103950e7?page=31"> The Company and its taxable subsidiaries file a c</a>
<a title="Financial Statements page 32" href="http://viewer.zmags.com/publication/103950e7?page=32"> 17. Operating Leases The Corporation leases cert</a>
<a title="Financial Statements page 33" href="http://viewer.zmags.com/publication/103950e7?page=33"> 20. Contingencies During 2007, the Corporation a</a>
<a title="Financial Statements page 34" href="http://viewer.zmags.com/publication/103950e7?page=34"> 22. Other Comprehensive (Loss) Income Other comp</a>
<a title="Financial Statements page 35" href="http://viewer.zmags.com/publication/103950e7?page=35"> The essential elements of the transition plan, as</a>