UNIVERSAL AMERICAN CORP.
(Exact name of registrant as specified in its charter)

44 South Broadway, Suite 1200, White Plains, New York 10601
(Address of principal executive offices and zip code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.


Class of Common Stock		Outstanding at August 1, 2013
Non-voting, par value $0.01 per share		3,300,000 shares
Voting, par value $0.01 per share		85,535,091 shares

As used in this quarterly report on Form 10-Q, except as otherwise indicated, references to the "Company," "we," "our," and "us" are to Universal American Corp., a Delaware corporation and its subsidiaries.

This report, including, without limitation, the information set forth or incorporated by reference under Part II, Item 1A "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and other risks and uncertainties set forth in this report and oral statements made from time to time by our executive officers contains "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. Statements in this report that are not historical facts are hereby identified as forward-looking statements and are intended to be covered by the safe harbor provisions of the PSLRA. They can be identified by the use of the words "believe," "expect," "predict," "project," "potential," "estimate," "anticipate," "should," "intend," "may," "will" and similar expressions or variations of such words, or by discussion of future financial results and events, strategy or risks and uncertainties, trends and conditions in the Company's business and competitive strengths, all of which involve risks and uncertainties.

Where, in any forward-looking statement, we or our management expresses an expectation or belief as to future results or actions, there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Our actual results may differ materially from our expectations, plans or projections. We warn you that forward-looking statements are only predictions and estimates, which are inherently subject to risks, trends and uncertainties, many of which are beyond our ability to control or predict with accuracy and some of which we might not even anticipate. We give no assurance that we will achieve our expectations and we do not assume responsibility for the accuracy and completeness of the forward-looking statements. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements as a result of many factors, including the risk factors described or incorporated by reference in Part II, Item 1A of this report. We caution readers not to place undue reliance on these forward-looking statements that speak only as of the date made.

We undertake no obligation, other than as may be required under the federal securities laws, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in these forward-looking statements are reasonable at the time made, any or all of the forward-looking statements contained in this report and in any other public statements that are made may prove to be incorrect. This may occur as a result of inaccurate assumptions as a consequence of known or unknown risks and uncertainties. All of the forward- looking statements are qualified in their entirety by reference to the factors discussed or incorporated by reference under the caption "Risk Factors" under Part II, Item 1A of this report. We caution that these risk factors may not be exhaustive. We operate in a continually changing business environment that is highly complicated, regulated and competitive and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the impact, if any, of the new risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those expressed or implied by any forward-looking statement. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur. You should carefully read this report and the documents that we incorporate by reference in this report in its entirety. It contains information that you should consider in making any investment decision in any of our securities.

	June 30, 2013		December 31, 2012

	Unaudited
ASSETS
Investments:
Fixed maturities available for sale, at fair value (amortized cost: 2013, $1,039,633; 2012, $1,146,642)	$	1,063,022	$	1,203,348
Short-term investments		—		16,993
Other invested assets		14,502		14,451

Total investments		1,077,524		1,234,792
Cash and cash equivalents		72,761		59,779
Accrued investment income		8,372		9,264
Deferred policy acquisition costs		96,724		102,765
Reinsurance recoverables—life		527,719		539,770
Reinsurance recoverables—health		128,019		125,406
Due and unpaid premiums		140,932		33,710
Present value of future profits and other amortizing intangible assets		34,010		38,469
Goodwill and other indefinite lived intangible assets		150,474		242,942
Income taxes receivable		46,551		36,100
Other assets		109,117		108,302

Total assets	$	2,392,203	$	2,531,299

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Reserves and other policy liabilities—life	$	538,049	$	547,618
Reserves for future policy benefits—health		445,786		449,597
Policy and contract claims—health		158,931		156,558
Premiums received in advance		8,385		11,405
Series A mandatorily redeemable preferred shares		40,000		40,000
Loan payable		124,850		131,984
Amounts due to reinsurers		9,517		8,920
Deferred income taxes payable		19,471		30,643
Other liabilities		125,682		142,077

Total liabilities		1,470,671		1,518,802

STOCKHOLDERS' EQUITY
Preferred stock (Authorized: 40 million shares)		—		—
Common stock—voting (Authorized: 400 million shares; issued and outstanding: 2013, 85.5 million shares; 2012, 85.0 million shares)		855		850
Common stock—non-voting (Authorized: 60 million shares; issued and outstanding: 3.3 million shares)		33		33
Additional paid-in capital		833,421		827,298
Accumulated other comprehensive income		9,386		29,089
Retained earnings		77,837		155,227

Total stockholders' equity		921,532		1,012,497

Total liabilities and stockholders' equity	$	2,392,203	$	2,531,299

	For the three months ended June 30,

	2013			2012
				(as adjusted)
Revenues:
Net premium and policyholder fees earned	$	484,284		$	489,128
Net investment income		9,511			10,536
Fee and other income		30,100			41,048
Net realized gains on investments		10,081			1,350

Total revenues		533,976			542,062

Benefits, claims and expenses:
Claims and other benefits		419,202			407,616
Change in deferred policy acquisition costs		2,195			654
Amortization of intangible assets		2,171			2,226
Commissions		8,843			11,178
Reinsurance commissions and expense allowances		1,678			1,602
Interest expense		1,668			1,751
Goodwill impairment charge		91,742			—
Other operating costs and expenses		91,668			106,377

Total benefits, claims and expenses		619,167			531,404

(Loss) income before equity in losses of unconsolidated subsidiaries		(85,191	)		10,658
Equity in losses of unconsolidated subsidiaries		(8,915	)		(2,105	)

(Loss) income before income taxes		(94,106	)		8,553
(Benefit from) provision for income taxes		(2,290	)		3,901

Net (loss) income	$	(91,816	)	$	4,652

(Loss) earnings per common share:
Basic	$	(1.05	)	$	0.05

Diluted	$	(1.05	)	$	0.05

Weighted average shares outstanding:
Basic weighted average shares outstanding		87,436			87,619
Effect of dilutive securities		87			1

Diluted weighted average shares outstanding		87,523			87,620

	For the six months ended June 30,

	2013			2012
				(as adjusted)
Revenues:
Net premium and policyholder fees earned	$	1,005,519		$	985,769
Net investment income		19,396			21,791
Fee and other income		59,768			57,995
Net realized gains on investments		12,557			8,261

Total revenues		1,097,240			1,073,816

Benefits, claims and expenses:
Claims and other benefits		836,158			809,632
Change in deferred policy acquisition costs		6,041			1,938
Amortization of intangible assets		4,459			3,647
Commissions		18,327			22,825
Reinsurance commissions and expense allowances		3,032			3,425
Interest expense		3,256			2,936
Goodwill impairment charge		91,742			—
Other operating costs and expenses		188,484			185,981

Total benefits, claims and expenses		1,151,499			1,030,384

(Loss) income before equity in losses of unconsolidated subsidiaries		(54,259	)		43,432
Equity in losses of unconsolidated subsidiaries		(17,203	)		(2,105	)

(Loss) income before income taxes		(71,462	)		41,327
Provision for income taxes		6,396			17,141

Net (loss) income	$	(77,858	)	$	24,186

(Loss) earnings per common share:
Basic	$	(0.89	)	$	0.28

Diluted	$	(0.89	)	$	0.28

Weighted average shares outstanding:
Basic weighted average shares outstanding		87,343			85,531
Effect of dilutive securities		67			223

Diluted weighted average shares outstanding		87,410			85,754

	For the three months ended June 30,						For the six months ended June 30,

	2013			2012			2013			2012
				(as adjusted)						(as adjusted)
Comprehensive (loss) income:
Net (loss) income	$	(91,816	)	$	4,652		$	(77,858	)	$	24,186
Other comprehensive (loss) income, net of income taxes:
Unrealized (loss) gain on investments		(13,827	)		5,237			(13,551	)		15,708
Less: reclassification adjustment for gains included in net income		(6,553	)		(878	)		(8,162	)		(5,370	)

Change in net unrealized (loss) gain on securities available for sale		(20,380	)		4,359			(21,713	)		10,338
Change in long-term claim reserve adjustment		2,255			(438	)		2,010			(2,397	)

Total other comprehensive (loss) income, net of income taxes		(18,125	)		3,921			(19,703	)		7,941

Comprehensive (loss) income	$	(109,941	)	$	8,573		$	(97,561	)	$	32,127

			Common Stock						Accumulated Other Comprehensive Income

	Preferred Stock		Common Stock				Additional Paid-in Capital					Retained Earnings
	Preferred Stock		Voting		Non-Voting		Additional Paid-in Capital					Retained Earnings			Total
2012
Balance at January 1, 2012, as adjusted	$	—	$	782	$	33	$	738,029	$	11,166		$	190,353		$	940,363
Net income, as adjusted		—		—		—		—		—			24,186			24,186
Other comprehensive income		—		—		—		—		7,941			—			7,941
Net issuance of common stock		—		5		—		5,994		—			—			5,999
Issuance of shares in connection with the acquisition of APS Healthcare		—		65		—		76,688		—			—			76,753
Stock-based compensation		—		—		—		6,381		—			—			6,381
Dividends to stockholders		—		—		—		—		—			71			71

Balance at June 30, 2012, as adjusted	$	—	$	852	$	33	$	827,092	$	19,107		$	214,610		$	1,061,694

2013
Balance at January 1, 2013	$	—	$	850	$	33	$	827,298	$	29,089		$	155,227		$	1,012,497
Net loss		—		—		—		—		—			(77,858	)		(77,858	)
Other comprehensive loss		—		—		—		—		(19,703	)		—			(19,703	)
Net issuance of common stock		—		5		—		4,204		—			—			4,209
Stock-based compensation		—		—		—		1,919		—			—			1,919
Dividends to stockholders		—		—		—		—		—			468			468

Balance at June 30, 2013	$	—	$	855	$	33	$	833,421	$	9,386		$	77,837		$	921,532

	For the six months ended June 30,

	2013			2012
				(as adjusted)
Operating activities:
Net (loss) income	$	(77,858	)	$	24,186
Adjustments to reconcile net (loss) income to cash (used for) provided by operating activities, net of balances acquired:
Deferred income taxes		(562	)		1,062
Net realized gains on investments		(12,557	)		(8,261	)
Amortization of intangible assets		4,459			3,647
Amortization of debt issuance costs		679			483
Goodwill impairment charge		91,742			—
Net amortization of bond premium		3,671			2,875
Depreciation expense		5,328			4,658
Changes in operating assets and liabilities:
Deferred policy acquisition costs		6,041			1,938
Reserves and other policy liabilities—life		(9,569	)		(8,468	)
Reserves for future policy benefits—health		(719	)		(3,250	)
Policy and contract claims—health		2,373			(18,401	)
Reinsurance balances		10,035			12,910
Due and unpaid/advance premium, net		(110,242	)		114,940
Income taxes receivable		(10,451	)		24,272
Other, net		(4,432	)		15,055

Cash (used for) provided by operating activities		(102,062	)		167,646
Investing activities:
Proceeds from sale, maturity, call, paydown or redemption of fixed maturity investments		270,052			341,016
Cost of fixed maturity investments acquired		(154,337	)		(249,238	)
Change in short-term investments		16,993			(26,977	)
Purchase of business, net of cash acquired		—			(137,747	)
Purchase of fixed assets		(3,499	)		(4,213	)
Other investing activities		(6,040	)		18,308

Cash provided by (used for) investing activities		123,169			(58,851	)
Financing activities:
Net proceeds from issuance of common and preferred stock, net of tax effect		429			4,056
Dividends paid to stockholders		(1,420	)		(13,514	)
Principal payment on loan payable		(7,134	)		(10,881	)
Proceeds from the issuance of loan payable		—			150,000
Payment of debt issue costs		—			(5,822	)

Cash (used for) provided by financing activities		(8,125	)		123,839

Net increase in cash and cash equivalents		12,982			232,634
Cash and cash equivalents at beginning of period		59,779			63,539

Cash and cash equivalents at end of period	$	72,761		$	296,173

Except as otherwise indicated, references to the "Company," "Universal American," "we," "our," and "us" are to Universal American Corp., a Delaware corporation, and its subsidiaries.

