UAM Universal American Corp. New (delisted)

Universal American Corp. (NYSE:UAM) today announced financial results for the quarter ended June 30, 2014.

Results of Second Quarter 2014

Universal American’s reported net loss for the second quarter of 2014 was $9.8 million, or $0.12 per share. Adjusted net income for the second quarter of 2014 was $1.0 million, or $0.01 per share, which excludes the following after-tax items:

• $0.3 million, or less than $0.01 per share, of net realized investment gains;
• $0.1 million, or less than $0.01 per share, of non-recurring tax expense;
• $4.5 million, or $0.05 per share, of legal expenses related to APS Healthcare; and
• $6.5 million, or $0.08 per share, of costs associated with our Accountable Care Organization (ACO) business.

Total revenues for the second quarter of 2014 were approximately $519 million.

Results of Six Months Ended June 30, 2014

Universal American’s reported net loss for the first half of 2014 was $14.9 million, or $0.17 per share. Adjusted net income for the first half of 2014 was $5.1 million, or $0.06 per share, which excludes the following after-tax items:

• $1.0 million, or $0.01 per share, of net realized investment gains;
• $0.1 million, or less than $0.01 per share, of non-recurring tax expense;
• $5.9 million, or $0.07 per share, of legal expenses related to APS Healthcare; and
• $15.0 million, or $0.17 per share, of costs associated with our ACO business.

Total revenues for the first half of 2014 were approximately $1.0 billion.

Management Comments

Richard A. Barasch, Chairman and CEO, commented, “We are highly focused on fixing or eliminating all of the items that detract from the solid businesses at the heart of Universal American.

“In Medicare Advantage, we have identified our core markets, largely with 4 Star ratings, and we will concentrate our efforts to increase membership, impact medical costs and improve quality in those markets. Consequently, we significantly reduced the number of markets in which we bid for 2015 and have contracted to sell our plans in Oklahoma.

“We are pleased with the underwriting results in the first half of 2014 in the core markets, helped by positive development from the prior year. These results, combined with the additional revenue resulting from 4 Star ratings in our core markets, gave us a solid base for our 2015 bids. We are pleased with the benefit packages that we will be offering for 2015 and look forward to the 2015 enrolment period.

“We remain firmly committed to our ACO business and are beginning to see encouraging data that demonstrates that we are impacting medical costs. We expect that the 2013 and 2014 results will show savings and revenue but we are continuing to reduce the size and scope of our investment. Similar to Medicare Advantage, we are identifying the ACO’s where the Medicare Shared Savings Program can work and where we can truly impact the cost and quality of medical care. We believe that we have a core group of ACOs with whom we will generate positive results.

“Even after the repurchase of our shares in May, our balance sheet remains strong and as we right-size the company, we intend to continue to return excess capital to our shareholders. At June 30, we had approximately $140 million of excess capital, not including the excess capital that will be generated from our reduced footprint in Medicare Advantage.”

Medicare Advantage

      Three Months Ended

June 30,

  Six Months Ended

June 30,

Financial Performance ($ in millions) 2014   2013 2014   2013   Revenue $ 362.4 $ 394.9 $ 722.2 $ 824.9   Operating Income $ 12.8 $ 0.0 $ 37.7 $ 38.6

For the first six months of 2014, the Medicare Advantage segment operating income declined by $0.9 million compared to the same period in 2013. The 2014 results were negatively impacted by expected lower membership, a lower premium yield per member and the new Affordable Care Act fee (“ACA Fee”), partially offset by lower administrative expenses and an improvement in favorable prior period items which led to a lower Medical Benefit Ratio (MBR).

The increase in operating income for the second quarter of 2014 as compared to the second quarter of 2013 was driven by an increase in the impact of favorable prior period items and lower administrative expenses, offset by a decline in membership and lower premium yield per member and the new ACA fee.

The six months ended June 30, 2014, included $11.6 million of expense related to the ACA fee. The second quarter of 2014 included $6.2 million of the ACA fee.

