Merrill Lynch Annual Health Care Conference December 1, 2004 The Waldorf Astoria, New York City PacifiCare Health Systems Gregory W. Scott Executive Vice President and Chief Financial Officer

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 Form 10Q filed as of September 30, 2004, and the Form10K filed as of December 31, Cautionary Statement

Medicare Supplement PBM Behavioral Health 2004 Market Expansion Continued Market Expansion 2003 Health Plan + Specialty Companies 2003 Specialty Companies only 2004 Planned Specialty Company Expansion A Fortune 200 company with 2004 goals of: $12 billion in revenue 2.3 million commercial lives 704K Medicare Advantage lives 11.8 million specialty lives Largest purchaser of health care services in the Western U.S.

Earnings Growth * Excluding effect of the adoption of FAS 142 relating to the amortization of goodwill ^ Includes proposed acquisitions of American Medical Security Group & Pacific Life’s group health insurance business $301-$306 $360-$375

Excess Statutory Capital Average of 400% RBC in core HMO states

2004 Trends- YTD through September 30th Net income up 30% from ‘03, excluding ‘03 favorable prior period development Commercial business, year-over-year Membership up 84K or 4.6% CA membership up 7% MLR down 20 basis points Aggregate gross margin up 14.3% Medicare Advantage business, year-over-year Membership up 1% MA MLR up 150 basis points, at low end of revised 2004 guidance SG&A down 20 basis points year-over-year Commercial premiums up 9.2% PMPM, over health care cost PMPM of 8.3%, excluding ’03 favorable prior period development ‘04 premium increase guidance 8.5% - 9%

Planned evolution from a traditional health maintenance organization into a leading consumer health organization HMO DIVERSIFIED INSURANCE COMPANY CONSUMER HEALTH ORGANIZATION PacifiCare Vision

Source: KFF/HRET Survey of Employer-Sponsored Health Benefits: ; KPMG Survey of Employer-Sponsored Health Benefits: 1993,1996; HIAA: ; Bureau of Labor Statistics, CPI (US City Avg of Annual Inflation) ; Bureau of Labor Statistics; Seasonally Adjusted: Increases in Health Insurance Premiums Compared to Other Indicators, % 2.2%

Unhappy about costs Imposed legislative/ regulatory actions to restrict aggressive intervention and mandate benefits Angry about Economics Hassles Professional autonomy Worried about Ability to access care when needed Hassles EmployersGovernmentPhysiciansConsumers PacifiCare’s Value Propositions and Consumer Aligned Health Care All Key Stakeholders Looking for Solutions

SUPERIOR HEALTH CARE COST MGMT DATA DRIVEN OUTCOMES CONSUMER DRIVEN TOTAL SOLUTION CUSTOMER SATISFACTION C O N S U M E R C E M U S N O R Delivering Consumer Aligned Value Propositions

Maximizing Cost & Quality Outcomes CONCENTRATED PURCHASING POWER INTEGRATED DISEASE MANAGEMENT PROGRAMS BEST IN CLASS NETWORKS DEMAND SIDE INTERVENTIONS TIERED & NARROW NETWORKS PROVEN MEDICAL MANAGEMENT CAPABILITY SUPERIOR HEALTH CARE COST MGMT

Cumulative DM Savings from 12/00 Program Inception $295M Cumulative DM Savings from 12/00 Program Inception $295M DM Outcome Report September 2004 $3.5M Rolling 12 Months Savings = $120 Million $3.6M Integrated Disease Management Programs SUPERIOR HEALTH CARE COST MGMT

PAAX - -Member Centric - -Integrated Data Sources - Episode Grouping - Risk Adjustment - Predictive Modeling - -Benchmarking - - Multiple Units of Analysis - Demographic Info - Medical Claims - Pharmacy Claims - Clinical Encounters - Health Risk Assessment - Disease Management - Direct Lab Feeds - Satisfaction Survey - Demographic Info - Medical Claims - Pharmacy Claims - Clinical Encounters - Health Risk Assessment - Disease Management - Direct Lab Feeds - Satisfaction Survey Health Services Reports Marketing & Sales Reports Actuary & Underwriting Reports Provider & Network Reports PAAX – PacifiCare AdvancedAnalytix SM DATA DRIVEN OUTCOMES

Quality Index ® Profile of Hospitals DATA DRIVEN OUTCOMES

Source: MSBR / CSA Satisfaction Details Highly Satisfied Commercial Members CUSTOMER SATISFACTION

On-Going Support - Care Management Disease Mgmt/ Web Admin Health Credits Women’s Health Flexible Spending Account Ethnic Diversity Programs Specialty Offerings Pharmacy Dental & Vision Behavioral Life/STD/LTD Caregiver PAN Front End Decision Support Quality Index Profiles Benefit Selection Pricer Health Risk Assessment Worksite/Web Based Tools On-Line Enrollment Low Cost High Cost Signature Freedom Signature Independence SignatureValue Select Hospital Plan SignatureValue Advantage SignatureOptions Advantage SignatureValue Traditional Plan SignatureOptions Traditional Plan SDHP HMO/EPO PPO Indemnity Consumer Driven Total Solution CONSUMER DRIVEN TOTAL SOLUTION

