Offsetting rating factors include Universal American’s declining premium revenue and increased business concentration risk. Premiums for Universal American have declined significantly over the last two years due to the sale of its Medicare Part D business and enrollment losses due to the discontinuation of Medicare Private-Fee-for-Service products in geographies deemed to be non-core. Additionally, new sales in its Medicare Advantage business was hindered during the last open enrollment period due to a late release from Centers for Medicare and Medicaid Services (CMS) sanctions. Universal American business is now highly concentrated in Medicare Advantage products. The downward trend in Medicare Advantage funding could pressure margins.The rating affirmations for American Progressive and Pyramid Life reflect their role as core subsidiaries of Universal American. On a consolidated basis, these entities continue to generate over half of the organization’s revenue and service approximately two-thirds of its Medicare Advantage enrollment. The revised outlook is due to positive near-term operating results and improved capitalization. Operating results for these entities have consistently been positive, and margins are showing improvement through 2011. Operations are expected to remain profitable for 2012. American Progressive and Pyramid Life’s favorable operating results, along with the decline in business risk, have resulted in a strengthening of their risk-adjusted capitalization. The rating affirmations for American Pioneer, Constitution Life, Marquette National and Union Bankers recognize their contributions to the overall business profile of the organization through product and rate flexibility. The revised outlook and rating affirmations for SelectCare of Texas acknowledge its strong operating results and high level of risk-adjusted capital. The rating affirmations for Today’s Options reflects its strategic role in Universal American’s core Medicare Advantage operations and continued support by Universal American. Positive rating actions could occur if Universal American records significant premium growth while maintaining strong capitalization in its insurance subsidiaries and if these entities’ businesses become more diversified through product, market segment or geographic expansion. Negative rating actions could occur if Universal American reports significant operating losses in its core Medicare Advantage business, experiences a drastic decline in risk-adjusted capital at its insurance subsidiaries or is unable to resume enrollment and premium growth.
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