CIBC 15th Annual Health Care Conference November 9, 2004 The Plaza, New York City PacifiCare Health Systems Brad Bowlus President and CEO, Health Plans Division

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

Largest purchaser of health care services in the western United States Fortune 200 company w/ 2004 Goals of: $12 billion in revenue 2.3 million commercial lives 704 thousand senior lives 11.8 million specialty lives Medical & Specialty Companies Continued Market Expansion 2004 Markets Planned Specialty Expansion Specialty Companies Only

Earnings Growth * Excluding effect of the adoption of FAS 142 relating to the amortization of goodwill ^ Includes proposed acquisition of American Medical Security Group $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 HMO Focus Deployed Product Leadership Strategy Solidified Total Solution Approach

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 DELIGHTING THE CUSTOMER 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 Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes CONCENTRATED PURCHASING POWER INTEGRATED DISEASE MANAGEMENT PROGRAMS BEST IN CLASS NETWORKS DEMAND SIDE INTERVENTIONS TIERED & NARROW NETWORKS PROVEN MEDICAL MANAGEMENT CAPABILITY

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 Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes Integrated Disease Management Programs

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 Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes

Quality Index ® Profile of Hospitals Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes

Source: MSBR / CSA Satisfaction Details Highly Satisfied Commercial Members Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes

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 Delight the Customer Superior HCC Mgmt Consumer Total Solution Data Driven Outcomes

SignatureFreedom engages members to:   Become better consumers of healthcare   Be accountable for their decisions   Manage their own health and adopt healthy lifestyles Consumer Aligned Product Leadership

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

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

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 Specialty company external member growth Prescription Solutions Behavioral health Dental & Vision Strategy for Profit Growth

Growth of Commercial Business Diversification through new Individual/Small Group sales

American Medical Security (AMS) Overview Individual and Small Group Health Insurer Headquartered in Green Bay, Wisconsin 2004 Markets AMS Markets AMS Highlights $700 million in revenue 315,000 medical members 218,000 dental, 130,000 life

Acquisition of American Medical Security (AMS) 28 Additional medical states after AMS acquisition PHS Only Markets 2005 Markets - Post Acquisition AMS Only Markets PHS & AMS Combined Markets

Transaction Summary Price: $32.75 cash per AMS share; ~$502M total Expected Close: Early 2005 Financing: $400M new term loan + ~$160M internal cash Accretion: Net Income guidance increased by $10-$15M to $360-$375M Required Approvals: AMS shareholders Hart Scott Rodino WI & GA DOIs Acquisition of American Medical Security Group

Acquisition of American Medical Security Group, Inc. Key Considerations/Value Drivers Diversifies PHS by product, geography & customerDiversifies PHS by product, geography & customer M+C reduced from 37% to 33% of total gross marginM+C reduced from 37% to 33% of total gross margin CA enrollment declines from 62% to 56% of totalCA enrollment declines from 62% to 56% of total Commercial membership (ISG) up 13%Commercial membership (ISG) up 13% Expansion of PPO into 29 states + D.C.Expansion of PPO into 29 states + D.C. Enhances broker distribution & facilitates cross- sellEnhances broker distribution & facilitates cross- sell 32,000 independent brokers32,000 independent brokers Cross sell opportunity for M+C, Med Supp, SignatureFreedomCross sell opportunity for M+C, Med Supp, SignatureFreedom

Acquisition of American Medical Security Group, Inc. Key Considerations/Value Drivers Acquire additional AMS product/functional expertiseAcquire additional AMS product/functional expertise ISG underwritingISG underwriting HSA, Group Life, Disability & Dental productsHSA, Group Life, Disability & Dental products Provides low cost, scalable platform to further expand ISG businessProvides low cost, scalable platform to further expand ISG business

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

(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

(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

Room for P/E Multiple Expansion 2004 Average 2005 Average Comparison as of 10/27/04

CIBC 15 th Annual Health Care Conference Thank You