      Six Months Ended

June 30, 2014

      Six Months Ended

June 30, 2013

Medical Benefit Ratio ($ in millions)                 Premiums $ 714.3 $ 814.6  

Quality Initiatives1

$ 15.6 2.2% $ 12.9 1.6% Medical Benefits 580.4 81.2% 685.1 84.1% Total Benefits $ 596.0 83.4% $ 698.0 85.7%

1Beginning in 2014, in connection with the reporting of minimum medical loss ratios under the Affordable Care Act, we are reporting the costs of quality improvement initiatives in claims and other benefits in the consolidated statements of operations. Historically, these costs were reported in other operating costs and expenses. To maintain consistency with the new reporting classification, we have reclassified $12.9 million of such costs for the six months ending June 30, 2013 consolidated statement of operations from other operating costs and expenses to claims and other benefits.

For the first six months of 2014, our reported MBR included positive prior period items of $28.1 million, pre-tax. Excluding these prior period items, our adjusted Medical Benefits MBR was 84.9%, compared to the reported amount of 81.2%. Our core markets had an adjusted Medical Benefits MBR of 83.2%, the non-core markets were 91.3% and the rural markets, with approximately 2,100 members, were 96.4%, in each case excluding expenses associated with quality initiatives. Our core markets consist of our HMO members in Texas and approximately 30,000 members in Upstate NY and Maine.

      Three Months Ended

June 30, 2014

  Three Months Ended

June 30, 2013

Medical Benefit Ratio ($ in millions)         Premiums $ 358.4 $ 390.0  

Quality Initiatives2

$ 8.1 2.3% $ 6.9 1.8% Medical Benefits 297.9 83.1% 344.1 88.2% Total Benefits $ 306.0 85.4% $ 351.0 90.0%

2Beginning in 2014, in connection with the reporting of minimum medical loss ratios under the Affordable Care Act, we are reporting the costs of quality improvement initiatives in claims and other benefits in the consolidated statements of operations. Historically, these costs were reported in other operating costs and expenses. To maintain consistency with the new reporting classification, we have reclassified $6.9 million of such costs in the June 30, 2013 consolidated statement of operations from other operating costs and expenses to claims and other benefits.

For the second quarter of 2014, our reported MBR included positive prior period items of $13.1 million, pre-tax. Excluding these prior period items, our adjusted Medical Benefits MBR was 86.2%, compared to the reported amount of 83.1%. Our core markets had an adjusted MBR of 84.6%, the non-core markets were 92.4% and the rural markets, with approximately 2,100 members, were 97.7%, in each case excluding expenses associated with quality initiatives.

The administrative expense ratio for the first six months of 2014, excluding the ACA fee of $11.6 million and $15.6 million of quality initiative expenses, was 10.8%, the same level as the first six months of 2013. For the second quarter of 2014, excluding the ACA fee of $6.2 million and $8.1 million of quality initiative expenses, the administrative expense ratio was 10.4%, compared to 11.2% in 2013.

Current Medicare Advantage membership is approximately 120,900.

Traditional Insurance

      Three Months Ended

June 30,

  Six Months Ended

June 30,

Financial Performance ($ in millions) 2014   2013 2014   2013   Revenue $ 51.9 $ 58.6 $ 105.9 $ 120.3   Operating / Income $ 3.4 $ 5.1 $ 3.3 $ 7.4

Revenue and Operating Income in our Traditional segment declined in both the three month and six month periods ended June 30, 2014 due to the continued run-off of our legacy insurance products, which we stopped marketing and selling after June 1, 2012.

Corporate & Other

      Three Months Ended

June 30,

  Six Months Ended

June 30,

Financial Performance ($ in millions) 2014   2013 2014   2013   Revenue $ 105.4 $ 74.8 $ 204.1 $ 147.4   Operating Loss $ (25.8) $ (109.3) $ (53.6) $ (130.1)

Our Corporate & Other segment includes the results of APS Healthcare, the Total Care Medicaid plan, the New York Health Benefit Exchange, ongoing expenses related to the development of our ACOs and the operations of our parent holding company, including debt service.

