1. Bank of America High Yield Bond & Leveraged Finance Conference May 22, 2002.…a health and consumer services company making people’s lives better

2. 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 company’s most recent filings with the SEC, including Form 10Q as of March 31, 2002, and Form 10K as of December 31, 2001.

3. 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 Medicare+Choice lives 8.9 million specialty lives.…a health and consumer services company making people’s lives better

4. Consumer Health Organization Expand scope of organization to offer services beyond traditional health insurance Health Services HMO Implement near-term corrective action programs Build infrastructure necessary to support expansion of health insurance portfolio Top-Level Strategy.…a health and consumer services company making people’s lives better

5. Primary Challenges 2000-2001.…a health and consumer services company making people’s lives better Transition of capitated business model Stabilization of earnings and balance sheet Commercial Growth Strategy Difficult political/regulatory environment in Texas Medicare+Choice reimbursement

6. 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).…a health and consumer services company making people’s lives better

7. Medicare+Choice Reimbursement Bush 2003 Budget Proposal Modifies M+C 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.…a health and consumer services company making people’s lives better

8. Earnings Improvement.…a health and consumer services company making people’s lives better Note: EPS excludes gains/charges 2002 FY Guidance = $3.37-$3.47 $0.88

9. Earnings Improvement- Pro Forma.…a health and consumer services company making people’s lives better

10. 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%  M+C up 21% Commercial premiums PMPM up 15%  cost trends = 12-14% M+C premiums PMPM up 10%  cost trends = 9%.…a health and consumer services company making people’s lives better

11. Earnings Improvement.…a health and consumer services company making people’s lives better

12. Improved Claims Management.…a health and consumer services company making people’s lives better

13. Free Cash Flow.…a health and consumer services company making people’s lives better (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

14. Balance Sheet Restructuring.…a health and consumer services company making people’s lives better 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

15. Balance Sheet Restructuring- New Notes.…a health and consumer services company making people’s lives better $593 term loan $142 revolver ($55M drawn) LIBOR +500 bp 50 bp int rate step-up @ 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 BEFOREAFTER

16. 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  M+C = 815 thousand  Specialty = 11 million  Commercial premium  increase high teens before buydowns, mid teens after buydowns.…a health and consumer services company making people’s lives better

17. Earnings in 2002  Consolidated MLR = 87-88%  commercial = 86-87%  Medicare = 89-90%  SG&A ratio = 11.5%-12%  Medical cost trends:  commercial- low to mid teens  Medicare- high single digits  pharmacy (after buydowns)-  commercial: mid teens  Medicare: negative.…a health and consumer services company making people’s lives better

18. Cash Flow.…a health and consumer services company making people’s lives better

19. 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

20. Thank you.…a health and consumer services company making people’s lives better