A.M. Best Upgrades Rating of Sierra Health Services Healthcare Subsidiaries; Affirms Rating of Sierra Insurance Group.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--May 21, 2003

A.M. Best Co. has upgraded the financial strength ratings to B+ (Very Good) from B (Fair) of Sierra Health Services, Inc.'s (Sierra) (NYSE: SIE) core HMO, Health Plan of Nevada, Inc. (both of Las Vegas), and its health insurance company, Sierra Health and Life Insurance Company, Inc. (Los Angeles).

A.M. Best has also assigned a "bb-" debt rating to Sierra's recently issued $115.0 million of 2.25% senior unsecured convertible debentures due 2023. The rating outlook is stable.

Concurrently, A.M. Best has affirmed the financial strength rating of B (Fair) of Sierra's discontinued workers' compensation insurance group, Sierra Insurance Group (Pleasanton, CA). (See listing of companies below.) The rating outlook is negative for all regulated workers' compensation subsidiaries.

Earnings growth at the Nevada companies, primarily Health Plan of Nevada, continues to be strong. The companies have increased their leading market share in the Las Vegas area where they operate a successful integrated delivery network. A.M. Best expects strong performance to continue over the medium term. Additionally, Sierra's consolidated cash earnings and debt service capability have improved substantially, driven by the essentially complete withdrawal from the Texas market, which had been a considerable drain and had been supported by funds borrowed on its revolving credit facility.

The excellent earnings growth has increased Sierra's debt interest expense coverage from -9.25 times to 7.8 times between 2000 and 2002, and this positive trend has continued into 2003. Despite this positive earnings trend, Sierra continues to maintain a marginal amount of cash at the holding company. Also, the HMO is thinly capitalized for a secure rating. Sierra has already begun to increase the holding company cash and the capitalization of the HMO and will continue to do so during 2003.

While many of the past year's critical concerns have been resolved, some concerns related to issues at entities other than the health plan remain. A.M. Best is somewhat concerned about the increase in Sierra's debt-to-capital ratio to approximately 50%, especially after the organization had focused intently on paying down outstanding debt. This increase was driven by Sierra's new $115.0 million 2.25% senior convertible debentures issued in March 2003. These concerns are mitigated by the conversion features of the debentures as well as Sierra's decision to redeem all of the workers' compensation subsidiary's senior debentures and its current intent to pay off the Texas properties' mortgage note ahead of maturity. As a result, A.M. Best anticipates Sierra's financial leverage could lower to approximately 35% by year-end 2003.

Furthermore, two outstanding events pose medium term uncertainties. The timing of the workers' compensation disposition and the ultimate value realized could impact Sierra's consolidated capital structure negatively. Also, the TRICARE North region bid, if won, could have negative implications from an execution and liquidity risk standpoint, owing to the size of the contract in relation to Sierra's current infrastructure and financial flexibility. A.M. Best will continue to evaluate these developments and their impact on the corporation's financial strength.

Sierra Insurance Group's financial strength rating has not been upgraded at this time due to the group's pending disposition, continued deterioration in overall capitalization and weak operating performance in recent years. Since 2000, adverse development of loss reserves for prior accident years has offset the improvement in current underwriting profitability driven by the firming workers' compensation market conditions. Any additional reserve charges going forward could further weaken capitalization and dampen operating profitability, which could put downward pressure on the group's financial strength rating. Reflecting this potential, the rating outlook is negative.

The following new debt rating has been assigned:

Sierra Health Services, Inc. --

-- "bb-" on senior convertible debt

The following subsidiaries' financial strength ratings have been upgraded to B+ (Very Good) from B (Fair) and assigned stable outlooks:

-- Health Plan of Nevada, Inc.

-- Sierra Health and Life Insurance Company, Inc.

The financial strength rating of B (Fair) has been affirmed for Sierra Insurance Group and its subsidiaries and assigned a negative outlook:

-- California Indemnity Insurance Company

-- CII Insurance Company

-- Commercial Casualty Insurance Company

-- Sierra Insurance Company of Texas

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.