The statements made during this ... WebMD agreement wit

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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 June 30, 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
• 800 thousand MedicareChoice lives
• 9 million specialty lives

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Critical Success Factors

• Executive Leadership
• Capital Structure
• Business Model/Mix
• Operations
• Regulatory Relations
• Network Stability
• Litigation
• Technology Upgrades

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Brand New Day at PacifiCare in 2002
Progress Report
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Brand New Day at PacifiCare in 2002
Progress Report

• Business Model Mix
• Reduced MC dependency
• Enhanced commercial profitability -Margin up
  gt 30
• Improved retention
• Offering total Health Benefit Solutions supported
  
• by superior quality and service platforms

• Operations
• Rapidly meeting/exceeding industry standards
• Full service systems platform supports all
  funding solutions

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• Networks
• More stable
• Require vigilant monitoring

• Legal/Regulatory
• Suits/settlements going our way
• Positive collaborative regulatory
  relationships
• TX AG suit remains to be resolved

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• Technology
• Investments in Future State underway
• Outsourcing generates operational savings
  significant flexibility

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• Brand
• Advertising/repositioning campaign launched

• Quality
• Tiered network emphasizes quality
• Physician Quality Index Market leader
• Introduction of Hospital Quality Index Will be
  market leader

• Earnings
• Visibility improved
• Increased diversification
• Rebuilding investor/creditor confidence

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Earnings Improvement- Pro Forma
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Operating Profit vs. Investment Income
Year-over-year
Investment Income (65) Operating
Profit 81
Investment Income (91) Operating
Profit 102
Adjusted for SFAS 142 change in accounting for
goodwill as if adopted January 1, 2001 and
excludes impairment, disposition, restructuring,
OPM and other charges/credits
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2nd Quarter 2002 Results- Drivers of Operating
Profit Improvement
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Earnings Guidance in 2002

• FY 02 EPS Guidance 3.37-3.47 (w/ FAS 142)
• EOY Membership
• Commercial 2.4 million
• MC lt 800 thousand
• Specialty 11 million
• Commercial premium
• Increase high teens before buydowns, mid teens
  after buydowns

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Earnings Guidance 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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Texas
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Recent Events

• Keystone Health Plan partners with PacifiCare
  Behavioral Health
• Effective 11/1/02
• Covers gt 200,000 Keystone enrollees in PA
• Readers Digest agreement with Senior Solutions
• Exclusive endorsement of Secure Horizons
  Medicare Supplement products
• Access to customer database with gt 100 million
  households
• Working with Readers Digest to offer additional
  products
• Significant new commercial case wins

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Recent Events

• WebMD agreement with Prescription Solutions
• Agreement is with WebMD sub, MedE America, which
  has 4 million lives
• Prescription Solutions to provide mail order
  prescriptions OTC medications
• 300K members initially additional mbrs. over
  next year

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Changes to MedicareChoice in 2003

• Discontinuing service in 7 counties in 2 states
• Affects gt 47,300 mbrs. gt 6 of YE 02 mbrs.
• 3 counties in TX gt 25K members
• 4 counties in CA gt 22.3K members
• Premium and benefits change for majority of
  members

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Thank You