Feb 19 2010
Universal American Corp. (NYSE: UAM) today announced financial results
for the quarter and year ended December 31, 2009.
“We are expanding our Healthy CollaborationSM model in which
we work closely with providers and members to promote better health
outcomes and control medical costs. We believe that we must be able to
improve the cost and quality of medical care in order to achieve long
term success.”
Fourth Quarter 2009 Highlights
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Net income was $88.8 million, or $1.12 per share, including after-tax
net realized losses of $3.2 million, or $0.04 per share, and after-tax
charges of $4.6 million, or $0.05 per share for special items.
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Revenues increased to $1.2 billion from the $1.1 billion for the prior
year period.
Full Year 2009 Highlights
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Net income was $140.3 million, or $1.73 per share, including after-tax
net realized losses of $16.2 million, or $0.20 per share, after-tax
charges of $16.4 million, or $0.20 per share for special items, and a
net non-recurring tax benefit of $5.0 million, or $0.06 per share.
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Revenues increased to approximately $5.0 billion.
Reaffirms 2010 Guidance
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Earnings per share of $1.70 to $1.80, excluding realized gains and
losses on investments.
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Revenues of between $5.3 and $5.6 billion.
Fourth Quarter 2009
Universal American’s reported net income for the fourth quarter of 2009
was $88.8 million, or $1.12 per share. The reported net income includes
the following items, after-tax:
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$3.2 million, or $0.04 per share, of net realized losses; and
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$4.6 million, or $0.05 per share, of charges in connection with the
closing of certain of our career sales offices.
Excluding these net realized losses and special items, net income for
the fourth quarter of 2009 was $96.6 million, or $1.21 per share.
This compares to reported net income of $63.9 million, or $0.75 per
share, in the fourth quarter of 2008, which included realized losses of
$3.4 million, or $0.04 per share, after-tax, and $3.9 million of
goodwill impairment or $0.05 per share, without tax benefit. Total
revenues for the fourth quarter of 2009 increased by approximately 10%
to $1.2 billion, compared to the fourth quarter of 2008.
Full Year 2009
Universal American’s reported income for the full year 2009 was $140.3
million, or $1.73 per share. This compares to reported net income of
$95.1 million, or $1.08 per share, for the full year of 2008, which
included net realized losses of $38.8 million after-tax, or $0.44 per
share and $3.9 million of goodwill impairment or $0.04 per share. Total
revenues for the full year 2009 increased 7% to $5.0 billion, as
compared to the full year 2008.
The reported net income for 2009 includes the following items, after-tax:
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$16.2 million, or $0.20 per share of net realized losses;
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$4.8 million, or $0.06 per share, of loss and other costs related to
the reinsurance of our life and annuity business, incurred in the
second quarter;
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$3.0 million, or $0.04 per share, of restructuring charges incurred in
connection with cost reduction initiatives in our Medicare Advantage
and Traditional segments incurred in the second quarter;
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$8.6 million, or $0.10 per share, of charges in connection with the
closing of certain of our career sales offices, of which $4.6 million
was incurred in the fourth quarter and $4.0 million was incurred in
the second quarter; and
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$5.0 million, or $0.06 per share, of tax benefits realized in the
third quarter.
Excluding these net realized losses and restructuring and other special
items, net income for 2009 was $167.9 million, or $2.07 per share.
Reported net income for the full year 2009 also includes $13.6 million
after-tax, or $0.16 per share, related to the following favorable prior
year adjustments, after-tax:
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$13.3 million, or $0.16 per share in the Medicare Advantage segment;
and
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$0.3 million, or less than $0.01 per share in the Medicare Part D
segment.
Excluding these favorable prior year adjustments, net income for 2009
was $154.3 million, or $1.91 per share.
Management Comments
Richard A. Barasch, Chairman and CEO, commented: “I am pleased to report
solid results in our core Medicare businesses for the fourth quarter and
for the full year. In the challenging environment that lies ahead, we
will continue to reduce our costs, expand our network footprint and
invest in improving our medical management capability for the benefit of
our members.
“We are expanding our Healthy CollaborationSM model in which
we work closely with providers and members to promote better health
outcomes and control medical costs. We believe that we must be able to
improve the cost and quality of medical care in order to achieve long
term success.
“We are off to a good start in 2010 with solid enrollment gains in Part
D and Medicare Advantage and are particularly pleased that we are now
the second largest Part D plan sponsor in the nation. We are also seeing
strong Medicare Advantage enrollment growth in our core markets where we
have, or plan to have, network products.”
