Universal American Corp. (UAM)

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Universal American Corporation (UAM)

Q1 2013 Earnings Call

April 30, 2013 10:00 AM ET


Richard Barasch – Chairman and CEO

Tony Wolk – SVP, General Counsel and Secretary

Bob Waegelein – President and CFO


Carl McDonald – Citigroup Inc

Thomas Carroll – Stifel Nicolaus

Scott Fidel – Deutsche Bank

Michael Baker – Raymond James



Greetings and welcome to the Universal American Corporation First Quarter 2013 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Richard Barasch, Chairman and CEO of Universal American Corp. Thank you, Mr. Barasch, you may begin.

Richard Barasch

Thank you, and good morning, everyone. Thanks for joining us on our first quarter 2013 conference call. I’m here with our CFO, Bob Waegelein and our General Counsel, Tony Wolk. I would like to ask Tony now to read our Safe Harbor language.

Tony Wolk

Before we begin, I would like to remind you that we have posted a presentation for this call in the Investors section of our website www.universalamerican.com. I would also like to remind all participants that our call this morning may contain forward-looking statements within the meaning of the federal securities laws. These statements, which reflect management’s current expectations, projections, and beliefs are subject to risks and uncertainties that may cause actual results to differ materially.

For a discussion of these risks and uncertainties, we recommend that you review the company’s risk factors and other disclosures set forth in our SEC filings. We undertake no obligation to update or revise any forward-looking statements to reflect events, developments or circumstances after the date hereof.

During the call, we will also be referring to certain non-GAAP financial measures. Please refer to the reconciliation tables listed in the press release for a discussion of these non-GAAP financial measures.

Richard Barasch

Thanks, Tony. Well or healthcare especially recently is not for the faint of heart. Having said that I am more convinced than ever that we are in the early stages of a massive revolution in the way healthcare in our country is delivered and financed. The combination of the reforms that have been legislated and the market and fiscally driven need to a more rational cost structure are causing every component of the healthcare system to figure out where we will be when this all shakes out.

There clearly will be winners and losers and we continue to be convinced that those who know how to deliver high quality healthcare at a fair cost will be among the winners. We are finding that even further we believe that we have positioned Universal American to be one of the winners through our ability to partner with providers largely primary care physicians to achieve these goals.

Turning to slide three, as you know Universal American has been actively involved in Medicare for quite a while and we have been quite adept over a long period of time in keeping pace with what the changing legislative and regulatory environments permits and adapting our business accordingly.

Thorough the Medicare Advantage business it’s got more complicated with sequester at the premium tax and lowered rates. But the product continues to gain popularity among seniors and the politics around the chain versus the 45 day letter show that the program has been embraced by both parties.

We believe our decision to pursue ACOs that the complement to Medicare Advantage is a natural extension of our provider focused approach to healthcare and also provides diversification of revenues and earnings. We also feel good about our decision to get into Medicaid. We are now actively pursuing the growing Medicaid market and in particular dual eligibles and people who need long term care.

The APS acquisition has proven to be more challenging than we had anticipated where we continue to believe that we will make progress in Medicaid certainly by 2014. I will come back to our current business and new initiatives in a moment but first let me turn it over to Bob who will describe our results for the first quarter.

Bob Waegelein

Thank you, Richard. I would like to remind you that we post additional information on our operating results in the financial supplement that can be found on our website in the Financial Reports tab of our Investors section.

So turning to slide four, you will see for the first quarter we reported adjusted after-tax income from our operations of $17.2 or $0.20 a share. Our Medicare Advantage business had a strong quarter with pre-tax profits of $38.6 million. Our reported MBR was 80.3% but after taking into account our typical positive prior year items, our restated Medicare Advantage MBR was 83.5 and was in line with our expectations.

We continue to be mindful of our administrative expenses and incur and expense ratio of 11.9% for the first quarter down from 12.4% in the first quarter of 2012. We do experience some seasonality as it relates to our expenses primarily for sales and marketing so we expect our Medicare Advantage expense ratio to be just above 13% for 2013. For the quarter, the traditional business also performed well earning 2.3 million for the quarter. As a reminder this business is in runoff and accordingly profits will reduce over time.

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