INScompanies Blog

Purchase mildly accretive to earnings in 2005

Expected to add up to 140,000 PP0 lives in 30 states in 2005

More than 95% of revenues from purchased Pacific Life business overlaps with combined PacifiCare/AMS health plan markets

CYPRESS, Calif., November 29, 2004 — PacifiCare Health Systems, Inc. (NYSE: PHS) and Pacific Life Insurance Company jointly announced today that they have signed a definitive agreement whereby PacifiCare will purchase Pacific Life’s group health insurance business. The business includes medical, dental and life coverage for small and large group employers, and is distributed through a network of approximately 30,000 brokers and agents in 30 states. Although the financial terms of the purchase were not disclosed, the transaction is structured as a coinsurance arrangement that is expected to result in PacifiCare’s acquisition of up to 140,000 medical members. At closing, Pacific Life will cede to PacifiCare all future premiums received for its existing group health business, and PacifiCare will assume all future claim liability. PacifiCare will also obtain renewal rights for the acquired membership.

As part of the transaction, PacifiCare will also obtain assets necessary to support and preserve the continuity of the acquired business, as well as the right to offer employment to the approximately 700 Pacific Life employees who currently provide service and support to the group insurance business.

Approximately 55% of the revenue from the acquired membership is generated in states that overlap with PacifiCare’s current eight core health plan markets, and more than 95% of the revenue is generated from membership that resides in states that will overlap with PacifiCare’s health plan operations after completion of its previously announced acquisition of American Medical Security Group (AMS). PacifiCare will finance the Pacific Life transaction through internally generated cash, and the companies anticipate a closing date in early 2005, subject to approval from the California Insurance Commissioner and compliance with provisions of the Hart-Scott-Rodino Act.

The purchase of Pacific Life’s group health business complements PacifiCare’s recently announced acquisition of AMS, and demonstrates the company’s renewed focus on the individual and small group markets, which it believes are the market segments offering the most potential for commercial membership growth in the coming years.

PacifiCare’s Chairman and Chief Executive Officer, Howard Phanstiel, stated, “This investment is a logical follow-on to our recently announced acquisition of American Medical Security Group. It deepens our penetration and significantly enhances our distribution capabilities in the important small group market, and further improves the size and scale of our geographic presence. And, just as AMS’s overlap with PacifiCare’s current eight core operating markets gives us the opportunity to build more cost effective proprietary networks, Pacific Life’s significant additional overlap allows us to extend the benefits of our existing lower cost networks to the membership acquired from them.”

The transaction is also consistent with PacifiCare’s strategy of diversification through the expansion of its full-service commercial portfolio balanced against a growing Medicare Advantage business. Based on PacifiCare’s most recent forecast’s for 2004 operating results, the completion of the AMS acquisition is expected to lower the portion of PacifiCare’s gross margin generated from Medicare Advantage from approximately 39% to 35%, and it is anticipated that the purchase of Pacific Life’s group health business will result in an additional reduction to approximately 32%. Despite the significant overlap with PacifiCare’s current eight core markets, this transaction will also expand the company’s geographic presence, and further increase the portion of total membership outside the State of California, from approximately 48% subsequent to the AMS acquisition, to approximately 50%.

Additionally, access to an expanded network of insurance agents and brokers is expected to provide new opportunities for PacifiCare to distribute its other products.

Brad Bowlus, president of PacifiCare’s Health Plan division said, “We are very excited about meeting with the agents and brokers in Pacific Life’s network to discuss opportunities to expand the distribution of products such as our popular SignatureFreedom plans, Medicare Supplement coverage, HSA products and, eventually, even Medicare Advantage.”

Based in Newport Beach, California, Pacific Life’s strength continues to be in providing life insurance and annuities to individuals, businesses, and pension plans. Pacific Life’s Life Insurance Division and Annuities and Mutual Funds Division are among the leaders in the industry, ranking seventh1 and eighth2 respectively in sales nationwide.

Thomas Sutton, chairman and chief executive officer of Pacific Life said, “With today’s increasingly competitive health insurance market, Pacific Life made the decision to focus on its core business of providing life insurance products, individual annuities, and other investment products and services to individuals, businesses, and pension plans. PacifiCare provides a great

fit for Pacific Life’s group health business not only because of their strength in the managed health care industry, but also because of their commitment to the small group market and their focus on member satisfaction.”