Universal American is a specialty health and life insurance holding company with an emphasis on providing a broad array of health insurance and managed care products and services to people covered by Medicare and Medicaid. Collectively, our health plans and insurance company subsidiaries are licensed to sell Medicare Advantage products, life, accident and health insurance and annuities in all fifty states and the District of Columbia. We currently sell Medicare Coordinated Care Plan products, which we call HMOs, Medicare Coordinated Care products built around contracted networks of providers, which we call PPOs and Medicare Advantage private fee-for-service products, known as PFFS Plans. We discontinued marketing and selling Traditional insurance products, consisting of Medicare supplement products, fixed benefit accident and sickness insurance and senior life insurance after June 1, 2012.

In 2011, Universal American formed a new subsidiary, Collaborative Health Systems, LLC, also known as CHS, to work with physicians and other healthcare professionals to form Accountable Care Organizations, or ACOs, under the Medicare Shared Savings Program ("Shared Savings Program"). Nine of our ACOs were approved for participation in the program by the Centers for Medicare & Medicaid Services, effective April 1, 2012, an additional seven ACOs were approved effective July 1, 2012 and fifteen additional ACOs were approved effective January 1, 2013. We estimate that these thirty one ACOs currently include approximately 3,000 participating providers with approximately 333,000 assigned Medicare fee-for-service beneficiaries covering portions of thirteen states, both within and outside our current Medicare Advantage footprint, including southeast Texas and upstate New York. CHS will provide these ACOs with care coordination, analytics and reporting, technology and other administrative capabilities to enable participating providers to deliver better care and lower healthcare costs for their Medicare fee-for-service beneficiaries. The Company provides capital to CHS to support the operating activities of CHS and the ACOs.

On March 2, 2012, we completed our acquisition of APS Healthcare, Inc., known as APS Healthcare. APS Healthcare provides specialty health services focused on behavioral health benefits, disease and condition management, and quality review and improvement. All of these services are designed to reduce health-related costs and enhance the health and quality of life of the members served. APS Healthcare provides services to government agencies, such as state Medicaid programs, commercial health plans, employers and unions. These services are provided on either an at-risk basis or an administrative services only basis. Behavioral health benefits are administered through APS Healthcare's provider network that consists of health care providers and facilities with which APS Healthcare directly or indirectly contracts to provide the necessary treatment. APS Healthcare operates in the United States and Puerto Rico. For further discussion of this transaction, see Note 4—Business Combination and Goodwill.

We have prepared the accompanying Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or U.S. GAAP, for interim reporting in accordance with Article 10 of the Securities and Exchange Commission's Regulation S-X. Accordingly, they do not include all of the disclosures normally required by U.S. GAAP or those normally made in an Annual Report on Form 10-K. For our insurance and HMO subsidiaries, U.S. GAAP differs from statutory

accounting practices prescribed or permitted by regulatory authorities. We have eliminated all material intercompany transactions and balances. The interim financial information in this report is unaudited, but in the opinion of management, includes all adjustments, including normal, recurring adjustments necessary to present fairly the financial position and results of operations for the periods reported. The results of operations for the three and six month periods ended June 30, 2013 and 2012 are not necessarily indicative of the results to be expected for the full year.

Unconsolidated Subsidiaries: In 2012, we entered into agreements with various healthcare providers to establish ACOs. These ACOs were generally formed as Limited Liability Companies. Our percentage ownership of each ACO varies, however, our share of the income of an ACO is generally 50% and our share of losses of an ACO is generally 100%. In the event of losses, we will share in 100% of subsequent profits until our losses are recovered. Any remaining profits are generally shared at 50%.

The ACOs are considered variable interest entities, known as VIEs, under U.S. GAAP as these entities do not have sufficient equity to finance their own operations without additional financial support. We assess our contractual, ownership or other interests in a VIE to determine if our interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. We perform an ongoing qualitative assessment of our variable interests in VIEs to determine whether we have a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. We have determined that we are not the primary beneficiary of the ACOs, and therefore we cannot consolidate them. We account for our participation in the ACOs using the equity method. Gains and losses from our participation in the ACOs are reported as equity in earnings (losses) of unconsolidated subsidiaries in the consolidated statements of operations. Our net investment in the ACOs is reported in other assets in the consolidated balance sheets.

Use of Estimates: The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported by us in our Consolidated Financial Statements and the accompanying Notes. Critical accounting policies require significant subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are based on information available at the time the estimates are made, as well as anticipated future events. Actual results could differ materially from these estimates. We periodically evaluate our estimates, and as additional information becomes available or actual amounts become determinable, we may revise the recorded estimates and reflect the revisions in operating results. In our judgment, the accounts involving estimates and assumptions that are most critical to the preparation of our financial statements are policy related liabilities and expense recognition, deferred policy acquisition costs, goodwill and other intangible assets, investment valuation, revenue recognition, and income taxes. There have been no changes in our critical accounting policies during the current quarter.

Significant Accounting Policies: For a description of existing significant accounting policies, see Note 3—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Adjustments to Financial Statements: In connection with the restatement to correct the accounting related to our recording of certain policy reserves and deferred acquisition costs in our Traditional

Insurance segment along with the related deferred income tax impact, the Company's prior annual financial statements, including the three and six months ended June 30, 2012, have been adjusted to record adjustments in their proper period for items that are not considered material but were previously corrected out-of-period.

We evaluated these adjustments in connection with the preparation of our financial statements as of and for the year ended December 31, 2012 and determined that these changes should be reported as a correction of errors in the prior periods. See Note 2—Basis of Presentation included in our Annual Report on Form 10-K for the year ended December 31, 2012 for additional information regarding these adjustments.

The following table reflects the adjustments to the financial statement line items of our consolidated statements of operations for the three and six months ended June 30, 2012:

	Three Months ended June 30, 2012								Six Months ended June 30, 2012

	As Reported		Other			As Adjusted			As Reported		Other			As Adjusted
	(in thousands, except per share amounts)
Other operating costs and expenses	$	108,482	$	(2,105	)	$	106,377		$	186,330	$	(349	)	$	185,981
Total benefits, claims and expenses		533,509		(2,105	)		531,404			1,030,733		(349	)		1,030,384
(Loss) income before equity in losses of unconsolidated subsidiaries		8,553		2,105			10,658			43,083		349			43,432
Equity in losses of unconsolidated subsidiaries		—		(2,105	)		(2,105	)		—		(2,105	)		(2,105	)
Income before income taxes	$	8,553	$	—		$	8,553		$	43,083	$	(1,756	)	$	41,327
Provision for income taxes		3,901		—			3,901			17,671		(530	)		17,141

Net income	$	4,652	$	—		$	4,652		$	25,412	$	(1,226	)	$	24,186

Earnings per common share:
Basic	$	0.05	$	—		$	0.05		$	0.30	$	(0.02	)	$	0.28

Diluted	$	0.05	$	—		$	0.05		$	0.30	$	(0.02	)	$	0.28

Comprehensive income for the six months ended June 30, 2012 as reported was $33.4 million and has been adjusted to $32.1 million. There were no adjustments to comprehensive income for the three months ended June 30, 2012.

Retained earnings at January 1, 2012 decreased by $12.8 million, net of tax, with $10.9 million relating to the correction and $1.9 million relating to other adjustments. Retained earnings at June 30, 2012 decreased by $14.0 million, net of tax, with $10.9 million relating to the correction and $3.1 million related to other adjustments. For the six months ended June 30, 2012, operating cash flows increased by $8.3 million, with a corresponding decrease in financing cash flows as a result of these adjustments.

Other Comprehensive Income: In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, known as ASU 2013-02, which requires an entity to provide additional disclosure about the amounts reclassified out of accumulated other comprehensive income. We adopted

this guidance on a prospective basis effective January 1, 2013. There was no impact to our financial position or results of operations, as ASU 2013-02 only impacts financial statement disclosure.

On March 2, 2012, we acquired 100% of the outstanding voting stock of APS Healthcare at a purchase price of $222.3 million, which is net of a working capital adjustment of $5.2 million. The consideration comprised $147.8 million in cash to retire APS Healthcare's outstanding indebtedness and other liabilities and approximately $74.5 million in Universal American common stock. The equity portion of the purchase price was funded through the issuance of 6,314,690 shares of Universal American common stock. The cash portion of the purchase price was funded with the proceeds of the $150 million term loan portion of a new Credit Facility.

We have recorded $5.0 million of acquisition accounting adjustments subsequent to the closing. The working capital adjustment was finalized in the third quarter of 2012, resulting in a $2.2 million decrease to the purchase price and the return of 189,771 shares of Universal American common stock. The remaining $2.8 million included an increase in deferred tax assets of $3.8 million, net of an increase in claims payable of $0.8 million and a decrease in other current assets of $0.2 million. These adjustments were offset to goodwill.

The allocation of the purchase price resulted in goodwill of $164.8 million and other intangible assets of $29.2 million. The goodwill recognized, assigned to the Corporate and Other segment, is attributable primarily to anticipated business growth and the assembled workforce of APS Healthcare. Approximately $5.5 million of the goodwill related to the acquisition of APS Healthcare is deductible for tax purposes. The other intangible assets, which consist of customer relationships, technology, trade name and provider network, have weighted average useful lives ranging from 4 to 8 years.

We test goodwill for impairment annually based on information as of October 1 of the current year or more frequently if circumstances suggest that impairment may exist. During the quarter ended June 30, 2013, certain events occurred and circumstances changed which indicated that it was more likely than not that goodwill for APS Healthcare might be impaired.

