Fitch Ratings Comments on Sierra Health.

Business Editors

CHICAGO--(BUSINESS WIRE)--Aug. 22, 2003

Fitch Ratings comments that yesterday's announcement by the U.S. Department of Defense (DoD) that Sierra Health Services (Sierra) was unsuccessful in its bid of the TRICARE Next Generation business will have no impact on Fitch's ratings on Sierra and its subsidiaries.

The current TRICARE program, which provides health benefits to military personnel and their dependents, is structured into 12 regions. Sierra Military Health Services, Inc., a subsidiary of Sierra, has been a prime TRICARE contractor for Region 1 since 1998. As part of the rebidding of all current contracts, the DoD is consolidating the program down to three regions. Based on yesterday's announcement, Sierra's current TRICARE operations would be phased out in late 2004 when the new contracts begin. The new contract awards are subject to appeal.

The TRICARE business has provided Sierra operational diversification and a consistent source of earnings. However, the business was capital intensive and, with pre-tax operating margins in 4% range, was less profitable than Sierra's other health insurance businesses. For the first six months of 2003, TRICARE operations accounted for reported $221 million or 31% of Sierra's consolidated revenue and $5.5 million or 9% of operating income. Most costs associated with a potential phase out of Sierra's TRICARE operations are subject to reimbursement by the DoD. As a result, a phase out of Sierra's TRICARE's operations should not result in an extraordinary charge in 2004.

Fitch's ratings on Sierra's two primary health insurance units, Health Plan of Nevada (HPN) and Sierra Health & Life Insurance Company (SHL), remain on Rating Watch Positive based on the companies' improving capitalization and earnings performance. The ratings on HPN and SHL continue to reflect SIE's strong market presence in the southern Nevada health care market, with strong and profitable competitive positions in the Medicare risk and commercial segments.

The 'BBB' insurer financial strength ratings on Sierra Health's workers' compensation unit, Sierra Insurance Group (SIG), remain on Rating Watch Evolving. In January 2003, Sierra Health reclassified SIG as a discontinued operation and announced plans to seek strategic alternatives for this business.

Sierra Health Services, Inc. is a publicly traded diversified managed care holding company (NYSE: SIE). The SIG companies, which include California Indemnity Insurance Company, Commercial Casualty Insurance Company, Sierra Insurance Company of Texas and CII Insurance Company, operate in the workers' compensation insurance business in California, Nevada, Colorado, Texas and five other selected markets. HPN and SHL are core operating companies in SIE's managed care division, and provide health insurance & managed care products and services primarily in the southern Nevada market.

Entity/Issue/Type/Rating/Outlook

Sierra Health Services, Inc.

-- Long-term issuer 'BB'/Stable;

-- Senior debt 'BB'/Stable.

Entity/Issue/Type/Rating/Rating Watch

Health Plan of Nevada

Sierra Health & Life Insurance Company

-- Insurer financial strength 'BBB'/Positive.

California Indemnity Insurance Co.

Commercial Casualty Insurance Co.

CII Insurance Co.

Sierra Insurance Company of Texas

-- Insurer financial strength 'BBB'/Evolving.