“We anticipate that, including all integration expenses, this transaction will be mildly accretive. I would estimate about two to three cents in incremental 2005 EPS, depending on the timing of the close in early 2005,” said Greg Scott, PacifiCare’s executive vice president and chief financial officer.

PacifiCare will hold a conference call to discuss the transaction at 4:30 PM Eastern time on Monday, November 29th. To access the call, dial (888) 459-7564, passcode “PacifiCare.”

Risk Factors Regarding Forward-Looking Statements
The statements in this news release, including those made by Howard Phanstiel, Greg Scott, Brad Bowlus and Thomas Sutton 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. Such forward-looking statements include, but are not limited to, the ability to execute growth strategies, the perceived benefits of the acquisition, the ability to diversify PacifiCare’s business, expectations about the timing and receipt of regulatory approvals, and the effects on PacifiCare’s earnings in 2005. These risks and uncertainties include, but are not limited to, the ability to implement certain growth or diversification strategies; our ability to consummate the purchase; risks that integration may be more difficult or costly than expected; revenue following the transaction and other actual results associated with the acquisitions that could differ from the perceived benefits; membership retention may be less than anticipated; profitability of the purchased business could be less than expected; and required regulatory approvals for the transaction may not be obtained on a timely basis or may be subject to certain conditions, and other items found in documents filed by PacifiCare with the Securities and Exchange Commission.

PacifiCare Health Systems and American Medical Security Group and their respective officers and directors may be deemed to be participants in the solicitation of proxies from shareholders of American Medical Security Group, Inc. with respect to the transactions contemplated by the merger agreement between PacifiCare and American Medical Security Group. Information regarding the companies’ officers and directors is included in their respective Definitive Proxy Statements for their 2004 Annual Meetings of Stockholders filed with the Securities and Exchange Commission in April 2004. These documents are available free of charge at the Securities and Exchange Commission web site at www.sec.gov, from PacifiCare at pacificare.com and from AMS at eAMS.com. Investors and security holders may obtain more detailed information about who may be deemed participants in the solicitation of proxies by reading American Medical Security Group’s proxy statement regarding the proposed merger. The proxy statement contains important information about the merger and the transactions contemplated by the Merger Agreement. Investors and securities holders of American Medical Security Group may obtain a free copy of American Medical Security Group’s proxy statement and other documents filed with the Securities and Exchange Commission at the Commission’s web site at www.sec.gov. American Medical Security Group’s proxy statement and these other documents may also be obtained for free from American Medical Security Group at eAMS.com.

PacifiCare Health Systems is one of the nation’s largest consumer health organizations with more than 3 million health plan members and approximately 10 million specialty plan members nationwide. PacifiCare offers individuals, employers and Medicare beneficiaries a variety of consumer-driven health care and life insurance products. Currently, more than 99 percent of PacifiCare’s commercial health plan members are enrolled in plans that have received Excellent Accreditation by the National Committee for Quality Assurance (NCQA). PacifiCare’s specialty operations include behavioral health, dental and vision, and complete pharmacy and medical management through its wholly owned subsidiary, Prescription Solutions. More information on PacifiCare Health Systems is available at www.pacificare.com.

Founded in 1868, Pacific Life provides life insurance products, individual annuities, mutual funds, group employee benefits, and offers to individuals, businesses, and pension plans a variety of investment products and services. A FORTUNE 500® company, Pacific Life counts 25 of the 50 largest U.S. companies as clients3 and is a member of IMSA (Insurance Marketplace Standards Association), whose membership promotes ethical market conduct for individual life insurance and annuities.

1 LIMRA International, Confidential Sales Survey of Participating Life Insurance Companies, 3rd Qtr. 2004. Based on new annualized premium.
2 Finetre Corporation, published sales figures as of 9/30/04.
3 Data compiled by Pacific Life using the 2004 FORTUNE 500 list, as of April 2004.
 