      Three Months Ended

June 30,

  Six Months Ended

June 30,

Pre-Tax Income (Loss) ($ in millions) 2014   2013 2014   2013   APS Healthcare $ 1.1 $ 1.8 $ 0.2 $ 0.4 Total Care 1.2 - 2.1 - ACOs (10.0) (9.5) (23.1) (18.3) Interest Expense (1.8) (1.7) (3.5) (3.3) Corporate (9.4) (7.7) (20.3) (16.4) APS Legal Costs (6.9) (0.5) (9.0) (0.8) Asset Impairment - (91.7) - (91.7) Total $ (25.8) $ (109.3) $ (53.6) $ (130.1)

Our Corporate & Other segment operating loss for both the three and six months ended June 30, 2014 improved year-over-year primarily due to the $91.7 million asset impairment charge relating to APS Healthcare that occurred in the second quarter of 2013.

Our Corporate & Other segment results include $6.9 million and $9.0 million, pre-tax, of legal costs relating to APS Healthcare pre-acquisition matters for the three and six month periods ending June 30, 2014, respectively.

Investment Portfolio

As of June 30, 2014, Universal American had $953 million of cash and invested assets as follows:

• 25% is invested in U.S. Government and agency securities;
• The average credit quality of the fixed income portfolio is AA-; and
• Less than 2% of the portfolio is non-investment grade.

A complete listing of our fixed income investment portfolio as of June 30, 2014 is available for review in the financial supplement located in the Investors – Financial Reports section of our website, www.UniversalAmerican.com.

Balance Sheet and Liquidity

As previously disclosed, on May 13, 2014, we repurchased and retired six million shares of our common stock directly from funds associated with Capital Z Partners Management, LLC at a price of $6.03 per share for total consideration of $36.2 million. We used cash on hand to fund the repurchase of these shares.

As of June 30, 2014, Universal American’s Balance Sheet had the following characteristics:

• Total cash and investments were $953.4 million and total assets were $2.1 billion;
• Total policyholder liabilities were $1.1 billion and total liabilities were $1.5 billion;
• Stockholders’ equity was $630.0 million and book value was $7.49 per diluted common share;
• Tangible book value per diluted common share (excluding accumulated other comprehensive income, goodwill, amortizing intangibles and deferred acquisition costs) was $5.59;
• Unregulated cash and investments of $39.4 million;
• $103.4 million of bank debt; and
• $40 million of mandatorily redeemable preferred stock, reported as a liability, with an annual dividend rate of 8.5%.

The ratio of debt to total capital, excluding the effect of Accumulated Other Comprehensive Income and including Universal American’s mandatorily redeemable preferred stock as debt was 18.9%.

Conference Call

Universal American will host a conference call at 9:30 a.m. Eastern Time on Tuesday, July 29, 2014, to discuss financial results and other corporate developments. Interested parties may participate in the call by dialing (201) 493-6744. Please call in 10 minutes before the scheduled time and ask for the Universal American call. This conference call will also be available live over the Internet and can be accessed at Universal American’s website at www.UniversalAmerican.com, and clicking on the “Investors” link in the upper right. To listen to the live call on the website, please go to the website at least 15 minutes early to download and install any necessary audio software. A replay of the call will be available on the investor relations section of the Company’s website for approximately two weeks following the call.

Prior to the conference call, Universal American will make available on its website a 2nd Quarter 2014 Investor Presentation and supplemental financial data in connection with its quarterly earnings release. You can access the 2nd Quarter 2014 Investor Presentation and supplemental financial data at www.UniversalAmerican.com in the “Investors” section under the “Presentations” and “Financial Reports” sections.

About Universal American Corp.

Universal American (NYSE: UAM), through our family of healthcare companies, provides health benefits to people covered by Medicare and/or Medicaid. We are dedicated to working collaboratively with healthcare professionals in order to improve the health and well-being of those we serve and reduce healthcare costs. For more information on Universal American, please visit our website at www.UniversalAmerican.com.