These events and circumstances, occurring during the quarter ended June 30, 2013, included the following:

Based on the foregoing, we performed an interim impairment review as of June 30, 2013, that included lowered expectations for future revenue growth and new business development and a higher discount

rate. As a result, we performed an interim impairment review as of June 30, 2013. Based on the results of the step one impairment test, we determined that as of June 30, 2013 the carrying value of APS Healthcare exceeded its fair value. We then proceeded to the second step of the impairment test to estimate the implied fair value of the APS Healthcare goodwill. This implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, that is, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value was the purchase price paid. Based on the June 30, 2013 step two analysis, the carrying amount of the APS Healthcare goodwill exceeded its implied fair value, resulting in a pre-tax impairment charge of $91.7 million, which we allocated on a pro-rata basis between taxable and non-taxable goodwill.

We estimate the fair values of our reporting units using discounted cash flows, which include assumptions about a wide variety of internal and external factors. Significant assumptions used in the impairment analysis include financial projections of cash flow (including significant assumptions about operations and target capital requirements), long-term growth rates for determining terminal value, and discount rates. Forecasts and long-term growth rates used for our reporting units are consistent with, and use inputs from, our internal long-term business plan and strategy. During our forecasting process, we assess revenue trends, medical cost trends, operating cost levels and target capital levels. Significant factors affecting these trends include changes in membership, premium yield, medical cost trends, and the impact and expectations of regulatory environments.

Although we believe that the financial projections used are reasonable and appropriate at the time made, the use of different assumptions and estimates could materially impact the analysis and resulting conclusions. In addition, due to the long-term nature of the forecasts there is significant uncertainty inherent in those projections. That uncertainty is increased by the impact of healthcare reforms as discussed in Item 1, "Business—Regulation" in our Annual Report on Form 10-K. For additional discussions regarding how the enactment or implementation of healthcare reforms and how other factors could affect our business and the related long-term forecasts, see Item 1A, "Risk Factors" in Part I of our Annual Report on Form 10-K and "Healthcare Reform" in Part 1, Item 2 of this Quarterly Report on Form 10-Q.

We use a range of discount rates that correspond to a market-based weighted average cost of capital. Discount rates are determined for each reporting unit based on the implied risk inherent in their forecasts. This risk is evaluated using comparisons to market information such as peer company weighted average costs of capital and peer company stock prices in the form of revenue and earnings multiples. The most significant estimates in the discount rate determinations include the risk-free rates and equity risk premium. Company-specific adjustments to discount rates are subjective and thus are difficult to measure with certainty.

Outcomes from the discounted cash flow analysis are compared to other market approach valuation methodologies for reasonableness.

The passage of time and the availability of additional information regarding areas of uncertainty in regards to the reporting units' operations could cause these assumptions used in our analysis to change materially in the future. If our assumptions differ from actual, the estimates underlying our goodwill impairment tests could be adversely affected. Decreases in business growth, decreases in earnings projections, increases in the weighted average cost of capital and increases in the amount of required capital for a reporting unit will all cause the reporting unit's fair value to decrease.

Changes in the carrying amounts of goodwill and intangible assets with indefinite lives (primarily trademarks and licenses) are shown below:

The results of operations and financial condition of APS Healthcare have been included in our consolidated statements of operations and consolidated balance sheets from March 2, 2012, the date of acquisition. In 2012, we recognized $3.7 million of acquisition related costs (primarily in the first quarter). These costs are included in the line item other operating costs and expenses in the consolidated statements of operations. We also incurred $5.8 million of costs in connection with the new credit facility. These costs have been deferred, are included in other assets in our consolidated balance sheets, and will be amortized over the life of the term loan. We have not recognized any acquisition-related costs in 2013.

The unaudited consolidated pro forma results of operations, assuming that operating results for APS Healthcare were included for the entire three and six month periods ended June 30, 2012, is as follows:

These amounts have been determined after applying our accounting policies and adjusting the results of APS Healthcare to reflect the changes in depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on January 1, 2012, and elimination of APS Healthcare's acquisition related costs, together with the related tax effects. These amounts also include adjustment of our results to reflect the cost of the new credit facility and additional stock based compensation that would have been charged assuming the acquisition took place on January 1, 2012, and elimination of our acquisition related costs, together with the related tax effects. The pro forma information presented above is for

disclosure purposes only and is not necessarily indicative of the results of operations that would have occurred had we consummated the acquisition on the date assumed, nor is the pro forma information intended to be indicative of our future results of operations.

	June 30, 2013

Classification	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Gross Unrealized OTTI(1)			Fair Value
	(in thousands)
U.S. Treasury securities and U.S. Government obligations	$	36,461	$	144	$	(56	)	$	—		$	36,549
Government sponsored agencies		15,887		507		(180	)		—			16,214
Other political subdivisions		104,345		1,632		(925	)		—			105,052
Corporate debt securities		438,420		19,666		(2,345	)		—			455,741
Foreign debt securities		113,182		2,396		(1,301	)		—			114,277
Residential mortgage-backed securities		213,235		5,682		(3,708	)		—			215,209
Commercial mortgage-backed securities		71,875		3,182		—			(107	)		74,950
Other asset-backed securities		46,228		1,096		(75	)		(2,219	)		45,030

	$	1,039,633	$	34,305	$	(8,590	)	$	(2,326	)	$	1,063,022

	December 31, 2012

Classification	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Gross Unrealized OTTI(1)			Fair Value
	(in thousands)
U.S. Treasury securities and U.S. Government obligations	$	31,125	$	192	$	(3	)	$	—		$	31,314
Government sponsored agencies		16,893		764		(2	)		—			17,655
Other political subdivisions		106,759		2,854		(65	)		—			109,548
Corporate debt securities		498,497		35,186		(423	)		—			533,260
Foreign debt securities		115,441		5,200		(8	)		—			120,633
Residential mortgage-backed securities		241,647		12,157		(139	)		—			253,665
Commercial mortgage-backed securities		74,142		4,841		(474	)		—			78,509
Other asset-backed securities		62,138		1,805		(548	)		(4,631	)		58,764

	$	1,146,642	$	62,999	$	(1,662	)	$	(4,631	)	$	1,203,348

At June 30, 2013, gross unrealized losses on mortgage-backed and asset-backed securities totaled $6.1 million, consisting primarily of unrealized losses of $2.2 million on subprime residential mortgage loans, with the balance related to obligations of commercial and residential mortgage-backed securities.

The fair value of certain subprime securities is depressed due to the deterioration of collectability of the underlying mortgages. The fair value of the other securities is depressed primarily due to changes in interest rates. We have evaluated these holdings, with input from our investment managers, and do not believe further other-than-temporary impairment to be warranted.

The amortized cost and fair value of fixed maturity investments at June 30, 2013 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The fair value and unrealized loss as of June 30, 2013 and December 31, 2012 for fixed maturities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below:

	Less than 12 Months					12 Months or Longer					Total

June 30, 2013	Fair Value		Gross Unrealized Losses and OTTI			Fair Value		Gross Unrealized Losses and OTTI			Fair Value		Gross Unrealized Losses and OTTI
	(in thousands)
U.S. Treasury securities and U.S. Government obligations	$	21,136	$	(56	)	$	—	$	—		$	21,136	$	(56	)
Government sponsored agencies		2,428		(180	)		—		—			2,428		(180	)
Other political subdivisions		30,057		(925	)		—		—			30,057		(925	)
Corporate debt securities		89,219		(2,345	)		—		—			89,219		(2,345	)
Foreign debt securities		48,278		(1,301	)		25		—			48,303		(1,301	)
Residential mortgage-backed securities		95,018		(3,708	)		—		—			95,018		(3,708	)
Commercial mortgage-backed securities		64		—			1,110		(107	)		1,174		(107	)
Other asset-backed securities		8,499		(62	)		4,768		(2,232	)		13,267		(2,294	)

Total fixed maturities	$	294,699	$	(8,577	)	$	5,903	$	(2,339	)	$	300,602	$	(10,916	)

Total number of securities in an unrealized loss position														140

	Less than 12 Months					12 Months or Longer					Total

December 31, 2012	Fair Value		Gross Unrealized Losses and OTTI			Fair Value		Gross Unrealized Losses and OTTI			Fair Value		Gross Unrealized Losses and OTTI
	(in thousands)
U.S. Treasury securities and U.S. Government obligations	$	8,046	$	(3	)	$	—	$	—		$	8,046	$	(3	)
Government sponsored agencies		2,612		(2	)		—		—			2,612		(2	)
Other political subdivisions		12,688		(65	)		—		—			12,688		(65	)
Corporate debt securities		27,374		(189	)		5,037		(234	)		32,411		(423	)
Foreign debt securities		1,246		(8	)		—		—			1,246		(8	)
Residential mortgage-backed securities		27,105		(139	)		—		—			27,105		(139	)
Commercial mortgage-backed securities		—		—			1,005		(474	)		1,005		(474	)
Other asset-backed securities		—		—			15,432		(5,179	)		15,432		(5,179	)

Total fixed maturities	$	79,071	$	(406	)	$	21,474	$	(5,887	)	$	100,545	$	(6,293	)

Total number of securities in an unrealized loss position														71

The reduction in fair values at June 30, 2013 compared to December 31, 2012, and the resulting increase in the number of securities in an unrealized loss position, is due to an overall increase in interest rates as a result of the general improvement in the U.S. economic outlook, and the Federal Reserve's announcement regarding the eventual reduction in its quantitative easing program.

We use interest rate swaps from time to time as part of our overall risk management strategy to efficiently reduce the duration, or sensitivity, of our fixed maturity investment portfolio market value to a rise in interest rates.

Our swaps are designated as held for managing asset-related risks that do not qualify for hedge treatment. Because the swaps do not meet the criteria for hedge accounting, gains or losses resulting from changes in fair value are recognized currently in earnings. Their fair value is based on the present value of expected net cash flows as determined by the contract rate and the LIBOR forward rate curve on the valuation date. As a component of managing overall interest rate risk, such gains and losses are most appropriately considered in the context of changes in the unrealized gains and losses on the fixed income portfolio. The swaps are recorded at fair value in other assets in our consolidated balance sheets.

As of June 30, 2013, we terminated all outstanding interest rate swaps, recognizing gains of $8.8 million and $9.9 million, respectively, for the three months and six months ended June 30, 2013. These gains are reflected in net realized gains on investments in the consolidated statements of operations.

