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

Investor’s Day with PacifiCare Ritz Carlton Battery Park, New York

June 4, 2002

Howard G. Phanstiel, President and CEO

Safe Harbor Statement

The statements made during these presentations 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, 2000.

Safe Harbor Statement

The statements made during these presentations 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, 2000.

PacifiCare = largest purchaser of health care services in the western U.S.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• ~9 million specialty lives

A Fortune 200 company with• ~$11 billion in revenue• 2.4 million commercial lives• 835 thousand Medicare+Choice lives• ~9 million specialty lives

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

“Crises” of 2000-2001“Crises” of 2000-2001

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

• Executive Leadership

• Capital Structure

• Business Model/Mix Strategically Threatened

• Operations Under Siege

• Regulatory Challenges

• Network Instability

• Legal Uncertainties

• Stakeholder Confidence

• Executive Leadership

• Capital Structure

• Business Model/Mix Strategically Threatened

• Operations Under Siege

• Regulatory Challenges

• Network Instability

• Legal Uncertainties

• Stakeholder Confidence

•Capital Structure

• UniHealth overhang

• Share repurchase program

• Maturity & concentration of bank debt

• FAS 142 goodwill exposure

•Capital Structure

• UniHealth overhang

• Share repurchase program

• Maturity & concentration of bank debt

• FAS 142 goodwill exposure

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

• Executive Leadership• Executive Leadership

“Crises” of 2000-2001“Crises” of 2000-2001

•Operations Under Siege• Retroactive CA provider contracts• Harris integration challenges• Claims inventory build-up

•Operations Under Siege• Retroactive CA provider contracts• Harris integration challenges• Claims inventory build-up

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

• Business Model/Mix Strategically Threatened

• Dependency on M+C/ ACRs locked in• Poor commercial business performance

• Conversion to risk model

• Business Model/Mix Strategically Threatened

• Dependency on M+C/ ACRs locked in• Poor commercial business performance

• Conversion to risk model

“Crises” of 2000-2001“Crises” of 2000-2001

• Network Instability• Network Instability

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

• Regulatory Challenges• Regulatory Challenges

• Legal Uncertainties•Class actions•OPM

• Legal Uncertainties•Class actions•OPM

• Stakeholder Confidence•Shareholders•Creditors•Providers•Employees•Members

• Stakeholder Confidence•Shareholders•Creditors•Providers•Employees•Members

“Crises” of 2000-2001“Crises” of 2000-2001

• Capital Structure • Issues largely resolved• Diversified access to working capital

• Capital Structure • Issues largely resolved• Diversified access to working capital

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

•Leadership• Strategically focused • Shareholder-aligned • Committed

•Leadership• Strategically focused • Shareholder-aligned • Committed

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Progress ReportProgress Report

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

• Operations • Rapidly becoming industry leader• Full service systems platform supports all

funding solutions

• Operations • Rapidly becoming industry leader• Full service systems platform supports all

funding solutions

• Product Strategies• Reduced M+C dependency• Enhanced commercial profitability• Retention & growth

• Product Strategies• Reduced M+C dependency• Enhanced commercial profitability• Retention & growth

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Progress ReportProgress Report

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

• Networks • More stable • Require vigilant monitoring

• Networks • More stable • Require vigilant monitoring

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

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

• Technology• Investments in “Future State” underway

• Outsourcing generates operational savings & significant flexibility

• Technology• Investments in “Future State” underway

• Outsourcing generates operational savings & significant flexibility

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Progress ReportProgress Report

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

• Brand • Advertising/repositioning campaign launched

• Brand • Advertising/repositioning campaign launched

• Quality• Programs advanced- can they catch us?

• Quality• Programs advanced- can they catch us?