Contact
Tyler Mason
PHS Media Relations
Tyler.mason@phs.com
(714) 226-3530 Dan Yarbrough
PHS Investor Relations
Dan.yarbrough@phs.com
(714) 226-3540 Tennyson Oyler
PL Media Relations
TOyler@PacificLife.com
(949) 219-3248

Sep 27, 2004 
The Deal: PacifiCare Health Systems has agreed to acquire American Medical Security Group Inc. for $502 million. Under the terms of the deal, PacifiCare will pay $32.75 for each outstanding share of American Medical Security. PacifiCare will also assume about $30.2 million in debt. The deal is expected to close early in 2005.

Discussion: American Medical Security offers health insurance products to individuals and small businesses. Company products include group life, dental, prescription drug, accidental death, and disability coverage. The company offers coverage through approximately 60 PPO networks operating in more than 30 states and the District of Columbia.

PacifiCare Health Systems offers commercial health and Medicare HMOs, PPOs, and POS plans. The company is one of the largest Medicare HMOs in the United States. PacifiCare offers specialty health coverage, including behavioral health, dental, vision coverage, and pharmacy benefits management. PacifiCare operates in US eight states, primarily on the West Coast and in the Southwest, and also offers coverage plans in Guam and the Philippines.

The acquisition is part of a PacifiCare strategy to become a more diversified consumer-health company. The deal will also extend the company’s geographical reach, providing a client base beyond the Western states.

Weekly Corporate Growth Report,  Sep 27, 2004 

WESTFIELD CENTER, OH - May 25, 2006 - Westfield Insurance has been awarded the Industry Leadership for Improved Commercial Lines Download award from ACORD. This award recognizes insurance companies who offer extensive commercial download based on current ACORD standards.

By successfully implementing commercial lines download based on ACORD standards, Westfield ensures that agents will spend less time entering data into their agency management system, saving time and money for the agency. The award is given to only a few select companies that show leadership in adopting standards.

“Westfield is setting an example for the rest of the industry that we hope inspires others to join ACORD and begin their work with data standards,” said Denise Garth, vice president of membership and development at ACORD.

ACORD (Association for Cooperative Operations Research and Development) is a nonprofit association that facilitates the development and use of standards for the insurance, reinsurance and related financial services industries. Westfield received the award at the ACORD LOMA Insurance Systems Forum on Monday, May 22.

“Westfield is committed to providing automation to help our agents effectively and efficiently sell and service business. Consistent, accurate commercial lines download saves agents both time and money,” said Steve Copley, agency automation executive at Westfield.

About Westfield Insurance
In business for more than 158 years, Westfield Insurance provides commercial and personal insurance and surety services to customers in 28 states. Westfield markets its products through more than 1,200 leading independent insurance agencies and is one of the country’s largest property and casualty insurers. Westfield Group provides banking through Westfield BankSM and agency support through Westfield Services, Inc. Westfield has over $3.1 billion in assets and holds an “A (Excellent)” rating from A.M. Best, a leading insurance financial rating agency. The Company has more than 2,500 employees, with 1,900 employed in Ohio.

Shelter Insurance Companies is lowering rates for automobile insurance for the majority of policyholders.

The size of the decrease for individual customers will vary by state and is based on policy coverages, geography, and the individual’s profile and loss experience. Customers who carry collision and comprehensive coverages will see the largest rate decreases.

The rate reduction is due in part to improved company performance during the past three years.

Shelter has introduced rate reductions in Arkansas, Colorado, Indiana, Iowa, Kansas, Kentucky, Louisiana, Missouri,Nebraska, Oklahoma, Tennessee, Mississippi and Illinois.

Shelter’s strong financial position will allow for the rate reduction while retaining the appropriate levels of premium reserves adequate to pay current claims and generate surplus dollars that can pay future claims from major storms or other disasters.

“We are continually attempting to fulfill our mission as a mutual insurance company responsible to the greater good of all customers,” said Don Duello, chairman of the board and CEO. “This means consistently attempting to provide the lowest possible rates and the best service in the industry.”

Shelter Insurance Companies is a multiple-lines insurance group with more than 3,260 licensed agents and claims representatives in 13 midwestern and southern states. The firm’s Home Office is in Columbia, Mo. Shelter is rated “A” Excellent by AM Best and Api by Standard & Poors.