Gross realized gains and gross realized losses on investments included in net realized gains on investments in the consolidated statements of operations are as follows:

	For the three months ended June 30,						For the six months ended June 30,

	2013			2012			2013			2012
	(in thousands)						(in thousands)
Realized Gains:
Fixed maturities	$	3,188		$	1,683		$	5,025		$	9,478
Interest rate swap		8,837			—			9,927			—
Other		33			44			40			44

		12,058			1,727			14,992			9,522

Realized Losses:
Fixed maturities		(1,977	)		(377	)		(2,435	)		(1,261	)

		(1,977	)		(377	)		(2,435	)		(1,261	)

Net realized gains on investments	$	10,081		$	1,350		$	12,557		$	8,261

We carry fixed maturity investments and equity securities at fair value in our Consolidated Financial Statements. These fair value disclosures consist of information regarding the valuation of these financial instruments followed by the fair value measurement disclosure requirements of Accounting Standards Codification 820-10, Fair Value Measurements and Disclosures Topic, known as ASC 820-10. ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs in the valuation techniques used to measure fair value into three broad Levels, numbered 1, 2, and 3. For further discussion, see Note 7—Fair Value Measurements included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The following table presents our recurring fair value measurements by ASC-820-10 hierarchy levels:

	Total		Level 1		Level 2		Level 3

*June 30, 2013*
Assets:
Fixed maturities, available for sale	$	1,063,022	$	—	$	1,060,616	$	2,406
Equity securities		7,516		—		7,516		—
Interest rate swaps		—		—		—		—

Total assets	$	1,070,538	$	—	$	1,068,132	$	2,406

*December 31, 2012*
Assets:
Fixed maturities, available for sale	$	1,203,348	$	—	$	1,200,895	$	2,453
Equity securities		7,608		—		7,608		—
Interest rate swaps		1,095		—		1,095		—

Total assets	$	1,212,051	$	—	$	1,209,598	$	2,453

The following table provides a summary of changes in the recurring fair value measurement of our Level 3 financial instruments:

During the quarter ended June 30, 2013, we determined that the carrying amount of the APS Healthcare goodwill exceeded its implied fair value of $73.0 million. As a result, we recorded an impairment charge to write off the excess amount. Because of the nature of the goodwill valuation process, we have classified this nonrecurring fair value measurement as Level 3. For further details see Note 4—Business Combination and Goodwill.

The components of accumulated other comprehensive income are as follows (in thousands):

	Net Unrealized Gains (Losses) on Investments Available for Sale			Gross Unrealized OTTI			Long-Term Claim Reserve Adjustment			Accumulated Other Comprehensive Income

Three months ended June 30, 2013
Balance as of April 1, 2013	$	37,746		$	(2,155	)	$	(8,080	)	$	27,511
Other comprehensive (loss) income before reclassifications		(14,470	)		643			2,255			(11,572	)
Amounts reclassified from accumulated other comprehensive income		6,553			—			—			6,553

Net current-period other comprehensive loss		(21,023	)		643			2,255			(18,125	)

Balance as of June 30, 2013	$	16,723		$	(1,512	)	$	(5,825	)	$	9,386

Three months ended June 30, 2012
Balance as of April 1, 2012	$	23,718		$	(3,258	)	$	(5,274	)	$	15,186
Other comprehensive income (loss) before reclassifications		5,115			122			(438	)		4,799
Amounts reclassified from accumulated other comprehensive income		878			—			—			878

Net current-period other comprehensive income		4,237			122			(438	)		3,921

Balance as of June 30, 2012	$	27,955		$	(3,136	)	$	(5,712	)	$	19,107

Six months ended June 30, 2013
Balance as of January 1, 2013	$	39,934		$	(3,010	)	$	(7,835	)	$	29,089
Other comprehensive (loss) income before reclassifications		(15,049	)		1,498			2,010			(11,541	)
Amounts reclassified from accumulated other comprehensive income		8,162			—			—			8,162

Net current-period other comprehensive loss		(23,211	)		1,498			2,010			(19,703	)

Balance as of June 30, 2013	$	16,723		$	(1,512	)	$	(5,825	)	$	9,386

Six months ended June 30, 2012
Balance as of January 1, 2012	$	17,723		$	(3,242	)	$	(3,315	)	$	11,166
Other comprehensive income (loss) before reclassifications		15,602			106			(2,397	)		13,311
Amounts reclassified from accumulated other comprehensive income		5,370			—			—			5,370

Net current-period other comprehensive income		10,232			106			(2,397	)		7,941

Balance as of June 30, 2012	$	27,955		$	(3,136	)	$	(5,712	)	$	19,107

In April 2011, we established the Universal American Corp. 2011 Omnibus Equity Award Plan (the "2011 Equity Plan"). The 2011 Equity Plan is the sole active plan for providing equity compensation to eligible employees, directors and other third parties. We issue shares upon the exercise of options granted under the plan. Detailed information for activity in our stock-based incentive plan can be found in Note 19—Stock-Based Compensation in our Annual Report on Form 10-K for the year ended December 31, 2012.

Compensation expense, included in other operating costs and expenses, and the related tax benefit were as follows:

We recognize compensation cost for share-based payments to employees, directors and other third parties based on the grant date fair value of the award, which we amortize over the grantees' service period in accordance with the provisions of Compensation—Stock Compensation Topic, ASC 718-10. We use the Black-Scholes valuation model to value stock options.

We estimated the fair value for options granted during the period at the date of grant using a Black-Scholes option pricing model with the following range of assumptions:


		For options granted in 2013
Weighted-average grant date fair value		$2.67 - $2.83
Risk free interest rates		0.56% - 0.76%
Dividend yields		0.00%
Expected volatility		39.66% - 40.86%
Expected lives of options (in years)		3.75

We did not capitalize any cost of stock-based compensation. Future expense may vary based upon factors such as the number of awards granted by us and the then-current fair value of such awards.

A summary of option activity for the six months ended June 30, 2013 is set forth below:

The total intrinsic value of stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised was less than $0.1 million during each of the six month periods ended June 30, 2013 and 2012.

We received proceeds of approximately $0.5 million and $0.1 million from the exercise of stock options during the six months ended June 30, 2013 and 2012 respectively.

As of June 30, 2013, the total compensation cost related to non-vested option awards not yet recognized was $13.7 million, which we expect to recognize over a weighted average period of 2.8 years.

In accordance with our 2011 Equity Plan, we may grant restricted stock to employees, directors and other third parties. These awards generally vest ratably over a four-year period; however during the six months ended June 30, 2013 we paid a portion of the annual bonuses in the form of restricted stock, which vests under certain circumstances on the two year anniversary of the grant. We generally value restricted stock awards at an amount equal to the market price of our common stock on the date of grant. We recognize compensation expense for restricted stock awards on a straight line basis over the vesting period.

A summary of non-vested restricted stock award activity for the six months ended June 30, 2013 is set forth below:

The total fair value of shares of restricted stock vested during the six months ended June 30, 2013 was $2.6 million.

ASC 718-10 requires us to report the benefits of tax deductions in excess of recognized compensation cost of equity awards as a financing cash flow. We recognized $0.4 million and $4.1 million of financing cash flows for these excess tax deductions for the six months ended June 30, 2013 and 2012 respectively.

We are subject to a variety of legal proceedings, investigations, audits, claims and litigation, including claims under the False Claims Act and claims for benefits under insurance policies and claims by members, providers, customers, employees, regulators and other third parties. In some cases, plaintiffs seek punitive damages. While the outcome of these matters is currently not determinable, we do not currently expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Laws and regulations governing Medicare, Medicaid and other state and federal healthcare and insurance programs are complex and subject to significant interpretation. As part of the recent healthcare reform legislation, CMS and other regulatory agencies have been exercising increased oversight and regulatory authority over our Medicare and other businesses. Compliance with such laws and regulations is subject to CMS audit, other governmental review and investigation and significant and complex interpretation. According to CMS, we are a high-risk Medicare Advantage sponsor. As a result, CMS continues to audit our Medicare Advantage plans with regularity to ensure we are in compliance with applicable laws, rules, regulations and CMS instructions. There can be no assurance that we will be found to be in compliance with all such laws, rules and regulations in connection with these audits, reviews and investigations, and at times we have been found to be out of compliance.

Failure to be in compliance can subject us to significant regulatory action including significant fines, penalties, cancellation of contracts with governmental agencies or operating restrictions on our business, including, without limitation, suspension of our ability to market to and enroll new members in our Medicare plans, termination of our contracts with CMS, exclusion from Medicare and other state and federal healthcare programs and inability to expand into new markets.

The activities of our holding company, along with start-up and operating costs associated with our ACO business, the operations of APS Healthcare since its acquisition on March 2, 2012 and other ancillary operations are reported in our Corporate & Other segment.

We report intersegment revenues and expenses on a gross basis in each of the operating segments but eliminate them in the consolidated results. These intersegment revenues and expenses affect the amounts reported on the individual financial statement line items, but we eliminate them in consolidation and they do not change income before taxes. The most significant items eliminated are intersegment revenue and expense relating to commissions earned by agency subsidiaries in our Corporate & Other segment from insurance subsidiaries in our Traditional segment and for services provided by APS Healthcare to our Senior Managed Care—Medicare Advantage segment.

Financial data by segment, with a reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes in accordance with U.S. GAAP is as follows:

	Three months ended June 30,

	2013						2012
	Revenues			Income(loss) before Income Taxes			Revenues			Income(loss) before Income Taxes
	(in thousands)
Senior Managed Care—Medicare Advantage	$	394,909		$	46		$	397,257		$	15,992
Traditional Insurance		58,586			5,057			66,706			5,375
Corporate & Other		74,755			(109,290	)		78,901			(14,164	)
Intersegment revenues		(4,355	)		—			(2,152	)		—
Adjustments to segment amounts:
Net realized gains on investments(1)		10,081			10,081			1,350			1,350

Total	$	533,976		$	(94,106	)	$	542,062		$	8,553

	Six months ended June 30,

	2013						2012
	Revenues			Income(loss) before Income Taxes			Revenues			Income(loss) before Income Taxes
	(in thousands)
Senior Managed Care—Medicare Advantage	$	824,937		$	38,640		$	823,388		$	49,301
Traditional Insurance		120,261			7,403			136,765			9,808
Corporate & Other		147,360			(130,062	)		108,404			(26,043	)
Intersegment revenues		(7,875	)		—			(3,002	)		—
Adjustments to segment amounts:
Net realized gains on investments(1)		12,557			12,557			8,261			8,261

Total	$	1,097,240		$	(71,462	)	$	1,073,816		$	41,327

Income Taxes: Our effective tax rate was 2.4% for the second quarter of 2013 compared to 45.6% for the second quarter of 2012. Permanent items, primarily relating to non-deductible goodwill impairment, executive compensation and interest on the mandatorily redeemable preferred stock as well as foreign and state income taxes drove the variance in the effective rate compared with the 35% federal rate. The second quarter of 2013 and 2012 each included non-recurring tax benefits of $0.1 million.

For the six months ended June 30, 2013, our effective tax rate was (8.9)% compared to 41.5% for the same period in 2012. Permanent items, relating to non-deductible goodwill impairment, executive compensation, APS Healthcare transaction costs and interest on the mandatorily redeemable preferred stock as well as foreign and state income taxes drove the variance in the effective rate compared with the 35% federal rate. The six months ended June 30, 2013 and 2012 also included non-recurring tax benefits of $0.4 million and $0.1 million, respectively, primarily related to state income tax refunds.

