Universal American Corp. Reports First Quarter 2008 Results and Maintains 2008 Guidance

RYE BROOK, N.Y.--(Business Wire)--
Universal American Corp. (NYSE: UAM) today announced financial
results for the quarter ended March 31, 2008.

First Quarter 2008 Highlights

-- Revenues increased to $1.2 billion

-- Net loss was $46.0 million, or $0.50 per share, including net
realized losses of $29.3 million, or $0.32 per share, from
additional impairments on our subprime portfolio

-- Repurchased 2.0 million shares at a total cost of $23.8
million

Maintaining 2008 Guidance

-- Revenues between $4.5 and $4.9 billion

-- Earnings per share of $1.56 to $1.74, excluding realized gains
and losses

First Quarter 2008 Compared to First Quarter 2007

Universal American reported a net loss of $46.0 million for the
first quarter of 2008, or $0.50 per share. The first quarter loss
includes $29.8 million resulting from additional impairments on our
subprime mortgage portfolio, offset by $0.5 million, after tax, of
realized gains. Excluding net realized losses, our net operating loss
was $16.7 million, or $0.18 per share. The operating loss compares to
net operating income (excluding realized gains) in the first quarter
of 2007 of $3.1 million, or $0.05 per share.

Total revenues for the first quarter of 2008 increased 98.1% to
$1.2 billion, as compared to the first quarter of 2007. Excluding the
revenue from the MemberHealth business that we acquired in September
2007, total revenues increased by 24%.

Management Comments

Richard Barasch, Chairman and CEO, commented: "The results of the
first quarter were mixed but contained encouraging indicators for the
balance of 2008 and beyond. Our operating loss was expected due to the
seasonality of our Part D businesses and, to a lesser extent, our
Medicare Supplement business. Our Part D business performed well and
we can report that the MemberHealth business we acquired in 2007 is
meeting the revised targets that we set this past March. We have
already begun to implement improvements in the cost structure of this
business and remain confident that our 2009 bids will be well-grounded
and competitive.

"In addition, we are quite pleased with the expansion and
profitability of our HMO businesses. We experienced 11% year over year
membership growth in our core Southeast Texas market as well as 89%
membership growth in our expansion markets in Oklahoma, Dallas and
Milwaukee.

"The mixed results come primarily from our private fee-for-service
('PFFS') business," Mr. Barasch continued. "As we had earlier
forecast, we will not have membership growth in this line. Moreover,
we recognized approximately $10 million of net prior period negative
reserve development in our first quarter numbers. It is important to
note, however, that even with this negative development, our results
for PFFS for 2007 came in approximately where we had originally
predicted. Excluding this prior period development, our benefit ratio
for the first quarter of 2008 is in line with our guidance and we
remain comfortable with our forecast for the balance of 2008. This
also gives us a solid basis for the upcoming 2009 bids.

"As previously forecast, we have taken additional impairments in
our subprime portfolio based on continued weakness in market values.
Nevertheless, we have a strong balance sheet, including $171 million
of unregulated cash at the holding company at the end of the quarter,
allowing us to resume repurchasing our shares under our previously
announced $50 million share buyback program."

Medicare Advantage

In the first quarter of 2008, Universal American's Medicare
Advantage business grew 25% to approximately 228,000 members from
approximately 182,000 members as of March 31, 2007. Revenues increased
by 48% year over year to $566.7 million. Pre-tax income for the same
period, however, declined from $6.0 million to $0.4 million largely as
a result of approximately $10 million of net adverse reserve
development in PFFS. As a result, the benefit ratio for private
fee-for-service in 2007 was 86.5%, after considering the adverse
reserve development. Backing out this adverse development, the benefit
ratio for PFFS for the first quarter of 2008 was 88.3%, which is
consistent with our plan and with our full year guidance. As of the
end of April, we had approximately 186,000 PFFS members.

We continued to generate excellent results from our Medicare
Advantage HMO's. Our HMO membership grew 15% year over year to
approximately 52,000 as of March 31, 2008 and our profitability
remains strong.

Medicare Part D

As of March 31, 2008, Universal American had approximately
1,306,000 members in the Community CCRxSM prescription drug plans
("PDP's") and 512,000 members in the Prescription PathwaySM PDP's that
we currently operate in a strategic alliance with Caremark Pharmacy
Services, a subsidiary of CVS Caremark. As expected, our PDP's
reported a pre-tax loss of $29.6 million for the first quarter on
total premiums, before reinsurance and before consideration of the
government risk corridor adjustment, of $640.0 million. Part D
Management Services, L.L.C., our joint venture with Caremark Pharmacy
Services, contributed $16.1 million of pre-tax income for the quarter.

