Universal American Corp ( UAM)

Q3 2010 Earnings Call

November 2, 2010 8:30 a.m. ET


Richard Barasch – Chairman and CEO

Tony Wolf – General Council

Bob Waegelein – EVP and CFO


Josh Raskin – Barclays Capital

Scott Fidel – Deutsche Bank

Carl McDonald - Citigroup

Tom Carroll – Stifel Nicolaus

Sarah James – Wedbush



Greetings, and welcome to the Universal American Corp. third quarter 2010 conference call. At this time, all participants are currently in a listen-only mode. Our question-and-answer session will follow the formal presentation. (Operator Instructions)

And now, I will turn the call over to Mr. Richard Barasch, Chairman and CEO for Universal American Corp. Thank you Mr. Barasch, you may begin.

Richard Barasch

Thank you, and good morning, everyone. Thanks for joining us on our third quarter 2010 conference call. I'm here with Bob Waegelein, our CFO and Tony Wolf, our new General Council. I'd like to ask Tony to read our Safe Harbor language.

Tony Wolf

Good morning, everybody. Before we begin, I would like to remind you that we have posted a presentation for this call in the investor section of our website at 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 expectation, projects and beliefs, are subject to risk and uncertainties that may cause actual results to differ materially.

For a discussion of these risk 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 this call, we will also be referring to certain non-GAAP financial measures. Please refer to the reconciliation table listed in the earnings press release for a discussion of these non-GAAP financial measures. Richard?

Richard Barasch

Thanks, Tony. This morning, Bob and I are going to spend some time describing the highlights of the first three quarters of the year, including the third quarter, and then move on to a discussion about how Universal American is positioned for 2011 and beyond.

As usual, Bob will be available later to answer any specific questions.

The short story is that 2010 is emerging better than we projected, enhanced by $0.11 of positive prior period items during this quarter. Therefore, as you saw from our press release, we increased our guidance by $0.20, and now project a range of $2.05 to $2.15 per share.

Starting with Slide 3 of the deck posted on our website, I’d like to reiterate that we still see tremendous potential in the senior market. This country faces an enormous task to pay for the increasing cost of healthcare in a rapidly growing senior population. Despite the rhetoric and increased regulatory scrutiny, we still see a huge role for private insurers, like Universal American to be a very constructive part of the solution.

Part D is proven to be a very successful partnership between the government and vibrant private enterprise. Each year the Part D sponsors compete to find better and less expensive solutions for the prescription drug needs of the Medicare population. In Medicare Advantage, we must be able to deliver to our members a better healthcare solution than standalone Medicare, and a less-costly alternative to Medicare, plus Medicare Supplement.

This can be achieved by wringing out the waste in the fee for service system with a combination of technology and common sense cost controls, and appropriately compensating our providers, for keeping our members healthy and delivering better and more effective cost outcomes. We must also focus on compliance and quality to the benefit of our members, and to conform to a more active, regulatory environment.

We’re doing this successfully in our HMOs through our Healthy Collaboration Model, in which we work closely with physicians and members to promote better health outcomes and control medical costs. And we’re confident we can deliver similar value to our new networks and rural members as well, even in a lower reimbursement environment.

As you see from Slide 4, we think we have the size and scale in Medicare to successfully manage through the coming changes.

Now, let’s turn to financial results on Slide 5 and 6, and I’m going to turn it over to Bob Waegelein.

Bob Waegelein

Thank you Richard. I’d like to remind you that we post additional information on our quarterly results in the financial supplement that can be found on our website in the financial reports tab of our investor section.

Turning to Slide 5, you will see that we reported net income of 60.7 million for the quarter, or $0.77 per share. Included in this amount are two non-recurring items, $0.10 of non-recurring tax benefits, and $0.04 of investment gains. Adjusting for these items our operating earnings amounted to $0.63.

While the quarter operating results were favorably impacted by 8.6 million, or $0.11 of after-tax items that related periods prior to the third quarter. These results were better than our internal forecast, and as a result, will be reflected in an increase to guidance that Richard will discuss shortly.

Our Medicare Advantage segment continues to provide solid results, generating 36.9 million of pretax earnings for the quarter, including 3.9 million of positive prior period items relating both to 2009 and the first half of 2010.

Read the rest of this transcript for free on seekingalpha.com

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