Posting Date: 02/06/2006

Many of us consider our home our most important investment, both in terms of our budget and our time. It’s a good idea to work with your Shelter Insuranceâ agent to make sure that you’ve got the right coverage for your home and your belongings. Shelter’s homeowners insurance comes with the added benefit of including liability coverage, as well as optional coverage for special collections, jewelry and other hazards not specifically listed in your policy.

There are two steps you can take to help better protect your home. First, do a comprehensive home inventory. There are free software products available on the Internet that will help you with this inventory, including one from the Insurance Information Institute. This not-for-profit group helps share information about the insurance industry and offers this free software at a website called www.knowyourstuff.org. Having this detailed list and estimated value of your belongings will be a great asset should they be destroyed or stolen. It’s a good idea to keep one copy at home and then send another copy to a friend or relative’s home in case of a total loss.

The second step is to schedule an annual insurance protection review with your Shelter agent. During these reviews, you can discuss your current insurance coverage. You can update that coverage to reflect any improvements you’ve made to your home such as a new addition or if you’ve had an elderly parent move in with you.

Start the New Year off with a resolution to contact your Shelter Insuranceâ agent and schedule your insurance protection review. This is a free service we offer, so set your appointment and bring all of your questions in. Best wishes for a terrific 2006.

Posting Date: 02/01/2006
Ending Date: 05/01/2006

According to National Survey Half the Victims of Aggressive Drivers Become Victimizers Themselves   

Meriden CT – December 5, 2006 |   Fully one-half of drivers who are subjected to aggressive driving behavior on the road respond with aggression of their own, thus risking a more serious confrontation.

According to a recently released national survey by car insurer Response Insurance, when a driver gets the finger, is cut off or tailgated, 50% of the victims respond with horn honking, yelling, cutting-off, and obscene gestures of their own.

The “Response Insurance National Driving Habits Survey” revealed that 34% of drivers say they honk their horn at the aggressor, 27% yell, 19% give the finger back, 17% flash their headlights, and 7% mimic the initial aggressive driving behavior. 2% of drivers admit to trying to run the aggressor off the road. 

“Road rage is a two-way street,” noted Ray Palermo, director of public relations for Response Insurance. “It takes two people to fight. So, if you are subjected to aggressive driving, often the best way to ensure it does not get any worse is to just ignore it.” 

When it comes to aggressive responses, men are more likely than women to do so (54% vs. 46%), as are drivers age 18-24 (67%) versus drivers 65 and older (30%). Drivers with children are more likely to respond aggressively (59%) versus those without children (45%), and cell phone users (59%) versus those who do not use a cell phone while driving (39%). 

Response Insurance is a direct to the consumer auto insurer focusing on insuring safe, responsible people. The Company regularly provides to the public news and information regarding driver safety and transportation issues. They issue safety tips, reports, analyses, and conduct original research as a public service. This Response Insurance National Driving Habits Survey of 1,000 adults was conducted 8/18-21/05. The survey has a margin of error of + / - 3%. This data is being released for the first time in this news release. 

Contact:
Ray Palermo
203-634-7251
rpalermo@response.com 

Meriden CT – April 18, 2006 |   One of the most frightening things about buying a new or used car is the possibility you just bought a “lemon.” But that lemon could be part of a much larger bunch, as some vehicle defects are common to an entire model or manufacturer. When that happens the National Highway Traffic Safety Administration (NHTSA) investigates and, when necessary, can issue a recall of the vehicle or part. Usually the recall will result in a repair at no cost to the owner.

“The concern we have is that the NHTSA doesn’t always hear about problems until thousands of the defective cars are already on the road,” said Ray Palermo, Director of Public Relations for Response Insurance, a national car insurer. “Safety related defects could put drivers and their passengers at serious risk, so owners who suspect their car has a manufacturers’ defect should report it immediately to the NHTSA.” The NHTSA reviews all complaints to determine if there is any trend that poses a safety risk.

According to Palermo, car owners now have the opportunity to file a report with the NHTSA online at www.safercar.gov, which also has information on current vehicle recalls. Complaints may also be filed by phone to 1-888-327-4236 or by mail to the NHTSA Office of Defects Investigation, 400 7th Street SW, Washington DC 20590. 

