A.M. Best Assigns and Affirms Issuer Credit Ratings of Sierra Health S

A.M. Best Assigns and Affirms Issuer Credit Ratings of Sierra Health Services and Affirms Financial Strength and Debt Ratings

    Business Editors

    OLDWICK, N.J.--(BUSINESS WIRE)--April 26, 2005--A.M. Best Co. has assigned issuer credit ratings of "bbb" and has affirmed the financial strength rating of B++ (Very Good) of Sierra Health Services, Inc.'s (Sierra) (Las Vegas, NV) (NYSE: SIE) core HMO subsidiaries, Health Plan of Nevada, Inc (HPN) (Las Vegas, NV) and its health insurance company, Sierra Health and Life Insurance Company, Inc. (Los Angeles, CA). A.M. Best has also affirmed the debt rating of "bb" of Sierra's $115 million of 2.25% senior unsecured convertible debentures, due 2023 and its issuer credit rating of "bb". All ratings have a stable outlook.
    Sierra's financial flexibility continues to improve, providing cash flows well in excess of debt-related interest payments, bank covenant thresholds and working capital needs. A.M. Best anticipates this trend would continue during the medium term. Management has grown the holding company's cash balance and HPN's risk-based capital, while right sizing the firm's capital structure through share repurchase. Financial leverage approximating 21%--adjusted conservatively by A.M. Best for the convertible debentures' equity characteristics--is reasonable for the ratings.
    A.M. Best anticipates management would continue to utilize cash flows to expand Sierra's, holding company's, cash balance and re-invest in its operating infrastructure, the latter including technology investments and clinic construction. A.M. Best anticipates share repurchase activity would moderate during the near term, driven by the sizeable climb in Sierra's stock price. Importantly, Sierra has repurchased sufficient common shares to satisfy the convertible debentures' conversion feature. A.M. Best foresees management modestly expanding the risk-based capital at HPN, which is adequate for the financial strength rating given the parent's financial flexibility.
    Sierra's operating ratios and debt service capability compare well to its peers' results. The workers' compensation company divestiture and Texas HMO business run-out removed a meaningful drag on HPN's strong earnings. Additionally, Sierra's favorable operating returns are no longer diluted by the lower-margin TRICARE business, owing to the lost government contract bid.
    Membership and revenue growth at the Nevada companies, primarily HPN, continues to be strong. The companies continue to increase their leading market share in the growing Las Vegas area where a successful integrated delivery network provides a competitive advantage. A.M. Best expects strong growth to continue over the medium term, aided by Las Vegas' favorable demographic projections and the transition of self-insured employer groups to Sierra's cost-effective integrated delivery system.
    The following debt rating has been affirmed with a stable outlook:

    Sierra Health Services, Inc.--
    -- "bb" on $115 million of 2.25% senior unsecured convertible
    debentures, due 2023

    Issuer credit ratings of "bbb" have been assigned, and the financial strength rating of B++ (Very Good) has been affirmed with a stable outlook for the following subsidiaries of Sierra Health Services, Inc.:

--	Health Plan of Nevada, Inc.
--	Sierra Health and Life Insurance Company, Inc.

    The issuer credit rating of "bb" has been affirmed with a stable outlook for Sierra Health Services, Inc.
    For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
    For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, please visit http://www.ambest.com/health/.
    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 http://www.ambest.com.

--30--MW/ny*

CONTACT: A.M. Best (Public Relations) Jim Peavy, 908/439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Striegel, 908/439-2200, ext. 5378 rachelle.striegel@ambest.com or (Analysts) Christian Miles, CPA, 908/439-2200, ext. 5026 christian.miles@ambest.com or Dana Mehta, CFA, 908/439-2200, ext. 5061 dana.mehta@ambest.com

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: INSURANCE SOURCE: A.M. Best

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