Reinsurance: We evaluate the financial condition of our reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies. We are obligated to pay claims in the event that a reinsurer to whom we have ceded an insured claim fails to meet its obligations under the reinsurance agreement. We are also obligated to pay claims on the traditional business of Pennsylvania Life Insurance Company, the company that we sold to CVS Caremark in 2011, in the event that any of the third party reinsurers to whom Pennsylvania Life has ceded an insured claim fails to meet their obligations under the reinsurance agreement. We are not aware of any instances where any of our reinsurers have been unable to pay any policy claims on any reinsured business.

As of June 30, 2013, all of our primary reinsurers, as well as the primary first party reinsurers of Pennsylvania Life's traditional business, were rated "A-" (Excellent) or better by A.M. Best with the exception of one reinsurer. For that reinsurer, which is not rated, a trust containing assets at 106% of reserves was established at the inception of the reinsurance agreement. The trust agreement requires that on an ongoing basis the trust assets be maintained at a minimum level of 100% of reserves. The reserves amounted to approximately $139.2 million as of June 30, 2013.

Restructuring Charges: A summary of our restructuring liability balance as of June 30, 2013 follows:

For further discussion of our restructuring initiatives, see Note 22—Other Operational Disclosures—Restructuring Charges in our Annual Report on Form 10-K for the year ended December 31, 2012.

Principal and Interest Payments on Term Loan: During the three and six month periods ended June 30, 2013, we made principal payments totaling $3.6 million and $7.1 million, respectively, and interest payments totaling $0.8 million and $1.3 million, respectively.

During the three month and six month periods ended June 30, 2012, we made principal payments totaling $10.9 million. During the three and six month periods ended June 30, 2012, we made interest payments totaling $1.0 million and $1.1 million, respectively.

Unconsolidated Subsidiaries: We account for our participation in the ACOs using the equity method. Gains and losses from our participation in the ACOs are reported as equity in earnings (losses) of unconsolidated subsidiaries in the consolidated statements of operations. Our net investment in the ACOs is reported in other assets in the consolidated balance sheets. We recognized losses of $8.9 million and $17.2 million from our ACO arrangements, for the three and six months ended June 30, 2013, respectively and losses of $2.1 million for both the three and six month periods ended June 30, 2012. For additional information on the ACOs, see Note 1—Organization and Company Background and Note 2—Basis of Presentation.

Special Cash Dividend: On August 1, 2013, the Board of Directors of the Company approved the payment of a special cash dividend of $1.60 per share, payable on August 19, 2013 to shareholders of record as of August 12, 2013. We expect the cumulative dividend payment to be approximately $139.9 million. In addition, pursuant to the terms of our 2011 Omnibus Equity Award Plan, the

exercise price on outstanding stock options will be reduced by the amount of the dividend, $1.60. We will also establish a dividend payable liability to record amounts expected to be paid in the future to holders of our restricted stock as such shares vest. This liability is expected to amount to approximately $2.2 million.

Stock Repurchase Plan: In addition, the Board of Directors of the Company authorized the repurchase of up to $40 million of its outstanding common stock. Purchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise as market conditions permit.

Acquisition of Total Care: On August 2, 2013, we announced that we entered into a definitive agreement to acquire the assets of the Total Care Medicaid managed care plan. Total Care is one of the oldest and largest Medicaid health plans in Upstate New York, currently serving approximately 35,000 members in Syracuse and surrounding areas. The transaction is subject to customary closing conditions, including approval from applicable New York regulators and is expected to close in the 4th quarter of 2013.

ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis presents a review of our financial condition as of June 30, 2013 and our results of operations for the three and six months ended June 30, 2013 and 2012. As used in this quarterly report on Form 10-Q, except as otherwise indicated, references to the "Company," "we," "our," and "us" are to Universal American Corp., a Delaware corporation and its subsidiaries.

You should read the following analysis of our consolidated results of operations and financial condition in conjunction with the consolidated financial statements and related consolidated footnotes included elsewhere in this quarterly report on Form 10-Q as well as the Consolidated Financial Statements and related consolidated Footnotes and the Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2012. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our actual results to differ materially from management's expectations. Factors that could cause such differences include those set forth or incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 6, 2013 under Part II, Item 1A—Risk Factors.

Through our health insurance, and managed care subsidiaries, we primarily serve the growing Medicare population by providing Medicare Advantage and Medicare Supplement insurance products. In addition, with the acquisition of APS Healthcare on March 2, 2012, we now provide a variety of healthcare services, including case management and care coordination, clinical quality and utilization review and behavioral health services to Medicaid agencies and other third parties. Approximately 27% of the over 65 year old population in the United States is currently enrolled in Medicare Advantage plans. In addition, we believe there is an opportunity to address the high cost of healthcare for the remaining Medicare population enrolled in traditional fee-for-service Medicare and have joined with primary-care provider groups, hospitals, integrated delivery systems, and a variety of other health care providers to form thirty-one Accountable Care Organizations, or ACOs, pursuant to the Medicare Shared Saving Program, or Shared Savings Program. All payers of healthcare costs, from the Federal and state governments to corporations and individuals, are incurring rising healthcare costs and we believe we can apply our capabilities and experience in controlling these costs while improving health outcomes.

In March 2010, President Obama signed into law The Patient Protection and Affordable Care Act and The Healthcare and Education Reconciliation Act of 2010, which we collectively refer to as the Affordable Care Act. The Affordable Care Act established ACOs as a tool to improve quality and lower costs through increased care coordination in the Medicare Fee-for-Service, or FFS, program, which covers approximately 75% of the Medicare recipients, approximately 36 million eligible Medicare beneficiaries. CMS established the Shared Savings Program to facilitate coordination and cooperation among providers to improve the quality of care for FFS beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers may participate in the Shared Savings Program by creating or participating in an ACO.

The Shared Savings Program is designed to improve beneficiary outcomes and increase value of care by (1) promoting accountability for the care of Medicare FFS beneficiaries; (2) requiring

coordinated care for all services provided under Medicare FFS; and (3) encouraging investment in infrastructure and redesigned care processes. The Shared Savings Program will reward ACOs that lower their growth in health care costs while meeting performance standards on quality of care and putting patients first. Under the final Shared Savings Program rules, Medicare will continue to pay individual providers and suppliers for specific items and services as it currently does under the FFS payment methodologies. The Shared Savings Program rules require CMS to develop a benchmark for savings to be achieved by each ACO if the ACO is to receive shared savings or for ACOs that have elected to accept responsibility for losses. An ACO that meets the program's quality performance standards will be eligible to receive a share of the savings to the extent its assigned beneficiary medical expenditures are below its own medical expenditure benchmark provided by CMS.

We have partnered with primary-care provider groups, hospitals, integrated delivery systems, and a variety of other health care providers to form 31 ACOs which have been approved by CMS for participation in the Shared Savings Program. We estimate that these 31 ACOs currently include approximately 3,000 participating providers with approximately 333,000 assigned Medicare fee-for-service beneficiaries covering portions of thirteen States both within and outside our current Medicare Advantage footprint, including Southeast Texas and upstate New York. We will provide these ACOs with care coordination, analytics and reporting, technology and other administrative capabilities to enable participating providers to deliver better care, improved health and lower healthcare costs for their Medicare fee-for-service beneficiaries.

The Affordable Care Act enacted significant changes to various aspects of the U.S. health insurance industry. There are many important provisions of the legislation that will require additional guidance and clarification in form of regulations and interpretations in order to fully understand the impact of the legislation on our overall business, which we expect to occur over the next several years.

Certain significant provisions of the Affordable Care Act that will impact our business include, among others, establishment of ACOs, reduced Medicare Advantage reimbursement rates, implementation of quality bonus for Star Ratings, stipulated minimum medical loss ratios, non-deductible federal excise taxes assessed to health insurers and coding intensity adjustments with mandatory minimums. The health care reform legislation is discussed more fully in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

In June 2012, the United States Supreme Court upheld the constitutionality of the Affordable Care Act, with one limited exception relating to its Medicaid expansion provision. The Supreme Court held that States could not be required to expand Medicaid or risk the loss of federal funding for existing Medicaid programs. Beginning in January 2014, Medicaid coverage will be expanded to all individuals under age 65 with incomes up to 133% of the federal poverty level, subject to the States' elections. The federal government will pay the entire costs for Medicaid coverage for newly eligible beneficiaries for three years, from 2014 through 2016. The federal share declines to 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and subsequent years.

We test goodwill for impairment annually based on information as of October 1 of the current year or more frequently if circumstances suggest that impairment may exist. During the quarter ended June 30, 2013 certain events occurred and circumstances changed which indicated that it was more likely than not that goodwill for APS Healthcare might be impaired.

These events and circumstances, occurring during the quarter ended June 30, 2013, included the following:

Based on the foregoing, we performed an interim impairment review as of June 30, 2013, that included lowered expectations for future revenue growth and new business development and a higher discount rate. As a result of the step one impairment test, we determined that as of June 30, 2013 the carrying value of APS Healthcare exceeded its fair value. We then proceeded to the second step of the impairment test to estimate the implied fair value of the APS Healthcare goodwill. This implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, that is, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value was the purchase price paid. Based on the June 30, 2013 step two analysis, the carrying amount of the APS Healthcare goodwill exceeded its implied fair value, resulting in a pre-tax impairment charge of $91.7 million, which we allocated on a pro-rata basis between taxable and non-taxable goodwill.

We estimate the fair values of our reporting units using discounted cash flows, which include assumptions about a wide variety of internal and external factors. Significant assumptions used in the

impairment analysis include financial projections of cash flow (including significant assumptions about future revenue, operating margins and target capital requirements), long-term growth rates for determining terminal value, and discount rates. Forecasts and long-term growth rates used for our reporting units are consistent with, and use inputs from, our internal long-term business plan and strategy. During our forecasting process, we assess revenue trends, medical cost trends, operating cost levels and target capital levels. Significant factors affecting these trends include changes in membership, premium yield, medical cost trends, and the impact and expectations of regulatory environments.

Outcomes from the discounted cash flow analysis are compared to other market approach valuation methodologies for reasonableness.

Future events that could have a negative impact on the levels of excess fair value over carrying value of our reporting units include, but are not limited to:

Negative changes in one or more of these factors, among others, could result in additional impairment charges.