Senior Administrative Services

CHCS Services, Universal American's senior health insurance
third-party administrator, continued its important contribution to the
Company. Pre-tax income in the first quarter was $6.0 million, up 3%
from the same period in 2007. Revenue for the first quarter of 2008
declined by 12% year over year to $22.6 million, as our affiliated
PFFS administration is no longer performed by CHCS.

Traditional Insurance

For the first quarter of 2008, Universal American earned $1.0
million, pre-tax, on $122.9 million of revenues in our traditional
insurance business. This compares to a pre-tax loss of $5.1 million on
$134.9 million of revenues in the first quarter of 2007. This
improvement reflects better results in our Medicare supplement
business including higher persistency requiring less amortization of
deferred acquisition costs and an improved benefit ratio of 76.2%,
compared to 78.2% for the first quarter of last year.

Balance Sheet Data

Total assets were $4.0 billion as of March 31, 2008. Total cash
and investments were $1.7 billion at March 31, 2008, compared to $1.8
billion at December 31, 2007. Total reserves for policyholder
liabilities were $1.9 billion at March 31, 2008 compared to $1.8
billion at December 31, 2007. Stockholders' equity as of March 31,
2008 was $1.24 billion, or $14.06 per common share, compared to $1.35
billion, or $14.66 per common share, at December 31, 2007.

The ratio of debt to total capitalization, excluding the effect of
FAS 115 and including Universal American's trust preferreds as debt,
increased to 26.8% at March 31, 2008 from 25.4% at December 31, 2007.
For more information, please see the discussion of Non-GAAP Financial
Measures contained in the Supplemental Financial Information at the
end of this press release.

Subprime Holdings

In the first quarter of 2008, Universal American recognized
additional impairments of $29.8 million on its subprime holdings.
These holdings had a carrying value as of March 31, 2008 of $65.2
million, which reflects $70.8 million of write-downs plus an
additional $8.1 million unrealized loss. As of now, it is unclear what
the ultimate tax treatment of these impairment losses will be.
Therefore, we have concluded that we can not record tax benefits
related to these losses for financial statement purposes. The majority
of the Company's subprime holdings are in senior or senior-mezzanine
level tranches, which have preferential liquidation characteristics.
These securities have an average S&P equivalent rating of AA with two
securities downgraded in the quarter ended March 31, 2008. In
addition, twelve securities have been placed on negative credit watch
by at least one of the major rating agencies. The Company continues to
review the estimated fair values indicated by pricing provided by a
third party pricing service and believes that it will recover
principal and interest greater than the market prices currently
indicate.

Share Repurchase Program

As of March 31, 2008, Universal American repurchased 2.0 million
shares of its stock at a total cost of $23.8 million. The Company has
$26.2 million remaining under its $50 million stock repurchase
program. The Company is not obligated to repurchase any specific
number of shares under the program or to make repurchases at any
specific time.

Guidance

Universal American expects to earn approximately $1.56 to $1.74
per diluted share for 2008, excluding realized gains on investment
transactions as well as subprime writedowns. The table below provides
additional information relating to our guidance.

-0-
*T
Reported
1Q08 2Q08
----------- -----------------------
Diluted EPS (loss) (1)
Operating EPS (loss) ($0.18) $ 0.18 $ 0.22
Realized gains / (losses) (0.32) 0.00 0.00
----------- ----------- -----------
Reported EPS (loss) ($0.50) $ 0.18 $ 0.22
=========== =========== ===========

Revenue ($ Million) (2)
Senior Managed Care - Medicare
Advantage $ 567 $ 560 $ 580
Medicare Part D (3) 573 495 510
Traditional Insurance 123 115 120
Senior Administrative Services 23 20 23
Corporate / Eliminations (16) (18) (20)
----------- ----------- -----------
Total Revenue $ 1,270 $ 1,172 $ 1,213
=========== =======================
Membership
End of quarter Membership
PDP's 1,818,000 1,810,000 1,830,000
Private fee-for-service 176,000 180,000 190,000
HMOs 52,000 52,000 56,000
----------- ----------- -----------
Total 2,046,000 2,042,000 2,076,000
=========== =========== ===========
Medicare Advantage HMO loss
ratio 78.0% 76.0% 78.5%
----------- -----------------------
Medicare Advantage PFFS loss
ratio 90.7% 86.0% 88.0%
----------- -----------------------

FY 2008
------------------------
Diluted EPS (loss) (1)
Operating EPS (loss) $ 1.56 $ 1.74
Realized gains / (losses) (0.32) (0.32)
------------ -----------
Reported EPS (loss) $ 1.24 $ 1.42
============ ===========