* * *

Forward Looking Statements

This news release and oral statements made from time to time by our executive officers may contain "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. Such statements that are not historical facts are hereby identified as forward-looking statements and intended to be covered by the safe harbor provisions of the PSLRA and can be identified by the use of the words "believe," "expect," "predict," "project," "potential," "estimate," "anticipate," "should," "intend," "may," "will," and similar expressions or variations of such words, or by discussion of future financial results and events, strategy or risks and uncertainties, trends and conditions in our business and competitive strengths, all of which involve risks and uncertainties.

Where, in any forward-looking statement, we or our management expresses an expectation or belief as to future results or actions, there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Our actual results may differ materially from our expectations, plans or projections. We warn you that forward-looking statements are only predictions and estimates, which are inherently subject to risks, trends and uncertainties, many of which are beyond our ability to control or predict with accuracy and some of which we might not even anticipate. We give no assurance that we will achieve our expectations and we do not assume responsibility for the accuracy and completeness of the forward-looking statements. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements as a result of many factors, including the risk factors described in the risk factor section of our SEC reports.

A summary of the information set forth in the "Risk Factors" section of our SEC reports and other risks includes, but is not limited to the following: the impact of CMS’s final Medicare Advantage reimbursement rates which will reduce Medicare Advantage payment rates for calendar year 2015 and may make it more difficult to maintain or grow our business; we are subject to extensive government regulation and the potential that CMS and/or other regulators could impose significant fines, penalties or operating restrictions on the Company, including with respect to False Claims Act matters or RADV audits; the Affordable Care Act and subsequent rules promulgated by CMS could have a material adverse effect on our opportunities for growth and our financial results; we may experience membership losses in our Medicare Advantage business; if we fail to design and price our products properly and competitively or if the premiums and fees we charge are insufficient to cover the cost of health care services delivered to our members, our profitability may be materially adversely affected; changes in governmental regulation or legislative reform could increase our costs of doing business and adversely affect our profitability; reductions in funding for Medicare programs could materially reduce our profitability; we may invest significant capital and management attention in new business opportunities, including our ACOs and Medicaid opportunities, that may not be successful; failure to reduce our operating costs could have a material adverse effect on our financial position, results of operations and cash flows; we may not be able to maintain or improve our CMS Star ratings which may cause certain of our plans to be terminated or to receive less bonuses or rebates than our competitors; we may experience higher than expected medical loss ratios which could materially adversely affect our results of operations; changes in governmental regulation or legislative reform, including the impact of Sequestration, could reduce our revenues, increase our costs of doing business and adversely affect our profitability; a substantial portion of our revenues are tied to our Medicare businesses and regulated by CMS and if our government contracts are not renewed or are terminated, our business could be substantially impaired; we no longer sell long-term care insurance and the premiums that we charge for the long-term care policies that remain in force may not be adequate to cover the claims expenses that we incur; any failure by us to manage our operations or to successfully complete or integrate acquisitions, dispositions and other significant transactions could harm our financial results, business and prospects; failure of the APS Healthcare business to retain existing contracts, including its contract with the Puerto Rico Medicaid agency that is expected to terminate on April 30, 2015, or enter into new contracts could further erode the value of the APS business; problems may arise in integrating the APS Healthcare business, which may result in Universal American not operating as effectively and efficiently as expected or failing to achieve the expected benefits of the transaction; Universal American may be unable to achieve cost-cutting synergies arising out of the transaction or it may take longer than expected to achieve those synergies; the APS Healthcare transaction may involve unexpected costs or unexpected liabilities, including litigation stemming from the acquisition; a substantial portion of APS Healthcare’s revenues are tied to short-term customer contracts which generally can be terminated without cause. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of Universal American.

All forward-looking statements included in this release are based upon information available to Universal American as of the date of the release, and we assume no obligation to update or revise any such forward-looking statements.