Employee Responsibility $1,000 to $2,000 In-Network 70% Out-of-Network 50% Self Directed Account $1,000 Covered Services (apply to deductible): Physician Office Visits Wellness & Preventive Care Office-based Diagnostic Tests Annual Deductible $2,000 In-Network 70% PPO Benefit Plan 100% After Coinsurance Maximum $ Employee Responsibility $1,000 to $2,000 Out-of-Network 50% Rx $10 generic $35 brand SignatureFreedom Plan Design

Key Features Model HSA – Health Savings Account Eligibility Contributor Account Carryover Ability to Withdraw for Non- Health Care No Yes Yes or NoYes No Employees enrolled in HDHP Ability to Earn Investment No Ye s No HRA – Health Reimbursement Account Signature Freedom (SDHP) All Employees Employee or employer or combination Employer OnlyPacifiCare Spending Account Model Comparison

 Grow commercial business through consumer-aligned products and ISG segment expansion  Build Senior Solutions products/distribution Medicare Advantage growth  Increase specialty company external membership Prescription Solutions- Medicare Part D Behavioral health Dental & Vision Strategy for Profit Growth

Approximately 10% from groups that did not previously offer insurance > 70% from Small Group (2 to 50 employees) 90% from customers new to PacifiCare SignatureFreedom Growth 70,300 Members

American Medical Security Group (AMS) Adds ~314K ISG PPO lives- 13% commercial member increase Lower cost operations on scalable ISG platform Network of 32,000 independent agents increases distribution for PHS products/services $100 million in excess statutory capital Commercial growth/diversification balances Medicare Advantage business Geographic expansion diversifies away from CA Potential network & PBM synergies ISG Market Segment Acquisitions

Pacific Life’s Group Health Business Leverages AMS acquisition Adds ~140K small/large group PPO lives- 6% commercial member increase Network of 30,000 agents increases distribution for PHS products/services Commercial growth/diversification balances Medicare Advantage business Geographic expansion diversifies away from CA 90% member overlap w/ combined PHS/AMS = network synergies ISG Market Segment Acquisitions

2004 Markets AMS Markets AMS Highlights $700 million in revenue 1,400 employees 315,000 medical members 218,000 dental, 130,000 life Key markets (TX, IL, FL) Independent Broker Network of 32,000 Agents

2004 Markets AMS Markets AMS Highlights $700 million in revenue 1,400 employees 315,000 medical members 218,000 dental, 130,000 life Key markets (TX, IL, FL) Independent Broker Network of 32,000 Agents

Geographic expansion/Increased distribution PHS current 8 health plan markets PHS Only Markets 2004 Markets - Pre Acquisition

Geographic expansion/Increased distribution 28 Additional medical states after AMS acquisition PHS Only Markets 2005 Markets - Post AMS Acquisition AMS Only Markets PHS & AMS Overlaps

Geographic expansion/Increased distribution Significant additional overlap w/ Pacific Life acquisition PHS Only Markets 2005 Markets - Post Acquisitions AMS Only Markets PHS/AMS/Pac Life Overlaps

Medicare Advantage Timeline Health Plan ACRs for 2005 submitted 9/13/04Health Plan ACRs for 2005 submitted 9/13/04 PPO and PDP regions defined: Nov - Dec ’04PPO and PDP regions defined: Nov - Dec ’04 Benchmark rates issued first Monday in April ’05Benchmark rates issued first Monday in April ’05 Health Plan RFPs due first Monday in June ’05Health Plan RFPs due first Monday in June ’05 New prescription drug benefit starts 1/1/06 New prescription drug benefit starts 1/1/06  Medicare Advantage Part D  Stand alone Part D administration

Medicare Advantage Timeline Health Plan ACRs for 2005 submitted 9/13/04Health Plan ACRs for 2005 submitted 9/13/04 PPO and PDP regions defined: Nov - Dec ’04PPO and PDP regions defined: Nov - Dec ’04 Benchmark rates issued first Monday in April ’05Benchmark rates issued first Monday in April ’05 Health Plan RFPs due first Monday in June ’05Health Plan RFPs due first Monday in June ’05 New prescription drug benefit starts 1/1/06 New prescription drug benefit starts 1/1/06  Medicare Advantage Part D  Stand alone Part D administration

(in millions) * Breakout of internal vs. external revenue is not available prior to CY 2002 Internal Revenue External Revenue $340 $394 $403 $472 $661 $172 $239 $322 $231$232 $ A*2001A*2002A2003A2004E Prescription Solutions Revenue Growth

Prescription Solutions Unaffiliated Membership

(in millions) $296 $341 $328 $387 $ % $0 $100 $200 $300 $400 $500 $ A2001A2002A2003A2004E 18.7% 20.3% 20.6% 25.0% 18.4% Mail Service Revenue & Mail Order Penetration

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