Universal American Corp. (UAM)

UAM 
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Universal American Corp. (UAM)

UBS Global Healthcare Conference Call

May 22, 2013 09:30 a.m. ET

Executives

Richard A. Barasch - Chairman and Chief Executive Officer

Analysts

Presentation

Unidentified Analyst

All right. I think we will get started here. Next up we have Universal American here. And we have the company's Chairman and CEO, Richard Barasch talk about it. So over to you I look forward to your comments.

Richard A. Barasch

Thank you. So I am in a three pitch presentation, a conversation between me and my old friend, Rob (Gia), who I have to say, probably 10 years ago was the first guy to recognize Universal American as something other than a traditional life insurance and (inaudible) company and an emerging player into that health insurance, health services business and always appreciative of Rob's prescient view of Universal American. So I am glad to see him here, filling up the whole right side of the room.

So you can see in these chart for these whole ten years, we started with the Medicare opportunity and we were just chatting before, there is a lot going on in the Medicare advantage market, rate cards, changes, regulatory issues, But this chart really oversee a period of time will overwhelm anything that's going on in the market, in the year-to-year piece of the market. I think that's absolutely correct.

The big change for Universal American over the past 1.5 year has been our determined effort to get into the Medicaid market as well, a place for all of our strengths, our flexibility, our ability to deal with multiple types of issues in healthcare. We are doing -- we don't have a lot to talk about just yet and I just hope everybody's got a little bit more patience with us about this part of the story, but it isn't going to emerge. And I think Universal American will have a very important place to play in the Medicaid market as well, the government programs and if you include the exchanges of the government program which it is on quasi basis is going to dominate healthcare for the next several, several generations. We are adept at this. We know how to work with the governments, we know what they are looking for and we think this is absolutely the place to be in the healthcare services business.

Now I won't spend a lot of time on our P&L for the first part of '13. We had a lot of prior periods where nobody should be multiplying this number by four, but you can -- even as we are in this transitional period we continue to make money, we continue to have a strong balance sheet, continue to do a good job on our bidding and our risk management continues to do well. So really the point here is really to one is, we are in a period of transition, we are still making money, still have a very strong balance. And number two, very importantly and I will about this some more afterwards, is our risk management capability.

Same balance sheet; we are fortunate when Rob met us 10 years ago, 12 years ago, whenever it was, we are insurance guys. We are -- capital return, equity returns by multiples of balance sheets were the way companies were valued, Bob Waegelein, who is our CFO and I were all insurance guys. So we continue to have that mentality and have continued to build the balance sheet. That gives us a ton of flexibility. Now we have spent a lot of talk about what we are going to do about this and I think these issues will emerge as well. We have too much capital at this point and it's a hard thing to stay with a straight face, having too much capital being a bad thing but we understand that frankly it's not our money and we have to do something about it for the benefit of our shareholders.

Let me talk a little about the healthcare landscape. 2014 is coming on as the (inaudible) starts in '14 and October 1, 2013 were the first big issues on the exchanges come, the headline is the implementation of the Affordable Care Act, the expansion of Medicaid, the exchanges and there is going to be noise. I don't think anybody should be surprised that there is noise. I think back to the first year of Part D, when everybody was scrambling to get ready for 1/1/2006, I know there were plenty of issues, plenty of noise, plenty of static, but once it's settled down, it became a wonderful program. And I kind of think that will happen with the exchanges and may take a little bit longer, because it's not a one product, single drug program but it's -- and it's more complicated and it's state by state and there is lots and lots of regulations.

But as time goes on, I think what we will see is that this is not socialism, this is not government takeover of healthcare, in fact it's the opposite. It's government regulation of healthcare, but all being done through the private sector. So it's actually the macro in our business continues to be very strong. These are large amounts of money that are currently getting paid in other ways, are all going to get, some are going to get shifted and almost all of the shift finds its way into the private sector at some point during its life cycle and we feel that being in that trip is going to do well for us.

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