Blue Cross and Blue Shield of Maryland, Inc. and Subsidiaries
Condensed Consolidated Statements of Income

Dollars In Thousands       Three Months ended Dec 31           Year-to-date Dec 31
(Unaudited)                        1996         1995             1996         1995

REVENUES
from operations                $508,238     $489,903       $1,960,698   $1,882,077

INCURRED CARE
includes paid and estimated
health care costs               456,121      434,149        1,749,256    1,656,130
                               --------     --------         --------     --------

  CONTRIBUTION MARGIN            52,117       55,754          211,442      225,947

OPERATING EXPENSES               49,373       49,049          195,416      188,896

INTEREST AND OTHER INCOME         6,557        5,811           22,743       23,629
                               --------     --------         --------     --------

  INCOME BEFORE TAXES             9,301       12,516           38,769       60,680

PROVISION FOR INCOME TAXES       (1,420)      (3,134)          (9,138)     (16,396)
                               ---------    ---------        ---------     --------

  NET INCOME (LOSS)               7,881        9,382           29,631       44,284
                               _________    _________        _________     ________

Dollars In Thousands                      As of Dec 31            December 31
(Unaudited)                                       1996                   1995

ASSETS:

    Cash and Investments                      $383,315               $384,897
    Premiums and Other Receivables             202,399                199,565
    Property and Equipment                      53,223                 52,339
    Hospital Advances and Other Assets         144,387                154,582
                                              --------               --------
        Total Assets                          $783,324               $791,383
                                              ________               ________

LIABILITIES AND RESERVES:

    Unpaid Claims                             $245,136               $241,044
    Unearned Premiums and Other Advances       108,331                150,949
    Accounts Payable and Other Liabilities     135,185                129,216
                                              --------               --------
        Total Liabilities                     $488,652               $521,209

Reserves and Unassigned Funds                  294,672                270,174
                                              --------               --------
        Total Liabilities                     $783,324               $791,383
        and Reserves                          ________               ________

1992   $84.4
1993  $164.2
1994  $210.3
1995  $270.2
1996  $294.7

Reserves and Unassigned Funds is the amount by which the Company's assets exceed its liabilities, and is based on consolidated financial statements of Blue Cross and Blue Shield of Maryland, Inc. which are prepared using generally accepted accounting principles. In its annual filing with the Maryland Insurance Administration (MIA), Blue Cross and Blue Shield of Maryland reported a statutory surplus of $252.1 million. Statutory Surplus is the company's unassigned funds that are available to pay unexpected claims costs and is determined using strict statutory accounting rules, National Association of Insurance Commissioners (NAIC) guidelines and methodologies required by the MIA. Reserves and Unassigned Funds include statutory surplus. The growth in reserves demonstrates increasing financial strength and stability.

BCBSMD owns five HMOs that operate primarily in the State of Maryland. The following graphs illustrate combined revenues and stockholder's equity for these HMOs over the past five years:


Revenues

1992  $400.2
1993  $416.1
1994  $492.0
1995  $530.1
1996  $558.3

1992   $61.7
1993   $71.5
1994   $82.2
1995  $101.8
1996  $110.9