The following table reflects income (loss) before taxes from each of our segments and contains reconciliations to reported net income:

	Three months ended June 30,						Six months ended June 30,

	2013			2012(1)			2013			2012(1)
	(in thousands, except per share amounts)
Senior Managed Care—Medicare Advantage(2)	$	46		$	15,992		$	38,640		$	49,301
Traditional Insurance(2)		5,057			5,375			7,403			9,808
Corporate & Other(2)		(109,290	)		(14,164	)		(130,062	)		(26,043	)
Net realized gains on investments(2)		10,081			1,350			12,557			8,261

(Loss) income before income taxes(2)		(94,106	)		8,553			(71,462	)		41,327
(Benefit from) provision for income taxes		(2,290	)		3,901			6,396			17,141

Net (loss) income	$	(91,816	)	$	4,652		$	(77,858	)	$	24,186

(Loss) earnings per common share (diluted):
Net (loss) income	$	(1.05	)	$	0.05		$	(0.89	)	$	0.28

(1): In connection with the restatement to correct the accounting related to our recording of certain policy reserves and deferred acquisition costs in our Traditional Insurance segment along with the related deferred income tax impact, the Company's prior annual financial statements, including the three and six months ended June 30, 2012, have been adjusted to record adjustments in their proper period for items that are not considered material but were previously corrected out-of-period.
(2): We evaluate the results of operations of our segments based on income before realized gains (losses) and income taxes. We believe that realized gains and losses are not indicative of overall operating trends. This differs from U.S. GAAP, which includes the effect of realized gains (losses) and income taxes in the determination of net income. The schedule above reconciles our segment income (loss) before income taxes to net (loss) income in accordance with U.S. GAAP.

Net loss for the three months ended June 30, 2013 was $91.8 million, or $(1.05) per diluted share, compared to net income of $4.7 million or $0.05 per diluted share for the three months ended June 30, 2012. Net (loss) income includes a goodwill impairment charge, net of taxes, of $90.6 million, or $1.03 per diluted share, realized investment gains, net of taxes, of $6.6 million, or $0.07 per diluted share, and $0.9 million, or $0.1 per diluted share, for the quarters ended June 30, 2013 and 2012, respectively.

Our effective tax rate was 2.4% for the second quarter of 2013 compared to 45.6% for the second quarter of 2012. Permanent items, primarily relating to non-deductible goodwill impairment, executive compensation and interest on the mandatorily redeemable preferred stock as well as foreign and state income taxes drove the variance in the effective rate compared with the 35% federal rate. The second quarter of 2013 and 2012 each included non-recurring tax benefits of $0.1 million.

Our Senior Managed Care—Medicare Advantage segment generated income before income taxes of less than $0.1 million for the three months ended June 30, 2013, a decrease of $15.9 million compared to the three months ended June 30, 2012. The decrease in earnings was driven primarily by deterioration in the medical expense ratio to 88.2% in the quarter ended June 30, 2013 from 83.9% in the quarter ended June 30, 2012, partially offset by improved expense efficiency as a result of our continued expense reduction initiatives. The second quarter of 2013 included unfavorable prior period

items of $6.5 million compared to favorable prior period items of $2.3 million in the second quarter of 2012.

Our Traditional Insurance segment generated income before income taxes of $5.1 million for the three months ended June 30, 2013, compared to $5.4 million for the three months ended June 30, 2012. The $0.3 million decrease in income was primarily due to a decrease in underwriting income due to the decline in overall business in force.

The loss before income taxes from our Corporate & Other segment increased by $95.1 million for the second quarter of 2013 compared to the second quarter of 2012. This was due primarily to a goodwill impairment charge of $91.7 million taken in the second quarter of 2013, an increase of $4.2 million in ACO start up and operating costs and higher corporate operating costs.

Net loss for the six months ended June 30, 2013 was $77.9 million, or $(0.89) per diluted share, compared to net income of $24.2 million or $0.28 per diluted share for the six months ended June 30, 2012. Net (loss) income includes a goodwill impairment charge, net of taxes, of $90.6 million, or $1.04 per diluted share, realized investment gains, net of taxes, of $8.2 million, or $0.09 per diluted share, and $5.4 million, or $0.6 per diluted share, for the six month periods ended June 30, 2013 and 2012, respectively.

Our Senior Managed Care—Medicare Advantage segment generated income before income taxes of $38.6 million for the six months ended June 30, 2013, a decrease of $10.7 million compared to the six months ended June 30, 2012. The decrease in earnings was driven primarily by deterioration in the medical expense ratio to 84.1% for first half of 2013 from 82.5% in the first half of 2012, partially offset by improved expense efficiency as a result of our continued expense reduction initiatives. The first half of 2013 included favorable prior period items of $17.2 million compared to favorable prior period items of $11.6 million in the first half of 2012.

Our Traditional Insurance segment generated income before income taxes of $7.4 million for the six months ended June 30, 2013, compared to $9.8 million for the six months ended June 30, 2012. The $2.4 million decrease in income was primarily due to a decrease in underwriting and investment income due to the decline in overall business in force.

The loss before income taxes from our Corporate & Other segment increased by $104.0 million for the first half of 2013 compared to the first half of 2012. This was due primarily to a goodwill impairment charge of $91.7 million taken in the second quarter of 2013, an increase of $8.9 million in ACO start up and operating costs and higher corporate operating expenses.

	Three months ended June 30,				Six months ended June 30,

	2013		2012		2013		2012
	(in thousands)				(in thousands)
Net premiums	$	389,988	$	391,367	$	814,632	$	811,393
Net investment income		4,878		5,839		10,218		11,910
Fee and other income		43		51		87		85

Total revenue		394,909		397,257		824,937		823,388

Medical expenses		344,114		328,492		685,098		669,250
Amortization of intangible assets		754		782		1,509		1,564
Commissions and general expenses		49,995		51,991		99,690		103,273

Total benefits, claims and other deductions		394,863		381,265		786,297		774,087

Segment income before income taxes	$	46	$	15,992	$	38,640	$	49,301

Our Senior Managed Care—Medicare Advantage segment includes the operations of our Medicare coordinated care HMO, PPO, network-based PFFS and non-network (Rural) PFFS Plans (collectively, the "Plans"), which provides coverage to Medicare beneficiaries in 34 states. Our HMOs offer coverage to Medicare beneficiaries primarily in Southeastern Texas, the area surrounding Dallas/Ft. Worth, 16 counties in Oklahoma and 3 counties in Indiana.

Net Premiums. Net premiums for the Senior Managed Care—Medicare Advantage segment decreased by $1.4 million compared to the three months ended June 30, 2012, primarily due to lower member months in 2013, partially offset by a higher premium yield per member. During the second quarter of 2013, net premiums included $1.3 million of net favorable items related to prior periods compared to $2.5 million during the same period in 2012.

Net investment income. Net investment income decreased $1.0 million primarily due to the maturity of higher yielding assets with the proceeds being reinvested in lower yielding securities in this low interest rate environment.

Medical expenses. Medical expenses increased by $15.6 million compared to the second quarter of 2012. During the second quarter of 2013, medical expenses included $7.8 million of net unfavorable items related to prior periods compared to $0.2 million during the same period in 2012. In addition, during the quarter ended June 30, 2013, sequestration increased our medical expense ratio by approximately 100 basis points and we saw an uptick in inpatient and emergent care utilization in our non-HMO lines of business. The medical expense ratio deteriorated to 88.2% for the second quarter of 2013 from 83.9% for the same period in 2012. Excluding the prior period items discussed above, the medical expense ratio for the second quarter of 2013 was 86.5%.

Commissions and general expenses. Commissions and general expenses for the three months ended June 30, 2013 decreased $2.0 million compared to the three months ended June 30, 2012, primarily as the result of the decreased level of membership and the execution of our continued expense reduction plan. The ratio of commissions and general expenses to net premiums improved to 12.8% in the second quarter of 2013 from 13.3% in the second quarter of 2012.

Net Premiums. Net premiums for the Senior Managed Care—Medicare Advantage segment increased by $3.2 million compared to the six months ended June 30, 2012, primarily due to a higher premium yield per member, partially offset by lower member months in 2013. In the first half of 2013, net premiums included $27.9 million of favorable prior period items, including $26.9 million related to 2012 risk scores based on our ongoing chart review process. This compares to $20.2 million of favorable premium adjustments in the first half of 2012 that included $11.4 million related to 2011 risk scores and $9.4 million related to a change in status by CMS for members who had previously been classified as Medicare Secondary Payer, or MSP, members.

Net investment income. Net investment income decreased $1.7 million primarily due to the maturity of higher yielding assets with the proceeds being reinvested in lower yielding securities in this low interest rate environment.

Medical expenses. Medical expenses increased by $15.8 million compared to the first half of 2012. During the first half of 2013, medical expenses included $10.7 million of net unfavorable items related to prior periods compared to $8.6 million of net unfavorable items related to prior periods in the first half of 2012. The 2012 development included $3.2 million related to the MSP status change discussed above. In addition, the second quarter 2013 effects of sequestration and an uptick in inpatient and emergent care utilization in our non-HMO lines of business unfavorably impacted medical expenses. The medical expense ratio deteriorated to 84.1% for the first half of 2013 from 82.5% for the same period in 2012. Excluding the prior period items discussed above, the medical expense ratio for the first six months of 2013 was 85.7%

Commissions and general expenses. Commissions and general expenses for the six months ended June 30, 2013 decreased $3.6 million compared to the six months ended June 30, 2012, primarily as the result of the decreased level of membership and the execution of our continued expense reduction plan. The ratio of commissions and general expenses to net premiums improved to 12.2% in the first half of 2013 from 12.7% in the first half of 2012.

	Three months ended June 30,				Six months ended June 30,

	2013		2012		2013		2012
	(in thousands)				(in thousands)
Net premiums	$	53,738	$	61,391	$	110,501	$	125,782
Net investment income		4,437		4,620		8,957		9,794
Fee and other income		411		695		803		1,189

Total revenue		58,586		66,706		120,261		136,765

Policyholder benefits		40,051		47,153		84,050		97,075
Change in deferred policy acquisition costs		2,195		654		6,041		1,938
Commissions and general expenses, net of allowances		11,283		13,524		22,767		27,944

Total benefits, claims and other deductions		53,529		61,331		112,858		126,957

Segment income before income taxes	$	5,057	$	5,375	$	7,403	$	9,808

Net Premiums. Net premium declined by $7.7 million or 12.5% from the second quarter of 2012. This is primarily the result of the continued effect of lapsation on our in force business and the decision to cease marketing and selling Traditional insurance products after June 1, 2012. The following table details premium for the segment by major lines of business:

Net investment income. Net investment income decreased by $0.2 million, primarily due to a lower invested asset base on the declining blocks of business.

Policyholder benefits. Policyholder benefits declined by $7.1 million, or 15.1%, compared to the second quarter of 2012. This decline was principally due to the overall decline of insurance in-force in the senior market and specialty health lines of business. For the three months ended June 30, 2013, the senior market policyholder benefit ratio improved to 66.7%, compared with 72.3% for the same period last year, due to favorable prior period development and a lower average claim trend in the Medicare supplement line of business. Specialty health's benefit ratio increased to 108.8%, compared with 101.5% for the same period last year, due to a higher incidence of open long-term claims during the second quarter of 2013 partially offset by favorable prior period items.