(Tables to follow)

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIESSELECTED CONSOLIDATED FINANCIAL DATAIn millions, except per share amounts(Unaudited)

 

      Three Months Ended

June 30,

  Six Months Ended

June 30,

Consolidated Results 2014   2013 2014   2013     Net premiums and policyholder fees $ 488.5 $ 484.3 $ 970.2 $ 1,005.5 Net investment income 7.8 9.5 15.8 19.4 Other income 22.6 30.1 44.5 59.7 Realized gains 0.5 10.1 1.5 12.6   Total revenues 519.4 534.0 1,032.0 1,097.2   Policyholder benefits 415.7 426.2 812.5 849.2 Change in deferred acquisition costs 1.5 2.2 4.5 6.0 Amortization of present value of future profits 1.3 2.2 2.6 4.5 Asset impairment charges - 91.7 - 91.7 Affordable Care Act fee 6.2 - 11.7 - Commissions and general expenses, net of allowances 96.5 96.9 196.2 200.1 Total benefits and expenses 521.2 619.2 1,027.5 1,151.5   (Loss) income before equity in losses of unconsolidated subsidiaries (1.8) (85.2) 4.5 (54.3)   Equity in losses of unconsolidated subsidiaries (7.3) (8.9) (15.6) (17.2)

Loss before income taxes

(9.1) (94.1) (11.1) (71.5) Provision for (benefit from) income taxes (1) 0.7 (2.3) 3.8 6.4   Net loss $ (9.8) $ (91.8) $ (14.9) $ (77.9)   Per Share Data (Diluted) Net loss $ (0.12) $ (1.05) $ (0.17) $ (0.89)   Diluted weighted average shares outstanding 84.5 87.4 86.0 87.3

See following page for explanation of footnote.

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIESSELECTED CONSOLIDATED FINANCIAL DATAIn millions, except per share amounts(Unaudited)

 

          Three Months Ended

June 30,

      Six Months Ended

June 30,

Income (loss) before income taxes by Segment 2014   2013 2014   2013   Medicare Advantage $ 12.8 $ 0.0 $ 37.7 $ 38.6 Traditional Insurance 3.4 5.1 3.3 7.4 Corporate & Other (25.8) (109.3) (53.6) (130.1) Realized gains 0.5 10.1 1.5 12.6   Loss before income taxes $ (9.1) $ (94.1) $ (11.1) $ (71.5) BALANCE SHEET DATA       June 30, 2014 Total cash and investments $ 953.4 Total assets $ 2,085.0 Total policyholder related liabilities $ 1,145.2 Total reinsurance recoverable (ceded policyholder liabilities) $ 649.7 Outstanding bank debt $ 103.4 Mandatorily redeemable preferred shares $ 40.0 Total stockholders' equity $ 630.0 Diluted book value per common share $ 7.49 Diluted common shares outstanding at balance sheet date 84.1  

Non-GAAP Financial Measures *

Total stockholders’ equity (excluding AOCI) * $ 614.6 Diluted book value per common share (excluding AOCI) * (2) $ 7.31 Diluted tangible book value per common share (excluding AOCI) * (3) $ 5.59 Debt to total capital ratio (excluding AOCI) * (4) 18.9%       Three Months Ended

June 30,

  Six Months Ended

June 30,

2014   2013 2014   2013   Adjusted net income (loss)(5) $ 1.0 $ (1.4) $ 5.1 $ 15.8 Adjusted net income (loss) per share (diluted) $ 0.01 $ (0.02) $ 0.06 $ 0.18

* Non-GAAP Financial Measures - See supplemental tables on the following pages of this release for a reconciliation of these items to financial measures calculated under U.S. generally accepted accounting principles (GAAP).

(1) For the three and six months ended June 30, 2014, we determined our current year income tax provision using actual year to date financial results for our domestic and foreign tax jurisdictions, as compared to the estimated annual effective tax rate method utilized in 2013. The effective tax rate was (8.3%) for the second quarter of 2014 compared to 2.4% for the second quarter of 2013. For the six months ended June 30, 2014, the effective tax rate was (34.4%), compared with (8.9%) for 2013. For the three and six month periods ended June 30, 2014, the tax effect of permanent items exceeded the tax effect of our loss from operations, resulting in income tax expense. Permanent items include those items that were mandated as non-deductible under the Affordable Care Act (ACA fee and non-deductible executive compensation) as well as interest on the mandatorily redeemable preferred stock. We include state and foreign income taxes in our tax expense that also contributed to the variance in the effective tax rate.

