Sierra Health Serv. Seeks Alternatives for WC Sub.

January 16, 2003

Nev.-based Sierra Health Services Inc. announced that it has retained Banc of America Securities to explore strategic alternatives for the company’s workers’ compensation company, CII Financial Inc. Such alternatives may include a sale, spin-off or management buyout.

“Since its acquisition in October 1995, our workers’ compensation company has been profitable on an overall basis but is no longer a core subsidiary,” said Anthony M. Marlon, M.D., chairman and chief executive officer of Sierra. “As we move through this process of seeking strategic alternatives, the service levels that our customers and agents have come to expect will in no way be diminished. Our emphasis on new and renewal business, at profitable rates, will also continue unabated.”

Consistent with these actions and as required by Statement of Financial Accounting Standards No. 144, beginning in the fourth quarter of 2002 Sierra will reclassify the workers’ compensation insurance operations as discontinued operations. A valuation allowance will be recorded in the fourth quarter to reduce this business to its estimated fair value less disposal costs.

Sierra’s workers’ compensation insurance operations employ approximately 400 staff in several locations throughout the country, primarily in Las Vegas, Burbank, Calif. and Pleasanton, Calif. The company expects to retain its existing management and staff throughout this strategic process and believes its turnkey operations may be an attractive option for companies seeking to enter the workers’ compensation market.

Sierra also announced that it is raising its earnings estimates for 2002 and 2003. Excluding discontinued operations, the company now expects to exceed its prior earnings guidance of $1.30 to $1.35 per share for 2002. During the fourth quarter and year-end 2002 earnings call, scheduled for Jan. 30, the company will provide revised guidance for the year ending 2003. Current estimates for 2003 range from $1.50 to $1.55 per share.

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