The Republican lawsuit targets reinsurance that helps insurance companies provide universal coverage without accounting for pre-existing conditions.
Universal American Corp. has reported financial results for the quarter ended June 30.
In its release on July 29, the Company 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.
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;
-$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.
Richard A. Barasch, Chairman and CEO, said, "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."
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, included $11.6 million of expense related to the ACA fee. The second quarter of 2014 included $6.2 million of the ACA fee.
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 percent, compared to the reported amount of 83.1 percent. Our core markets had an adjusted MBR of 84.6 percent, the non-core markets were 92.4 percent and the rural markets, with approximately 2,100 members, were 97.7 percent, 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 percent, 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 percent, compared to 11.2 percent in 2013.
Current Medicare Advantage membership is approximately 120,900.
Revenue and Operating Income in our Traditional segment declined in both the three month and six month periods ended June 30, due to the continued run-off of our legacy insurance products, which we stopped marketing and selling after June 1, 2012.
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.
Our Corporate & Other segment operating loss for both the three and six months ended June 30, 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, respectively.
As of June 30, Universal American had $953 million of cash and invested assets as follows:
-25 percent is invested in U.S. Government and agency securities;
-The average credit quality of the fixed income portfolio is AA- ; and
-Less than 2 percent of the portfolio is non-investment grade.
Balance Sheet and Liquidity
As previously disclosed, on May 13, we repurchased and retired six million shares of our common stock directly from funds associated with Capital Z Partners Management 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, 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 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 percent.
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