(2) Diluted book value per common share (excluding AOCI) represents Total Stockholders’ Equity, excluding accumulated other comprehensive income (“AOCI”), plus assumed proceeds from the exercise of vested, in-the-money options, divided by the total shares outstanding plus the shares assumed issued from the exercise of vested, in-the-money options.

(3) Tangible book value per common share represents Total Stockholders’ Equity, excluding AOCI and intangible assets plus assumed proceeds from the exercise of vested, in-the-money options, divided by the total shares outstanding plus the shares assumed issued from the exercise of vested, in-the-money options.

(4) The Debt to Total Capital Ratio (excluding AOCI) is calculated as the ratio of the Mandatorily Redeemable Preferred Shares to the sum of Stockholders’ Equity (excluding AOCI) plus the Mandatorily Redeemable Preferred Shares.

(5) Adjusted net income (loss) is calculated as net income (loss) excluding the following items on after tax basis: asset impairment, net realized gains and losses, non-recurring tax benefits/expenses, ACO costs and other non-recurring items.

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIESSUPPLEMENTAL FINANCIAL INFORMATIONNON-GAAP FINANCIAL MEASURESIn millions, except per share amounts(Unaudited)

Universal American uses both GAAP and non-GAAP financial measures to evaluate the Company’s performance for the periods presented in this press release. You should not consider non-GAAP measures to be an alternative to measurements required by GAAP. Because Universal American’s calculation of these measures may differ from the calculation of similar measures used by other companies, investors should be careful when comparing Universal American’s non-GAAP financial measures to those of other companies. We have not included a reconciliation of projected earnings per diluted share because projections for some components of this reconciliation are not possible to forecast at this time. The key non-GAAP measures presented in our press release, including reconciliation to GAAP measures, are set forth below.

Adjusted Net Income (Loss) ($ in millions, except per share amounts)

    Three Months Ended

June 30,

  Six Months Ended

June 30,

2014   2013 2014   2013       Net loss $ (9.8) $ (91.8) $ (14.9) $ (77.9) Net realized gains, after-tax (0.3) (6.6) (1.0) (8.2) Non-recurring tax expense (benefit) 0.1 (0.1) 0.1 (0.4) ACO costs, after-tax 6.5 6.4 15.0 11.5 Asset impairment charge, after tax - 90.6 - 90.6 Other non-recurring items, after-tax 4.5 0.1 5.9 0.2 Adjusted net income (loss) $ 1.0 $ (1.4) $ 5.1 $ 15.8   Per share (diluted) Net loss $ (0.12) $ (1.05) $ (0.17) $ (0.89) Net realized gains, after-tax - (0.07) (0.01) (0.09) Non-recurring tax benefit - - - (0.01) ACO costs, after-tax 0.08 0.07 0.17 0.13 Asset impairment charge, after tax - 1.03 - 1.04 Other non-recurring items, after-tax 0.05 - 0.07 - Adjusted net income (loss) $ 0.01 $ (0.02) $ 0.06 $ 0.18

Universal American uses adjusted net income (loss), calculated as net loss excluding net realized gains after tax, non-recurring tax expense (benefit), ACO costs after-tax, asset impairment charge after tax, and other non-recurring items after tax as a basis for evaluating operating results. Although the excluded items may recur, we believe that the excluded items do not relate to the performance of Universal American’s core business operations and that adjusted net income (loss) provides a more useful comparison of our business performance from period to period.

