Bank of America

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.a health and consumer services company making
peoples lives better
Bank of America High Yield Bond Leveraged
Finance Conference May 22, 2002
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Safe Harbor Statement The statements made during
this presentation that are not historical facts
are forward-looking statements within the meaning
of the Federal securities laws, and may involve a
number of risks and uncertainties. Factors
that could cause actual results to differ
materially from expectations include, but are not
limited to, the risks discussed in the companys
most recent filings with the SEC, including Form
10Q as of March 31, 2002, and Form 10K as of
December 31, 2001.
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PacifiCare- largest purchaser of health care
services in the western U.S.

• A Fortune 200 company with
• 11 billion in revenue
• 2.4 million commercial lives
• 835 thousand MedicareChoice lives
• 8.9 million specialty lives

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Primary Challenges 2000-2001

• Transition of capitated business model
• Stabilization of earnings and balance sheet
• Commercial Growth Strategy
• Difficult political/regulatory environment in
  Texas
• MedicareChoice reimbursement

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Significant Events 2000-2001

• Turnaround plan milestones
• 15 commercial yield increases
• improved cost mgmt/visibility
• specialty business growth
• slowing shift from capitation
• improved claims mgmt
• lower MLR, increasing EBITDA
• Substantial free cash flow generation
• Bank extension to 2005
• OPM settlement/litigation dismissal
• Secured 150M equity line of credit (Acqua
  Wellington)

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MedicareChoice Reimbursement

• Bush 2003 Budget Proposal
• Modifies MC payment formula to better reflect
  actual health care costs, and allocate resources
  to underpaid counties
• All plans would receive payment increases equal
  to national FFS cost growth less 0.5
• Plans in counties that received only 2-3 annual
  increases over last 4 years to get 6.5 increase
  in 2003

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Earnings Improvement
2002 FY Guidance 3.37-3.47

• 0.88

Note EPS excludes gains/charges
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Earnings Improvement- Pro Forma
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1st Quarter 2002 Results

• Year-over-year operating result comparisons
• Op income, excl. investment income, up 61 y-o-y
• Net income up 12
• Specialty company net income up 22
• Increased gross profit margin PMPM
• commercial up 37
• MC up 21
• Commercial premiums PMPM up 15
• cost trends 12-14
• MC premiums PMPM up 10
• cost trends 9

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Earnings Improvement
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Improved Claims Management
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Free Cash Flow
(1) Excludes impairment, disposition,
restructuring other charges, OPM credits, and
cumulative effect of change in accounting
principle (2) Includes 12.3M of bank fees
excludes 12M debt for equity exchange in Q301
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Balance Sheet Restructuring

• Recent Events
• Acqua Wellington agreement
• 1st step in restructure process
• 2-year credit facility extension
• 500M notes
• Future Options
• Permanent bank refinancing
• Convertible debt
• Additional equity financing

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Balance Sheet Restructuring- New Notes
BEFORE
AFTER

• 593 term loan
• 142 revolver (55M drawn)
• LIBOR 500 bp
• 50 bp int rate step-up _at_ 7/03
• Matures 1/2/05
• 250M reductions due by 1/03
• 85M 7 FHP bonds due 9/03

• 500M 10.75 notes due 6/09
• 55M revolver (0 drawn)
• 274M term loan
• No interest rate step-up
• Credit facility matures 1/05
• 85M set aside for FHP bonds

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Earnings in 2002

• FY 02 EPS Guidance 3.37-3.47 (w/ FAS 142)
• Q2 0.85-0.88
• Q1 FAS 142 effect 0.40
• EOY Membership
• Commercial 2.4 million
• MC 815 thousand
• Specialty 11 million
• Commercial premium
• increase high teens before buydowns, mid teens
  after buydowns

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Earnings in 2002

• Consolidated MLR 87-88
• commercial 86-87
• Medicare 89-90
• SGA ratio 11.5-12
• Medical cost trends
• commercial- low to mid teens
• Medicare- high single digits
• pharmacy (after buydowns)-
• commercial mid teens
• Medicare negative

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Cash Flow
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Summary

• Higher pro forma EPS
• Increased gross profit margins PMPM
• Increased EBITDA
• Restructured balance sheet
• Declining debt-to-EBITDA
• Increased statutory capital
• Adequate cash flows and reserves

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.a health and consumer services company making
peoples lives better
Thank you