Commercial growth/diversification balances Medicar

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Bear Stearns 2005 London Health Care
Conference May 10, 2005 The Four Seasons, London
PacifiCare Health Systems Gregory W.
Scott Executive Vice President and CFO
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Cautionary 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 the Form10K filed
as of December 31, 2004.
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Strategy of a growth company
PHS 8 health plan markets before acquisitions

• A Fortune 200 company with
• 12 billion in revenue
• 2.6 million commercial lives
• 715K Medicare Advantage
• lives
• 10 million specialty lives

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Expansion through recent acquisitions
28 Additional medical states after American
Medical Security Group acquisition

• A Fortune 200 company with 2005 goals of
• 14.1 billion in revenue
• 2.7 million commercial lives
• 743K Medicare Advantage
• lives
• 11.8 million specialty lives

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Expansion through recent acquisitions
Significant additional overlap with Pacific Life
acquisition
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Benefits of AMS and Pacific Life acquisitions

• Adds a total of more than 370K ISG PPO lives
  15 commercial member increase
• Focus on important ISG market segment
• Expanded network of independent agents increases
  distribution for PHS products/services
• Commercial growth/diversification balances
  Medicare Advantage business
• Geographic expansion diversifies outside of CA

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Earnings growth
370-385
303
Excluding effect of the adoption of FAS 142
relating to the amortization of goodwill
Includes acquisition of American Medical Security
Group proposed acquisition of Pacific Lifes
group health insurance business
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2005 Guidance
Includes effect of FAS 123R on equity based
compensation
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PacifiCare Vision
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PacifiCare offers a total solution
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Specialty company growth- Pharmacy Benefit
Management Company (PBM)
Prescription Solutions Unaffiliated Membership
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Specialty company growth
1,647
Breakout of internal vs. external revenue is
not available prior to CY 2002. Revenue
increases related to a change in contracting
methodology from the gross method to the net
method for retail prescription drug transactions
50M in 2004, 890M in 2005 mainly for PHS
contract.
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Specialty company growth
25.3
26.0
20.6
20.3
18.4
18.7
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Specialty company growth- Recent PBM recognition

• Among MCOs Top rated PBM on 5 of 8 evaluation
  factors - Recent Flashpohler Research survey
• Of 2nd tier PBMs, mentioned more than any other
  PBM - CSFB report, 10/04
• Outperforms the industry in pharmacy management
  and doing an excellent job regarding its primary
  functions rebates, network management, mail
  service and generic fill rates - CapGemini
  Benchmarking study, 2004
• 2 among all PBMs in mail order satisfaction
  PCMA 2004
• Rx Benefit Innovation Award- The Pharmacy
  Benefit Management Institute

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Medicare opportunities

• Medicare Advantage HMO/ Private Fee for Service
• Part D Administration- Prescription Drug Plan
  (PDP)
• Medicare Supplement
• Medicare Advantage Regional PPO

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Medicare opportunities

• Medicare Advantage HMO

• Goals of Medicare Modernization Act
• Stabilize membership through increased benefits
  and provider payments
• Nationwide 04 MA Risk member increase 98,500
• PHS had 3 of 4 fastest growing plans in U.S.
• PHS had 22K net adds in 04 target growth in 05
  39K
• Position MA for growth in 2006
• Broker distribution
• Geographic expansion
• Preferred provider relationships Value Plans
• Community faith-based organization marketing
• Small acquisitions
• CMS demonstration project

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Medicare opportunities

• Part D Administration- Potential market

35.7 million
17 million
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Medicare opportunities

• Part D Administration- Model of potential market
  share

• PHS to offer benefits nationally, in all 34 PDP
  regions
• Assume 10 national/large PDPs 3 regional PDPs
  in each region
• Assume equal distribution of 17 million assumed
  06 membership
• Example

• Potential revenue excludes additional subsidies
  for low income, institutionalization, etc.
• PHS will issue specific guidance late 2005

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Medicare opportunities

• Part D Administration- PHS capabilities

• Captive PBM w/ external focus (new mail order
  facility in planning)
• Broad distribution capabilities
• State-of-the-art mail facility
• National pharmacy network
• Risk-based business model
• 10 years of senior prescription drug data
• Managed care tools to control costs, improve
  outcomes
• Additional marketing channels
• Direct TV/radio advertising
• Direct mail
• Recent acquisitions
• Broker distribution