1. CIBC World Markets 13th Annual Healthcare Conference
The Plaza Hotel, New York City
November 6, 2002
Gregory W. Scott
Executive Vice President,
Chief Financial Officer
Pacificare Health Systems

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 June 30, 2002, and Form 10K as of December 31, 2001.

3. Consumer Health Organization
Consumer-Aligned Organization
Drug Discount Program
Debit Card
Women’s Health Initiative
Stand Alone Rx Plan
Tight Network Operations
Quality Measurement
Extended Service Hours
Customer Welcome Calls
Consumer Health Organization
(CHO)
Top-Level Strategy
MCO Product/Segment Extensions
PPO
Med Supp
ASO
Defined Contribution
3rd Party Specialty Business
Full Service MCO
Fix the Core
Operational Control
Profit Margin
HMO

4. PacifiCare- largest purchaser of health care services in the western U
PacifiCare- largest purchaser of health care services in the western U.S.
2002 Markets
A Fortune 200 company with
$11 billion in revenue
2.4 million commercial lives
800 thousand Medicare+Choice lives
9 million specialty lives

5. 2003 Market Expansion Medicare Supplement Pharmacy Benefit Management
Behavioral Health

6. 3rd 2002 Quarter Results
Reported EPS = $1.20 vs. consensus of $0.84
EPS up 29% year-over-year on FAS 142 adjusted basis
Operating income, excluding net investment income, up 66% y-o-y
Cash flow from operations = $189 million, up 136% y-o-y

7. 3rd 2002 Quarter Results EBITDA up 23% vs. prior quarter
Consolidated medical loss ratio = 85.8%, down 340 basis points y-o-y
EBITDA = $109.3 million, up 22% y-o-y
EBITDA up 23% vs. prior quarter
SG&A ratio = 13%, up 250 basis points y-o-y
Full year 2002 EPS guidance raised from $3.37-$3.47 to $3.90

8. Earnings Improvement *Reported EPS
NOTE: 2001 EPS figure adjusted to FAS 142 comparable basis; Q202 adjustment relates to investment impairments

9. Operating Profit Improvement
Investment
Income: (52)%
Operating
Profit: 74%
Investment
Income: (19)%
Operating
Profit: 66%
*Adjusted for SFAS 142 change in accounting for goodwill as if adopted January 1, 2001 and excludes impairment, disposition, restructuring, OPM and other charges/credits

10. Drivers of 2002 Operating Profit Improvement

11. Growth in Specialty Company Unaffiliated Membership
Up 30%
Up 9%

12. Improved Free Cash Flow
Free cash flow is defined as net income plus depreciation & amortization less capital expenditures
* Excluding non-recurring items

13. Increase in Excess Statutory Capital

14. Lower Debt to EBITDA Ratio
2.4x
1.66x
NOTE: Debt to EBITDA ratios based on annualized current quarter EBITDA; Q202 & Q302 debt total excludes FHP bonds due to cash collateral account

15. SG&A 3rd quarter SG&A ratio = 13%, up 250 basis points y-o-y
~ $40 million in 3rd quarter costs are non-recurring
litigation-related accruals
incentive compensation accrual
4th quarter SG&A will include:
Seasonal open enrollment costs
Marketing costs
2003
Continued investment in future state & new products

16. Debt Restructured High Yield Notes FHP bonds
Bank Credit Facility
January ‘03 maturity date extended 2 years
$461 million reduction of outstanding balance YTD ‘02
High Yield Notes
$200 million offer increased to $500 million
10 ¾% coupons, priced to yield 10 7/8%; mature June ’07 maturity
FHP bonds
$43 million remaining balance covered by cash collateral account

17. Recent Events
Keystone Health Plan partners with PacifiCare Behavioral Health
Effective 11/1/02
Covers > 200,000 Keystone enrollees in PA
Reader’s Digest agreement with Senior Solutions
Exclusive endorsement of Secure Horizons’ Medicare Supplement products
Access to customer database with > 100 million households
Working with Reader’s Digest to offer additional products

18. Recent Events WebMD agreement with Prescription Solutions
Agreement is with WebMD sub, MedE America, which has 4 million lives
Prescription Solutions to provide mail order prescriptions & OTC medications
300K members initially; additional mbrs. over next year
International Brotherhood of Teamsters agreement
Prescription Solutions endorsed as preferred PBM
Covers >250 Taft-Hartley trusts with > 1.4 million lives

19. Recent Events Significant new commercial case wins
65,000 new Large Group & National Accounts members effective January 1, 2003
Includes Wells Fargo, IBM, Verizon Communications, LAUSD, County of Riverside and Fidelity National
17,000 new members from County of San Diego effective October 2002
Commercial HMO membership YTD is 85,000 > plan

20. New Products Value Network Self Directed Health Plan
Designed to lower premiums 6-16%
Smaller network than standard HMO, but up to 4 times larger than Kaiser in CA
Self Directed Health Plan
Access to PPO
Combines employer funded medical spending account + catastrophic coverage
Stand Alone Rx Plan
No deductible; no annual max
Covers ~400 medications, mostly generic
Discounts of 15-30% on other drugs
M+C PPO Demonstration Project
Active in 2 counties in AZ and NV
Only participating plan in CA
Medicare Disease Management Demonstration Project
Targets up to 15,000 CHF patients

21. Changes to Medicare+Choice
Goal is to maximize cash flow

22. 2003 Guidance Higher commercial membership, excluding loss of CalPERS
Lower Commercial MLR
Commercial premium PMPM increase equal to or slightly higher than 2002
Medicare+Choice MLR higher
Continued investments in IT, new products
Continued rapid growth in unaffiliated specialty company membership

23. Thank You