Total Stockholders’ Equity (excluding AOCI)

      June 30,

2014

    December 31,

2013

Total stockholders’ equity $ 630.0 $ 664.9 Less: Accumulated other comprehensive income (15.4) (7.3)   Total stockholders’ equity (excluding AOCI) $ 614.6 $ 657.6

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIESSUPPLEMENTAL FINANCIAL INFORMATIONNON-GAAP FINANCIAL MEASURESIn millions, except per share amounts(Unaudited)

Universal American uses total stockholders’ equity (excluding AOCI), as a basis for evaluating growth in equity on both an absolute dollar basis and on a per share basis, as well as in evaluating the ratio of debt to total capitalization. We believe that fluctuations in stockholders’ equity that arise from changes in unrealized appreciation or depreciation on investments, as well as changes in the other components of accumulated other comprehensive income or loss, do not relate to the performance of Universal American’s core business operations.

Diluted Book Value per Common Share

        June 30,

2014

      December 31,

2013

Total stockholders’ equity $ 630.0 $ 664.9 Proceeds from assumed exercises of vested options - - $ 630.0 $ 664.9 Diluted common shares outstanding 84.1 88.9   Diluted book value per common share

$

7.49 $ 7.48  

Total stockholders’ equity (excluding AOCI)

$

614.6

$

657.6

Proceeds from assumed exercises of vested options

-

-

$

614.6

$

657.6

Diluted common shares outstanding

84.1

88.9

 

Diluted book value per common share (excluding AOCI)

$

7.31

$

7.40

As noted above, Universal American uses total stockholders’ equity (excluding AOCI), as a basis for evaluating growth in equity on a per share basis. We believe that fluctuations in stockholders’ equity that arise from changes in unrealized appreciation or depreciation on investments, as well as changes in the other components of accumulated other comprehensive income, do not relate to the performance of Universal American’s core business operations.

Tangible Book Value per Common Share       June 30,

2014

    December 31,

2013

Total stockholders’ equity (excluding AOCI) $ 614.6 $ 657.6 Less: intangible assets (1) (144.7) (149.4) Proceeds from assumed exercises of vested options - -   Tangible Book Value $ 469.9 $ 508.2 Diluted common shares outstanding 84.1 88.9   Tangible book value per common share $ 5.59 $ 5.72

Universal American uses Tangible book value per common share as a basis for evaluating the value of the Company’s tangible net assets.

(1) Intangible assets include the following at June 30, 2014 and December 31, 2013, respectively: goodwill ($77.5 million at both dates), deferred acquisition costs, net of taxes ($55.6 million and $58.7 million) and amortizing intangible assets, net of taxes ($11.6 million and $13.2 million).

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIESSUPPLEMENTAL FINANCIAL INFORMATIONNON-GAAP FINANCIAL MEASURESIn millions, except per share amounts(Unaudited)

Debt to Total Capital Ratio               June 30,

2014

        December 31,

2013

Outstanding bank debt $ 103.4 $ 103.4 Mandatorily redeemable preferred shares 40.0 40.0 Total outstanding debt $ 143.4 $ 143.4   Total stockholders’ equity $ 630.0 $ 664.9 Outstanding bank debt 103.4 103.4 Mandatorily redeemable preferred shares 40.0 40.0 Total capital $ 773.4 $ 808.3   Debt to total capital ratio 18.5% 17.7% Total stockholders’ equity (excluding AOCI)  

$

 

 

614.6          

$

 

           

 

657.6 Total outstanding bank debt 103.4 103.4 Mandatorily redeemable preferred shares     40.0                 40.0 Total capital

$

 

 

758.0

$

 

           

 

801.0         Debt to total capital ratio (excluding AOCI)     18.9%

$

 

              17.9%

As noted above, Universal American uses total stockholders’ equity (excluding AOCI), as a basis for evaluating the ratio of debt to total capital. We believe that fluctuations in stockholders’ equity that arise from changes in unrealized appreciation or depreciation on investments, as well as changes in the other components of accumulated other comprehensive income, do not relate to the performance of Universal American’s core business operations.

Universal American Corp.Robert A. Waegelein, 914-934-8820President & Chief Financial OfficerorINVESTOR RELATIONS COUNSELThe Equity Group Inc.Linda Latman, 212-836-9609orFred Buonocore, 212-836-9607www.theequitygroup.com