Revenue ($ Million) (2)
Senior Managed Care - Medicare Advantage $ 2,200 $ 2,400
Medicare Part D (3) 1,850 2,000
Traditional Insurance 465 480
Senior Administrative Services 84 90
Corporate / Eliminations (75) (85)
------------ -----------
Total Revenue $ 4,524 $ 4,885
========================
Membership
End of quarter Membership
PDP's 1,810,000 1,830,000
Private fee-for-service 180,000 190,000
HMOs 52,000 56,000
------------ -----------
Total 2,042,000 2,076,000
============ ===========
Medicare Advantage HMO loss ratio 76.0% 78.5%
------------------------
Medicare Advantage PFFS loss ratio 86.0% 88.0%
------------------------
*T

-0-
*T
(1) Assumes diluted shares outstanding of 89.1 million in 2Q 2008 and
89.9 million for full year 2008 and no additional share
repurchases.
(2) Excluding realized gains/losses.
(3) Includes Community CCRx, Prescription Pathway and equity income of
Part D Management Services, Inc.
*T

Conference Call

Universal American will host a conference call at 9:30 a.m.
Eastern Time on Wednesday, May 7, 2008, to discuss the first quarter
results and other corporate developments. Interested parties may
participate in the call by dialing 706-679-0770. 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. 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. We will archive the conference
call; if you are unable to listen live, you can access it from the
investor relations area of the Company's website for approximately 60
days.

Prior to the conference call, Universal American will make
available on its website supplemental financial data in connection
with its quarterly earnings release. You can access this supplemental
financial data at www.universalamerican.com (under the heading
"Investor Relations; Financial Reports").

About Universal American Corp.

Universal American offers a diverse range of healthcare products -
including health insurance, managed care, and prescription drug
benefits - through its subsidiaries. Its companies are collectively
among the leading providers of Medicare Advantage and Medicare
prescription drug plans in the U.S., as over 2 million seniors rely on
Universal American's products for their health or prescription drug
coverage. For more information on Universal American, please visit our
website at www.universalamerican.com.

Matters discussed in this news release and oral statements made
from time to time by representatives of Universal American may
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and the Federal
securities laws. Although Universal American believes that the
expectations reflected in any forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. Forward-looking information is subject
to risks, trends and uncertainties that could cause actual results to
differ materially from those projected. Many of these factors are
beyond Universal American's ability to control or predict. Important
factors that may cause actual results to differ materially and could
impact Universal American and the statements contained in this news
release can be found in Universal American's filings with the
Securities and Exchange Commission, including quarterly reports on
Form 10-Q, current reports on Form 8-K and annual reports on Form
10-K. For forward-looking statements in this news release, Universal
American claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act
of 1995. Universal American assumes no obligation to update or
supplement any forward-looking statements, whether as a result of new
information, future events or otherwise.

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*T
UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
In millions, except per share amounts
(Unaudited)

Three Months
Ended
March 31,
Consolidated Results 2008 2007
---------------------------------------------------- --------- -------

Direct and assumed premiums $1,434.4 $804.3
======== ======

Net premiums and policyholder fees $1,207.7 $587.9
Net investment income 24.3 22.4
Other income 21.8 6.2
Realized (losses) gains (29.0) 1.9
-------- ------
Total revenues 1,224.8 618.4
-------- ------

Policyholder benefits 1,115.9 501.0
Interest credited to policyholders 4.1 4.7
Change in deferred acquisition costs 7.5 10.3
Amortization of present value of future profits 1.9 2.1
Commissions and general expenses, net of allowances 166.8 107.7
-------- ------
Total benefits and expenses 1,296.2 625.8
-------- ------

Loss before equity in earnings of unconsolidated
subsidiary (71.4) (7.4)
Equity in earnings of unconsolidated subsidiary 16.1 13.2
-------- ------
(Loss) income before income taxes (55.3) 5.8
(Benefit) Provision for income taxes (1) ( 9.3) (1.4)
-------- ------
Net (loss) income $ (46.0) $ 4.4
======== ======

Per Share Data (Diluted)
----------------------------------------------------
Net (loss) income $ (0.50) $ 0.07
======== ======
*T

See following page for explanation of footnotes.