Change in deferred acquisition costs. The net change in deferred acquisition costs increased by $1.5 million due to a lower level of acquisition costs incurred and deferred in 2013 as a result of the decision to cease marketing and selling Traditional insurance products after June 1, 2012.

Commissions and general expenses, net of allowances. Total commissions and general expenses, net of allowances, decreased by $2.2 million compared to the second quarter of 2012. This decrease in expenses is attributed primarily to lower commissions and other acquisition costs as a result of the decline in new business issued in 2013, discussed above, as well as the decline in the business in force.

Net Premiums. Net premium declined by $15.3 million or 12.1% from the six months ending June 30, 2012. This is primarily the result of the continued effect of lapsation on our in force business and the decision to cease marketing and selling Traditional insurance products after June 1, 2012. The following table details premium for the segment by major lines of business:

Net investment income. Net investment income decreased by $0.8 million, primarily due to the maturity of higher yielding assets with the proceeds being reinvested in lower yielding securities in this low interest rate environment, as well as a lower invested asset base on the declining blocks of business.

Policyholder benefits. Policyholder benefits declined by $13.0 million, or 13.4%, compared to the six months ending June 30, 2012. This decline was principally due to the overall decline of insurance in-force in the senior market and specialty health lines of business. For the six months ended June 30, 2013, the senior market policyholder benefit ratio improved to 70.9%, compared with 74.1% for the same period last year, due to favorable prior period development and a lower average claim trend in the Medicare supplement line of business. Specialty health's benefit ratio increased to 99.0%, compared with 96.7% for the same period last year, due to a higher incidence of open long-term claims during the second quarter of 2013 partially offset by favorable prior period items.

Change in deferred acquisition costs. The net change in deferred acquisition costs increased by $4.1 million due to a lower level of acquisition costs incurred and deferred in 2013 as a result of the decision to cease marketing and selling Traditional insurance products after June 1, 2012.

Commissions and general expenses, net of allowances. Total commissions and general expenses, net of allowances, decreased by $5.2 million compared to the six months ending June 30, 2012. This decrease in expenses is attributed primarily to lower commissions and other acquisition costs as a result of the decline in new business issued in 2013, discussed above, as well as the decline in the business in force.

The following table presents the primary components comprising the loss before taxes for the segment:

	Three months ended June 30,						Six months ended June 30,

	2013			2012			2013			2012
	(in thousands)						(in thousands)
Net premiums	$	40,558		$	36,370		$	80,387		$	48,594
Net investment income		196			77			220			87
Fee and other income		34,001			42,454			66,753			59,723

Total revenue		74,755			78,901			147,360			108,404

Claims and other benefits		35,038			31,971			67,010			43,307
Amortization of intangible assets		1,339			1,357			2,715			1,810
Interest expense		1,671			1,748			3,260			2,935
Goodwill impairment charge		91,742			—			91,742			—
Commissions and general expenses		45,340			55,885			95,492			84,291

Total benefits, claims and other deductions		175,130			90,961			260,219			132,343
Equity in losses of unconsolidated subsidiaries		(8,915	)		(2,104	)		(17,203	)		(2,104	)

Segment loss before income taxes	$	(109,290	)	$	(14,164	)	$	(130,062	)	$	(26,043	)

Net premiums. Net premiums increased by $4.2 million compared with the quarter ended June 30, 2012 due primarily to increased revenues from the APS Puerto Rico business.

Fee and other income. Fee and other income declined by $10.7 million compared with the quarter ended June 30, 2012, due primarily to lower levels of fee for service business at APS Healthcare.

Claims and other benefits. Claims and other benefits increased by $3.1 million compared with the quarter ended June 30, 2012, primarily related to the increase in the Puerto Rico risk business discussed above.

Goodwill impairment charge. During the quarter ended June 30, 2013 certain events occurred and circumstances changed which indicated that it was more likely than not that goodwill for APS Healthcare might be impaired. These events and circumstances, occurring during the quarter ended June 30, 2013, included reductions in future sales growth expectations, declines in operating profit margins due to reductions in renewal rates on certain contracts and the loss of other contracts. Accordingly, we performed an interim impairment review as of June 30, 2013. This review indicated that the carrying amount of the APS Healthcare goodwill exceeded its implied fair value, resulting in an impairment charge of $91.7 million. For additional information, see Note 4—Business Combination and Goodwill.

Commissions and general expenses. Total commissions and general expenses decreased by $12.7 million compared to the six months ending June 30, 2012. This was driven by a $9.7 million decline at APS Healthcare related to expense reduction initiatives and lower levels of business. In

addition, operating expenses for our ACO business declined by $2.6 million, as more ACO costs were chargeable at the ACO subsidiary level (See further discussion below). General corporate expenses increased $1.8 million, compared with 2012, primarily related to business development activities.

Equity in losses of unconsolidated subsidiaries. This line represents our share of losses on our unconsolidated ACO subsidiaries. Including the ACO operating expenses reported in commissions and general expenses above, total ACO costs were $9.5 million in the quarter ended June 30, 2013 compared with $5.3 million in the same period of 2012 and represent the start-up and operating costs of our ACO business. The increase of $4.2 million is driven by increased operating costs, as there are now 31 ACO entities in operation in 2013 compared to nine at June 30, 2012. Due to the nature of the Shared Savings Program, we do not anticipate recognizing revenue, if any, until the end of the program year, which is December 31, 2013, at the earliest. Based on the ACO operating agreements, we bear all costs of the ACO operations until revenue is recognized. At that point, we share in 100% of the revenue up to the costs recognized. Any remaining revenue is generally shared equally with our ACO partners.

Net premiums. Net premiums increased by $31.8 million compared with the six months ended June 30, 2012 due primarily to 2013 including a full six months of APS Healthcare results compared with four months in 2012. APS Healthcare was acquired on March 2, 2012.

Fee and other income. Fee and other income increased by $2.2 million compared with the six months ended June 30, 2012, due primarily to 2013 including a full six months of APS Healthcare results compared with four months in 2012, partially offset by lower levels of domestic business at APS Healthcare in 2013.

Claims and other benefits. Claims and other benefits increased by $23.7 million compared with the six months ended June 30, 2012, primarily related to 2013 including a full six months of APS Healthcare results compared with four months in 2012 as well as the increase in the Puerto Rico risk business discussed above.

Amortization of intangible assets. This represents the amortization of APS Healthcare intangible assets. The increase is due to 2013 including a full six months of APS Healthcare results compared with four months in 2012

Goodwill impairment charge. The goodwill impairment charge of $91.7 million relates to the impairment of APS Healthcare goodwill during the quarter ended June 30, 2013, as discussed above. For additional information, see Note 4—Business Combination and Goodwill.

Commissions and general expenses. Total commissions and general expenses increased by $6.3 million compared to the six months ending June 30, 2012. This was driven by a $15.1 million increase at APS Healthcare primarily related to 2013 including a full six months of APS Healthcare results compared with four months in 2012, net of expense reduction initiatives and lower levels of business. In addition, operating expenses for our ACO business declined by $6.2 million, as more ACO costs were chargeable at the ACO subsidiary level (See further discussion below). General corporate expenses increased $2.4 million, compared with 2012, primarily related to business development activities.

Equity in losses of unconsolidated subsidiaries. This line represents our share of losses on our unconsolidated ACO subsidiaries. Including the ACO operating expenses reported in commissions and general expenses above, total ACO costs were $18.3 million in the six months ended June 30, 2013 compared with $9.4 million in the same period of 2012 and represent the start-up and operating costs of our ACO business. The increase of $8.9 million is driven by increased operating costs, as there are now 31 ACO entities in operation in 2013 compared to nine at June 30, 2012. Due to the nature of the Shared Savings Program, we do not anticipate recognizing revenue, if any, until the end of the program year, which is December 31, 2013, at the earliest. Based on the ACO operating agreements, we bear all costs of the ACO operations until revenue is recognized. At that point, we share in 100% of the revenue up to the costs recognized. Any remaining revenue is generally shared equally with our ACO partners.

Sources and Uses of Liquidity to the Parent Company, Universal American Corp. We require cash at our parent company to support the operations and growth of our insurance, HMO and other subsidiaries, fund new business opportunities through acquisitions or otherwise, and pay the operating expenses necessary to function as a holding company, as applicable insurance department regulations require us to bear our own expenses.

The parent company's sources and uses of liquidity are derived primarily from the following:

As of June 30, 2013, we had approximately $165 million of cash and investments in our parent company and unregulated subsidiaries. An additional $51.5 million of dividends was received from our Insurance and HMO subsidiaries in July 2013, as discussed below.

On August 1, 2013, the Board of Directors of the Company approved the payment of a special cash dividend of $1.60 per share, payable on August 19, 2013 to shareholders of record as of August 12, 2013. We expect the cumulative dividend payment to be approximately $139.9 million. For additional information see Note 12—Subsequent Events.

Insurance and HMO subsidiaries. We require cash at our insurance and HMO subsidiaries to meet our policy-related obligations and to pay operating expenses, including the cost of administration of the policies, and to maintain adequate capital levels. The primary sources of liquidity are premiums received from CMS and policyholders and investment income generated by our invested assets.

Our insurance subsidiaries are required to maintain minimum amounts of statutory capital and surplus as required by regulatory authorities and each currently exceeds its respective minimum requirement at levels we believe are sufficient to support their current levels of operation. Our HMO subsidiaries are also required by regulatory authorities to maintain minimum amounts of capital and surplus and each currently exceeds this minimum requirement. Excess capital can be used by the insurance and HMO subsidiaries to make dividend payments to their respective holding companies, subject to certain restrictions, and from there to our parent company.

At June 30, 2013, our insurance and HMO subsidiaries held total cash and invested assets of approximately $950 million, primarily comprised of fixed maturity securities that could readily be converted to cash. We believe that this level of liquidity is sufficient to meet our obligations and pay expenses.

Capital contributions to and dividends from our Insurance and HMO subsidiaries are made through their respective holding companies. We did not make any capital contributions to our insurance and HMO subsidiaries during the first six months of 2013. During the second quarter, we evaluated capital levels at our insurance and HMO subsidiaries. In addition to ordinary dividends based on prior year earnings, we also requested extraordinary dividends at certain subsidiaries to reduce excess capital. As a result, our insurance and HMO subsidiaries paid $200.4 million of dividends to their holding companies, with $148.9 million paid in June and the balance of $51.5 million paid in July. These are summarized in the following table:

Management service organizations. The primary sources of liquidity for these subsidiaries are fees collected from affiliates for performing administrative, marketing and management services. The primary uses of liquidity are the payments for salaries and expenses associated with providing these services. We believe the sources of cash for these subsidiaries will exceed scheduled uses of cash and result in amounts available to dividend to our parent company.

