Coastal Healthcare Group enters into definitive agreement to acquire Mid-South Insurance Company.

DURHAM, N.C.--(BUSINESS WIRE)--March 13, 1995--Coastal Healthcare Group Inc. (NYSE:DR) announced today that it has entered into a definitive agreement to acquire Mid-South Insurance Company (NASDAQ:MIDS), primarily a medical indemnity insurer based in Fayetteville, N.C.

Coastal will issue approximately 2.9 million common shares in exchange for 100% of the outstanding common stock of Mid-South. Consummation of the transaction is subject to the satisfaction of certain conditions including the approval of Mid-South's shareholders, the approval of the North Carolina Department of Insurance and other regulatory approvals.

Mid-South, using managed care provider networks, has 2,200 employer relationships that represent approximately 81,000 covered lives, two-thirds of which are concentrated in North Carolina. In addition, the company contracts with approximately 4,400 physicians and 180 hospitals. While Mid-South's operations are focused on the small group employer markets in North Carolina, South Carolina, Georgia and Virginia, it is licensed in 28 states, including Coastal's target markets of Texas and Florida.

"This transaction substantially strengthens Coastal's presence in key Sunbelt markets that we have targeted for the development of integrated health care delivery systems," stated Steven M. Scott, M.D., president and chief executive officer of Coastal Healthcare Group Inc. "We believe there are important competitive advantages to the combination of Mid-South's 2,000-broker distribution network and the addition of a managed care indemnity product to Coastal's HMO operations in North Carolina. This will also enable Coastal to add a Point-of-Service (POS) option to our northern Florida HMO, HealthPlan Southeast. We believe the combined effect should accelerate Coastal's growth of covered lives. Additional growth opportunities should come from IPA development and management, MSOs, hospital-based contracting and increased utilization of Coastal's clinic-based provider network in North Carolina."

Graham B. Blanton, Mid-South president, commented: "Coastal's reputation and ability to work with physicians to build managed care operations, combined with exciting geographic synergies, will allow us to offer a broad choice of quality-driven managed care products. Coastal and Mid-South are both focused on expanding and strengthening their positions in the Southeast and believe that building long-term relationships with physicians is the key to success in the development of cost-effective integrated health care delivery systems."

Following the transaction, Mid-South will operate as a wholly owned subsidiary of Coastal and will maintain its corporate headquarters in Fayetteville. In addition, Mr. Blanton will be assuming the role of chief executive officer for Mid-South and will be taking on additional responsibilities at Coastal. Mid-South's founder and current CEO, Walter B. Clark, will assume an advisory role to both Mid-South and Coastal.

The transaction is expected to be a tax-free, stock-for-stock exchange and accounted for as a pooling of interests. The definitive agreement provides for an exchange ratio of 0.5398 shares of Coastal common stock for each share of Mid-South. The actual number of shares to be delivered at closing will be subject to potential adjustment based on Coastal's twenty-day average stock price prior to the closing of the transaction. The transaction is anticipated to close in the third quarter of 1995. In addition, a voting agreement was executed in conjunction with the definitive agreement with selected shareholder members of Mid-South's board of directors.

Coastal Healthcare Group Inc. -- The Physician Company, is the largest publicity traded physician management company in the U.S., and provides a broad range of health care and administrative services to physicians, hospitals, employers, managed care programs and other health care providers.

CONTACT: Coastal Healthcare Group Inc.

David H. Fater, 919/383-0355