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

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

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Progress ReportProgress Report

Consumer-Aligned Organization• Drug Discount program• Debit Card• Women’s Health Initiative• Senior Caregiver• Tight Network Operations• Quality Measurement• Rx POS Connectivity• Extended Service Hours• Customer Welcome Calls

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

Top-Level StrategyTop-Level Strategy

Consumer Health

Organization (CHO)

Consumer Health

Organization (CHO)

MCO Product/Segment Extensions• PPO• Med Supp• ASO• Defined Contribution• 3rd party specialty business

Full Service MCOFull Service MCO

Fix the core• Operational control• Profit margin

HMOHMO

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

• Senior Business

• Exit unprofitable/unsustainable markets

• Harvest until visible reimbursement improvement

• Leverage gross margin for debt repayment

• Convert to Senior Solutions business

• Senior Business

• Exit unprofitable/unsustainable markets

• Harvest until visible reimbursement improvement

• Leverage gross margin for debt repayment

• Convert to Senior Solutions business

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Detailed StrategiesDetailed Strategies

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

• Commercial

• Exit unprofitable/unsustainable markets

• Implement experience-rated underwriting

• Price for margin, not market share

• Leverage Western U.S. purchasing power

• Implement seamless, full service solutions

• Expand product offerings

• Cross-sell specialty businesses

• Commercial

• Exit unprofitable/unsustainable markets

• Implement experience-rated underwriting

• Price for margin, not market share

• Leverage Western U.S. purchasing power

• Implement seamless, full service solutions

• Expand product offerings

• Cross-sell specialty businesses

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Detailed StrategiesDetailed Strategies

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

• Specialty Businesses

• Increase PHSY member penetration; cross-sell

• Increase unaffiliated membership

• Expand product/service offerings

• Extend integration with core business

• Implement leading edge technology

• Improve shareholder value recognition

• Specialty Businesses

• Increase PHSY member penetration; cross-sell

• Increase unaffiliated membership

• Expand product/service offerings

• Extend integration with core business

• Implement leading edge technology

• Improve shareholder value recognition

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Detailed StrategiesDetailed Strategies

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

• Reposition & leverage PHSY and Secure Horizons brands with disruptive & unique advertising

• Leverage leading position as women’s health solutions company

• Leverage leading position in quality measurement, NCQA ratings, and customer satisfaction

• Reposition & leverage PHSY and Secure Horizons brands with disruptive & unique advertising

• Leverage leading position as women’s health solutions company

• Leverage leading position in quality measurement, NCQA ratings, and customer satisfaction

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Consumer Aligned Business StrategyConsumer Aligned Business Strategy

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

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002

• Offer new products not covered under traditional definition of medical necessity

• Provide consumer/employers with more informed choices

• Become the Southwest Airlines of our industry, with leading back-office technologies and business processes

• Roll out “hassle-free” e-scribing solutions

• Offer new products not covered under traditional definition of medical necessity

• Provide consumer/employers with more informed choices

• Become the Southwest Airlines of our industry, with leading back-office technologies and business processes

• Roll out “hassle-free” e-scribing solutions

Consumer Aligned Business StrategyConsumer Aligned Business Strategy

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

• Complete medical management build-up to support full risk

• Leverage disease management programs

• Implement optional tighter network solutions & channel membership through cost & quality measurements

• Complete implementation of $300M IT Future State with standardization of common, best practices

• Continue to leverage other outsourced solutions for non-core functions

• Complete medical management build-up to support full risk

• Leverage disease management programs

• Implement optional tighter network solutions & channel membership through cost & quality measurements

• Complete implementation of $300M IT Future State with standardization of common, best practices

• Continue to leverage other outsourced solutions for non-core functions

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 Cost Reduction Detailed StrategyCost Reduction Detailed Strategy

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

Earnings

Brand

Investment

Texas

Debt

Achievement

Earnings

Brand

Investment

Texas

Debt

Achievement

“Brand New Day” at PacifiCare in 2002

“Brand New Day” at PacifiCare in 2002 CONCLUSION – 2002 Means EBITDACONCLUSION – 2002 Means EBITDA

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

Investor’s Day with PacifiCare

Ritz Carlton Battery Park, New YorkJune 4, 2002

Howard G. Phanstiel,President and CEO