S&P Announces: PacifiCare Health Systems Inc. Ratings Placed On CreditWatch Negative

NEW YORK--(BUSINESS WIRE)--Sept. 15, 2004--On Sept. 15, 2004, Standard & Poor's Ratings Services placed all its ratings on PacifiCare Health Systems Inc. (NYSE:PHS; PacifiCare) on CreditWatch with negative implications.

Published on September 15, 2004

The CreditWatch follows today's joint announcement by PacifiCare and American Medical Security Group Inc. (NYSE: AMZ; not rated) that they have signed a definitive agreement whereby PacifiCare will acquire all of AMS's outstanding shares of common stock through a cash merger resulting in AMS becoming a wholly owned subsidiary of PacifiCare. The total purchase price is approximately $532 million. PacifiCare will finance the acquisition with $400 million of term debt and internal resources.

AMS provides a variety of individual and small group insurance products to members in 33 states and the District of Columbia through a network of more than 32,000 independent agents. With more than 314,000 commercial PPO members, AMS generated $712 million in total premium revenue in 2003.

The closing of the acquisition is subject to the approvals of AMS shareholders and insurance regulators, as well as other closing conditions. The transaction is expected to close in early 2005.

Because Standard & Poor's has concerns about the proposed transaction given that we do not have ratings on AMS, Standard & Poor's will be meeting with PacifiCare's management in the near future to assess the credit quality and financial strength of AMS, and its potential effects on the ratings on PacifiCare. In addition, Standard & Poor's will evaluate PacifiCare's strategic thinking and plans with regard to this proposed transaction, interim integration risk, and prospective capital structure.

Ratings List

To From

PacifiCare Health Systems Inc.

Counterparty credit rating BBB-/WatchNeg/-- BBB-/Stable/--

Secured bank loan rating BBB-/WatchNeg BBB-

Senior unsecured debt rating BBB-/WatchNeg BBB-

Subordinated debt rating BB+/WatchNeg BB+

Contacts

Standard & Poor's