Fitch raises PacifiCare ratings

Fitch Ratings said it has upgraded all debt ratings assigned to PacifiCare Health Systems Inc.

The outlook is stable.

Fitch said the rating action reflects the significant progress made by PacifiCare over the past two years to improve profitability and strengthen its balance sheet. The rating action also reflects the improved outlook for the Medicare Advantage program following the recent passage of the Medicare Modernization Act in 2003.

Debt leverage declined over the last two years from a high of about 39% in June 2002 to about 25% at year-end 2003. Fitch said it expects the company will maintain leverage between 24% to 26% over the next 12 months and interest coverage is expected to exceed 5x.

Fitch raised PacifiCare Health Systems Inc.'s 3% convertible subordinated debentures to BB/stable from B+/positive; 10.75% senior unsecured notes due 2009 to BB+/stable from BB-/positive, bank loan rating to BB+/stable from BB/positive, and long-term rating to BB+/stable from BB/positive.

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