Online Complaint Forms Available   

Response Insurance regularly provides to the public news and information regarding driver safety and transportation issues. The Company issues safety tips, reports, analyses, and conducts original research and sponsors national surveys as a public service to drivers, their passengers and pedestrians. Informational brochures are available from the company at their website: www.response.com.

Contact:
Ray Palermo
203-634-7251
rpalermo@response.com

Too Lazy – It Adds to the Excitement of Driving – Not Enough Time    
 
Meriden CT – March 14, 2006 |   A new national survey reveals that 57% of American drivers admit they don’t use their turn signal when changing lanes, but what is most startling are the excuses drivers gave.

According to Response Insurance, a national car insurer, 42% of those drivers say they don’t have enough time, 23% admit they are just plain “lazy,” 17% don’t signal because when they do, they forget to turn it off, 12% admit they are changing lanes too frequently to bother, 11% say it is not important, 8% say they don’t signal because other drivers don’t, and perhaps most disturbing 7% say forgoing the signal “adds excitement to driving.”

The Company identified several driver-types when it comes to ignoring turn signals – Impulsive, Lazy, Forgetful, Swervers, Ostriches, Followers, and the Dare Devils. 

“The bottom line is that most drivers are failing to see the importance of using their turn signals,” noted Mory Katz, Chairman & CEO of Response Insurance. “But, they are doing so at their own peril – and the peril of others – since their unanticipated actions cause crashes.”

The just released Response Insurance National Driving Habits Survey also indicated that men are more likely than women to forgo their signal when changing lanes (62% vs. 53%), as are younger drivers (ages 18-24), 71% of whom report they don’t signal, as compared to 49% of older adults (ages 55-64).

Response Insurance is a direct to the consumer auto insurer focusing on insuring safe, responsible people. The Company regularly provides to the public news and information regarding driver safety and transportation issues. They issue safety tips, reports, analyses, and conduct original research as a public service. This Response Insurance National Driving Habits Survey of 1,000 adults was conducted 8/18-21/05. The survey has a margin of error of + / - 3%.

Evaluation demonstrates PEMCO’s commitment to quality

February 21, 2006

SEATTLE – Many companies advertise great service, but how many have been recognized for this by a non-partial third party such as J.D. Power and Associates? PEMCO Insurance is part of an elite class of companies that have been recognized by J.D. Power and Associates for its Call Center Customer Satisfaction Excellence.

To receive recognition, companies must score higher than 730 out of a possible 1000 points. PEMCO received 911 points, a score that was noted as unusually high by J.D. Power and Associates.

“We come to work every day committed to giving our customers the absolute highest level of service and value,” said Jon Osterberg, PEMCO spokesperson. “This certification demonstrates that. Service is the bedrock of PEMCO’s culture, and it’s extremely gratifying to see our customers recognize that.”

J.D. Power and Associates’ evaluation was conducted in two phases. The first phase looked at PEMCO’s recruiting, training, employee incentives, management roles and responsibilities, and quality assurance capabilities.

The second phase of the study surveyed 400 random callers that contacted PEMCO’s call center from December 1, 2005 to December 13, 2005.

Results revealed in the report showed there is an awareness of and sensitivity to the situations their clients are dealing with and an embedded philosophy of going beyond to please the customer.
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The report also said PEMCO’s operations demonstrate a remarkably strong commitment to the satisfaction of their customers, resulting in uniquely high levels of satisfaction among them.

Almost 90 percent of callers gave PEMCO’s customer service representatives the highest ratings in all areas of evaluation that included:

• Courtesy of the customer service representative
   (CSR)
• Knowledge of PEMCO’s services and practices by
   the CSR
• Concern for resolving the customer’s questions
   and/or problem
• Usefulness of the information provided by the CSR
• Convenience of customer service operating hours
• Ease of getting through to a CSR
• Timely resolution of the customer’s problem,
   question, or request.

“We’ll use this rating as a benchmark to help us strive for higher service marks in the future,” said Osterberg. “We’re proud of this certification, but we’ll do even better.”