Medicare Advantage
In the fourth quarter of 2009, Medicare Advantage operating income
included negative prior period adjustments of $2.6 million. For the full
year 2009, operating income included net positive prior year adjustments
of $21.1 million, pre-tax. Excluding all prior period adjustments, the
adjusted medical benefits ratio, or MBR, was 82.2% for the three months
ended December 31, 2009, and 83.1% for the full year.
Membership in network-based plans increased 18.4% year-over-year to
approximately 64,300 as of December 31, 2009, including growth of 34.8%
in the HMO expansion markets in Oklahoma, Wisconsin, and Dallas, TX. As
of December 31, 2009, PFFS membership was approximately 176,200, a
decrease of 5% year-over-year due to lapses.
We filed and obtained approval for 29 new PPO’s in 66 counties for 2010,
giving us a total of 126 counties in 43 markets in which we will have
network-based products in 2010. We are continuing to build our network
footprint through the filing of PPO and HMO products in up to 15
additional core markets.
Medicare Part D
The Part D segment operating income for the fourth quarter of 2009,
included $2.9 million of pre-tax unfavorable net prior period
adjustments.
For the full year 2009, the improvement in operating results was
attributable to higher membership and a reduction in benefit and expense
ratios. These improvements more than offset the elimination of the
income generated from our equity interest in Part D Management Services
LLC, our strategic joint venture with CVS Caremark that was terminated
at the end of 2008. Year-over-year, operating income increased 40% to
$178.3 million, including positive prior year adjustments of $0.5
million, pre-tax.
Traditional Insurance
The Traditional Insurance segment operating income decreased from 2008
to 2009 mainly due to costs of $7.6 million, pre-tax, related to the
reinsurance of the life and annuity business in the second quarter of
2009 and lower net investment income, as a result of lower invested
assets and lower average yields.
Investment Portfolio
Subsequent to the reinsurance of the life and annuity business in the
second quarter of 2009, the Company pursued a strategy to reposition its
portfolio to reflect the change in the nature of its liabilities and to
reduce credit and concentration exposures in its portfolio. The Company
incurred $0.9 million of pre-tax realized losses in the fourth quarter
related to this repositioning. In addition, the Company also recorded
other-than-temporary impairments of $4.0 million, pre-tax for the
quarter.
Universal American’s $1.8 billion portfolio of cash and invested assets,
as of December 31, 2009, has the following characteristics:
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Approximately $857 million of cash and cash equivalents are primarily
invested in U.S. Government money market funds
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82% is invested in U.S. Government and agency securities, including
investments in U.S. Government money market funds
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The average credit quality of the longer term fixed-income portfolio
is AA, with 67% invested in securities rated AA or higher
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Less than 1% of the portfolio is non-investment grade
A complete listing of our investment portfolio 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
Total assets were $3.8 billion as of December 31, 2009, compared with
$3.9 billion at December 31, 2008. Total cash and investments were $1.8
billion at December 31, 2009, compared to $1.6 billion at December 31,
2008. Total policyholder liabilities were $1.4 billion at December 31,
2009, down from $1.5 billion at December 31, 2008. Amounts recoverable
from reinsurers, representing ceded policyholder liabilities, increased
to $0.7 billion at December 31, 2009, compared to $0.2 billion at
December 31, 2008, primarily due to the reinsurance of our life and
annuity business. Stockholders’ equity as of December 31, 2009, was $1.4
billion, compared to $1.3 billion at December 31, 2008. Book value per
share increased to $18.44 per common share from $15.58 per common share,
at December 31, 2008.
As of December 31, 2009, the Company had unregulated cash of
$102.1 million and access to $150 million under our credit facility,
which expires in September 2012. The ratio of debt to total
capitalization, excluding the effect of Accumulated Other Comprehensive
Income (Loss) and including Universal American’s trust preferreds as
debt was 22.5% at December 31, 2009 compared to 24.1% at December 31,
2008. 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.
Share Repurchase Program
In the fourth quarter of 2009, the Company amended its Credit Facility
Loan Agreement to allow for additional share repurchases under the
Company’s share repurchase program. Subsequently, the Company’s Board of
Directors authorized an additional $50 million of share repurchases up
to a total of $175 million. During 2008 and 2009, 13.4 million shares
have been repurchased at an average price of $9.87 per share for a total
cost of $132.7 million, with 2.6 million shares repurchased in the 2009
fourth quarter at a total cost of $26.3 million. The Company has not
repurchased any shares to date in 2010. Therefore, approximately $42.3
million remains authorized for share repurchases. The Company is not
obligated to repurchase any specific number of shares under the program
or to make repurchases at any specific time or price.
Reaffirms 2010 Guidance
Universal American expects to earn approximately $1.70 to $1.80 per
diluted share for the full year 2010, excluding realized gains/ (losses)
on investments. The table below provides additional information relating
to our guidance.