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*T
UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
In millions, except per share amounts
(Unaudited)

Three Months
Ended
March 31,
Income (Loss) before Taxes by Segment 2008 2007
-------------------------------------------------------- ------ -----

Senior managed care-Medicare Advantage $ 0.4 $ 6.0
Medicare Part D (29.6) 5.0
Traditional insurance 1.0 (5.1)
Senior administrative services 6.0 5.8

Corporate (4.1) (7.8)

Realized (losses) gains (29.0) 1.9
------ -----

(Loss) income before income taxes $(55.3) $ 5.8
====== =====
*T

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*T
BALANCE SHEET DATA March 31, December
2008 31, 2007
------------------------------------------------- --------- ---------
Total cash and investments $1,723.7 $1,815.6
Total assets $3,978.8 $4,089.8
Total policyholder related liabilities $1,874.1 $1,800.7
Outstanding bank debt $ 348.3 $ 349.1
Other long term debt $ 110.0 $ 110.0
Total stockholders' equity $1,242.3 $1,351.1
Book value per common share $ 14.06 $ 14.66
Diluted weighted average shares outstanding-year
to date 92.2 71.5

Non-GAAP Financial Measures *
-------------------------------------------------
Total stockholders' equity (excluding FAS 115) * $1,251.1 $1,351.2
Diluted book value per common share (excluding
FAS 115) * (2) $ 13.90 $ 14.40
Debt to total capital ratio * (3) 26.8% 25.4%
*T

-0-
*T
* 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 accounting
principles generally accepted in the United States (GAAP).
(1) The effective tax rate for the quarter ended March 31, 2008 was
16.8% and was 24.8% for the same quarter of 2007. The effective
tax rate for the first quarter of 2008 includes establishment of
a tax valuation allowance relating to net deferred tax assets of
$10.6 million for subprime impairment. The effective tax rate for
the quarter ended March 31, 2007 includes a one time benefit
relating to state taxes of $0.7 million.
(2) Diluted book value per common share (excluding FAS 115) represents
Total Stockholders' Equity, excluding accumulated other
comprehensive income (loss) ("FAS 115"), plus assumed proceeds
from the exercise of vested options, divided by the total shares
outstanding plus the shares assumed issued from the exercise of
vested options.
(3) The Debt to Total Capital Ratio is calculated as the ratio of the
sum of the Outstanding Bank Debt and Other Long Term Debt to the
sum of Stockholders' Equity (excluding FAS 115) plus Outstanding
Bank Debt plus Other Long Term Debt.
*T

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP FINANCIAL MEASURES

In 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. The key non-GAAP
measures presented in our press release, including reconciliation to
GAAP measures, are set forth below.

-0-
*T
Total Stockholders' Equity March December
(excluding FAS 115) 31, 31,
2008 2007
Total stockholders' equity $1,242.3 $ 1,351.1
Less: Accumulated other comprehensive loss 8.8 0.1
------- --------

Total stockholders' equity (excluding FAS 115) $1,251.1 $ 1,351.2
======= ========
*T

Universal American uses total stockholders' equity (excluding FAS
115), 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, do not
relate to the core performance of Universal American's business
operations.

-0-
*T

March December
31, 31,
Diluted Book Value per Common Share 2008 2007
Total stockholders' equity $1,242.3 $ 1,351.1
Proceeds from assumed exercises of vested options 10.0 24.5
------- --------
$1,252.3 $ 1,375.6
======= ========
Diluted common shares outstanding 90.7 95.6
======= ========

Diluted book value per common share $ 13.80 $ 14.39
======= ========
*T

-0-
*T
Total stockholders' equity (excluding FAS 115) $1,251.1 $1,351.2
Proceeds from assumed exercises of vested options 10.0 24.5
------- -------
$1,261.1 $1,375.7
======= =======
Diluted common shares outstanding 90.7 95.6
======= =======

Diluted book value per common share (excluding FAS
115) $ 13.90 14.40
======= =======
*T

As noted above, Universal American uses total stockholders' equity
(excluding FAS 115), 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 core performance of
Universal American's business operations.

-0-
*T
UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP FINANCIAL MEASURES
In millions
(Unaudited)

March December
31, 31,
Debt to Total Capital Ratio 2008 2007
Outstanding bank debt $ 348.3 $ 349.1
Other long term debt 110.0 110.0
-------- --------
Total outstanding debt $ 458.3 $ 459.1
======== ========

Total stockholders' equity $1,242.3 $1,351.1
Outstanding bank debt 348.3 349.1
Other long term debt 110.0 110.0
-------- --------
Total Capital $1,700.6 $1,810.2
======== ========

Debt to total capital ratio 26.9% 25.4%
======== ========

Total stockholders' equity (excluding FAS 115) $1,251.1 $1,351.2
Total outstanding bank debt 348.3 349.1
Total outstanding trust preferred securities 110.0 110.0
--------- ---------
Total Capital $1,709.4 $1,810.3
========= =========

Debt to total capital ratio 26.8% 25.4%
========= =========
*T

As noted above, Universal American uses total stockholders' equity
(excluding FAS 115), 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 core performance of
Universal American's business operations.

Universal American Corp.
Robert A. Waegelein, 914-934-8820
Executive Vice President &
Chief Financial Officer
or
Investor Relations Counsel:
The Equity Group Inc.
Linda Latman, 212-836-9609
www.theequitygroup.com

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