In 2004, J.D. Power and Associates’ Call Center Certification program was launched to help call centers increase efficiency and effectiveness by establishing best practices for handling service calls.

About PEMCO Insurance
PEMCO Insurance, established in 1949, is a Seattle-based provider of auto, home, boat, life, and umbrella insurance to Washington state residents. PEMCO Insurance is sold by community agents throughout the state and through PEMCO offices. For more information, visit www.pemco.com.

PEMCO’s Northwest Insurance Poll reveals most Washington residents believe owning a hybrid will save money; research shows owners will have to be patient

April 10, 2006

SEATTLE – Most new-car buyers in Washington who are likely to buy a hybrid share a common misconception that owning a hybrid car will save them money through better mileage, according to PEMCO’s Northwest Insurance Poll. The reality is that while the increased purchase cost of a hybrid can be offset in gas savings, it can take up to five years before the savings pencil out, according to published reports.

PEMCO’s poll data shows that 47 percent of drivers who plan to purchase a new car in the next year, and who are likely to buy a hybrid, report the primary reason they would buy a hybrid is to improve gas mileage. Twenty-two percent say their primary reason would be to save the environment, while 19 percent specifically said “to save money.”

“New-car buyers can consider hybrids because they reduce pollution and save the environment, but they shouldn’t expect to save money in the short-term,” said Jon Osterberg, PEMCO’s spokesperson. “Our poll data uncovered false expectations. Forty-four percent said a hybrid would cost less than a conventional car to drive and maintain.”

Consumers should be aware that in a recent study commissioned by the nation’s leading consumer magazine, only two of six hybrid cars that were tested recovered the price premium in less than five years. Five years is also the typical period of car ownership, according to the magazine.

In the coming months and years, virtually every car manufacturer has plans to introduce a hybrid car model. In 2005, hybrid cars accounted for 1.2 percent of auto sales – more than double its market share from 2004. Auto manufacturers are having a hard time keeping them on the lot.

Those looking to save money by purchasing a hybrid car need to know that hybrids can cost anywhere from $2,000 to $8,000 more than their gas-powered counterparts.

The timing of a hybrid car purchase also plays into savings. To help ease higher initial fees, new hybrid-car owners currently can take advantage of federal tax credits ranging from $650 to $3,150. Consumers should know that after each manufacturer sells 60,000 hybrid units, regardless of model, the credits gradually will be phased out.

In most cases, the tax credits offered on hybrids, combined with money saved on gasoline, are not enough to recover the purchase price during the first several years of owning the car.

Despite the perceived cost savings, over half of Washington’s residents who plan to purchase a new car this year do not plan to purchase a hybrid, according to PEMCO’s poll data.

“With such rapid growth of the hybrid car market, it’s important for consumers to have realistic expectations. Hybrid cars can save owners money, but not as soon as most people think,” said Osterberg.

Other poll observations:

• Older drivers (age 35+) in Washington state are
   more likely to purchase a hybrid car than younger
   drivers (ages 18 – 34).
• 46 percent of Washington drivers who are likely to
   purchase a hybrid in the next year have a college
   degree, 37 percent report having some college or
   technical education, and 24 percent have no
   college education.
• Washington state drivers who own their home, and
   who plan to purchase a new car in the next year,
   are almost twice as likely to purchase a hybrid car
   as those drivers who rent their home (43 percent of
   owners compared to 23 percent of renters).

Anyone wanting to compare their answers with respondents to the PEMCO Northwest Insurance Poll can do so by visiting www.pemco.com, where complete results are posted.

About the poll
PEMCO Insurance commissioned the independent, statewide survey that asked Washington homeowners several questions about automobiles and other issues.

Informa Research Services Inc. of Seattle conducted the poll. The sample size, 606 respondents, yields an accuracy of +/- 4 percent at the 95 percent confidence level. In other words, if this study was conducted 100 times, in 95 instances the data will not vary by more than +/- 4 percent.

About PEMCO Insurance
PEMCO Insurance, established in 1949, is a Seattle-based provider of auto, home, boat, life, and umbrella insurance to Washington residents. PEMCO Insurance is sold by community agents throughout the state, as well as through PEMCO offices. For more information, visit www.pemco.com.