APS Healthcare. The primary sources of liquidity for APS Healthcare are fees from its customers, including health plans, state agencies and related organizations for performing a range of healthcare services. The primary uses of liquidity are the payments for salaries and expenses associated with providing these services. We believe the sources of cash for APS Healthcare will exceed scheduled uses of cash and result in amounts available to dividend to our parent company. APS Healthcare's Puerto Rico subsidiary is required to maintain minimum statutory equity as required by contract with the Commonwealth of Puerto Rico and currently exceeds its minimum requirement at levels we believe are sufficient to support its current level of operations.

Investments. We invest primarily in fixed maturity securities of the U.S. Government and its agencies, U.S. state and local governments, mortgage-backed securities and corporate fixed maturity securities with investment grade ratings of BBB- or higher by S&P or Baa3 or higher by Moody's Investor Service. As of June 30, 2013, approximately 99% of our fixed maturity investments had investment grade ratings from S&P or Moody's.

At June 30, 2013, cash and cash equivalents and short-term investments represent approximately 6% of our total cash and invested assets, approximately 24% of cash and invested assets were held in securities backed by the U.S. government or its agencies and the average credit quality of our total investment portfolio was AA-.

The average book yield of our total investment portfolio was 3.2% at June 30, 2013 and 3.3% at December 31, 2012.

2012 Credit Facility. In connection with the acquisition of APS Healthcare, on March 2, 2012, we entered into a new credit facility (the "2012 Credit Facility") consisting of a five-year $150 million senior secured term loan and a $75 million senior secured revolving credit facility.

The 2012 Credit Facility contains customary representations and warranties as well as customary affirmative and negative covenants. Negative covenants include, among others, limitations on the incurrence of indebtedness, limitations on the incurrence of liens and limitations on acquisition, dispositions, investments and restricted payments. In addition, the 2012 Credit Facility contains certain financial covenants relating to minimum risk-based capital, consolidated leverage ratio, and consolidated debt service ratio. As of June 30, 2013, we were in compliance with all financial covenants. The 2012 Credit Facility also contains customary events of default. Upon the occurrence and during the continuance of an event of default, the Lenders may declare the outstanding advances and all other obligations under the 2012 Credit Facility immediately due and payable. The Company's obligations under the Credit Agreement are secured by a first priority security interest in 100% of the capital stock of the Company's material subsidiaries and are also guaranteed by certain of our subsidiaries.

The 2012 Credit Facility bears interest at rates equal to, at the Company's election, LIBOR or the base rate, plus an applicable margin that varies based on the Company's consolidated leverage ratio from 1.75% to 2.50%, in the case of LIBOR loans, and from 0.75% to 1.50% in the case of base rate loans. Effective June 30, 2013, the interest rate on the term loan portion of the 2012 Credit Facility was 2.52%, based on a spread of 225 basis points above LIBOR. On April 1, 2013 our spread increased to 225 basis points above LIBOR.

The Company is required to pay a commitment fee on unused availability under the Revolving Facility that varies based on the Company's consolidated leverage ratio, from 0.40% to 0.50% per year. As of the date of this report, we had not drawn on the Revolving Facility.

For additional information on Liquidity and Capital Resources, please refer to our Annual Report on Form 10-K for the year ended December 31, 2012, filed by Universal American on March 6, 2013.

There have been no changes to our critical accounting policies during the current quarter ended June 30, 2013. For a description of our significant accounting policies, see Note 3—Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2012.

The following table presents the components of the change in our liability for policy and contract claims—health:

	Six months ended June 30, 2013

	(in thousands)
Balance at beginning of period	$	156,558
Less reinsurance recoverable		(4,811	)

Net balance at beginning of period		151,747

Incurred related to:
Current Year		832,235
Prior Year Development		613

Total Incurred		832,848

Paid related to:
Current Year		690,436
Prior Year		139,986

Total paid		830,422

Net balance at end of period		154,173
Plus reinsurance recoverable		4,758

Balance at end of period	$	158,931

The liability for policy and contract claims—health at June 30, 2013 increased by $2.4 million from December 31, 2012. The increase in the liability was primarily attributable to an increase in pending claims for our Medicare Advantage business.

The medical cost amount, noted as "prior year development" in the table above, represents (favorable) or unfavorable adjustments as a result of prior year claim estimates being settled or currently expected to be settled, for amounts that are different than originally anticipated. This prior year development occurs due to differences between the actual medical utilization and other components of medical cost trends, and actual claim processing and payment patterns compared to the assumptions for claims trend and completion factors used to estimate our claim liabilities.

During the six months ended June 30, 2013, claim reserves settled, or are currently expected to be settled, for $0.6 million more than estimated at December 31, 2012, related primarily to our Medicare Advantage business. Prior period development represents less than 0.1% of the incurred claims recorded in 2012.

The following table illustrates the sensitivity of our accident and health IBNR payable at June 30, 2013 to identified reasonably possible changes to the estimated weighted average completion factors and health care cost trend rates. However, it is possible that the actual completion factors and health care cost trend rates will develop differently from our historical patterns and therefore could be outside of the ranges illustrated below.


Completion Factor(1):		Claims Trend Factor(2):
(Decrease) Increase in Factor		Increase (Decrease) in Net Health IBNR		(Decrease) Increase in Factor		(Decrease) Increase in Net Health IBNR
($ in thousands)
	-3	%	$	483			-3	%	$	(7,213	)
	-2	%		322			-2	%		(4,809	)
	-1	%		161			-1	%		(2,404	)
	1	%		(161	)		1	%		2,404
	2	%		(322	)		2	%		4,809
	3	%		(483	)		3	%		7,213

A summary of recent and pending accounting pronouncements is provided in Note 3—Recently Issued and Pending Accounting Pronouncements.

In general, market risk to which we are subject relates to changes in interest rates that affect the market prices of our fixed income securities.

Our profitability could be affected if we were required to liquidate fixed income securities during periods of rising and/or volatile interest rates. We attempt to mitigate our exposure to adverse interest rate movements through a combination of active portfolio management, the use of interest rate swaps and by staggering the maturities of our fixed income investments to assure sufficient liquidity to meet our obligations and to address reinvestment risk considerations. Our investment policy is to balance our portfolio duration to achieve investment returns consistent with the preservation of capital and to meet payment obligations of policy benefits and claims.

Some classes of mortgage-backed securities are subject to significant prepayment risk. In periods of declining interest rates, individuals may refinance higher rate mortgages to take advantage of the lower rates then available. We monitor and adjust our investment portfolio mix to mitigate this risk.

We regularly conduct various analyses to gauge the financial impact of changes in interest rate on our financial condition. The ranges selected in these analyses reflect our assessment as being reasonably possible over the succeeding twelve-month period. The magnitude of changes modeled in the accompanying analyses should not be construed as a prediction of future economic events, but rather, be treated as a simple illustration of the potential impact of such events on our financial results.

The sensitivity analysis of interest rate risk assumes an instantaneous shift in a parallel fashion across the yield curve, with scenarios of interest rates increasing and decreasing 100 and 200 basis points from their levels as of June 30, 2013, and with all other variables held constant. The following table summarizes the impact of the assumed changes in market interest rates at June 30, 2013. Due to the current low interest rate environment, when estimating the effect of market interest rate decreases on fair value we have set an interest rate floor of 0% and have not allowed interest rates to go negative.

We pay interest on our term loan based on rates equal to, at the Company's election, LIBOR or the base rate, plus an applicable margin that varies based on the Company's consolidated leverage ratio from 1.75% to 2.50%, in the case of LIBOR loans, and from 0.75% to 1.50% in the case of base rate loans. Due to the variable interest rate, we would be subject to higher interest costs if short-term interest rates rise. We regularly conduct various analyses to gauge the financial impact of changes in interest rates on our financial condition. The ranges selected in these analyses reflect our assessment as being reasonably possible over the succeeding twelve-month period. The magnitude of changes modeled in the accompanying analyses should not be construed as a prediction of future economic events, but rather, be treated as a simple illustration of the potential impact of such events on our financial results.

The sensitivity analysis of interest rate risk assumes scenarios involving increases or decreases in LIBOR of 100 and 200 basis points from their levels as of and for the six months ended June 30, 2013,

and with all other variables held constant. The following table summarizes the impact of changes in LIBOR.

As noted above, we have floating rate debt outstanding of $125 million as of June 30, 2013, which is exposed to rising interest rates. In addition, we held approximately $73 million of cash and cash equivalents as of June 30, 2013. Our exposure to rising interest costs on our debt would be partially mitigated by the increase in net investment income on our cash and short-term investments.

The magnitude of changes reflected in the above analysis regarding interest rates should not be construed as a prediction of future economic events, but rather as an illustration of the potential impact of such events on our financial results.

We maintain disclosure controls and procedures that are designed to ensure that we record, process, summarize and report the information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 within the time periods specified in the SEC's rules and forms, and that we accumulate this information and communicate it to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our disclosure controls and procedures and our internal controls over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and we must consider the benefits of controls relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that we have detected all control issues and instances of fraud, if any, within Universal American. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The individual acts of some persons or collusion of two or more people can also circumvent controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2013, at a reasonable assurance level, to timely alert management to material information required to be included in our periodic filings with the Securities and Exchange Commission.

There were no changes in our internal controls over financial reporting during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

For information relating to litigation affecting us, see Note 9—Commitments and Contingencies in Part I—Item 1 of this report, which is incorporated into this Part II—Item 1—Legal Proceedings by reference.

Except as set forth below, there have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on March 6, 2013, as modified by the changes to those risk factors included in other reports we filed with the SEC subsequent to March 6, 2013:

A substantial portion of APS Healthcare's revenues are tied to short-term customer contracts which generally can be terminated without cause.

The majority of APS Healthcare's revenues are derived from Medicaid. In addition, most of APS Healthcare's contracts are terminable on short notice. As a result of fiscal budgetary and other issues, it is possible that Medicaid funding could be reduced, the counterparty to our Medicaid contracts (state or Medicaid agency) may delay payment to us for many months, or APS Healthcare's contracts could be terminated or amended in an adverse manner, which could have a material adverse effect on APS Healthcare's revenues and operating results.

APS Healthcare's contracts with clients generally provide for initial terms of one to three years, but oftentimes may be terminated early without cause. The termination of, or our inability to renew or extend, contracts with our clients could lead to decreased revenues and profitability. In addition, certain of the customer contracts contain performance guarantees of various kinds, including operational performance guarantees, guarantees relating to the achievement of health goals as demonstrated by population based clinical measures and guarantees relating to the reduction of overall health costs experienced by the client. Further, certain of the contracts contain liquidated damages provisions for nonperformance that can be assessed in significant amounts. Our failure to meet these performance guarantees could lead to reduced revenue and profitability. In addition, our contract with the Puerto Rico Medicaid agency to provide managed behavioral health and other services, accounts for a significant portion of APS Healthcare's total revenues. This contract was recently extended through June 30, 2014, but may be terminated earlier under certain circumstances. The Puerto Rico government is considering substantial changes to the healthcare system in Puerto Rico. Failure to successfully retain this contract could have a material adverse effect on our results of operations.


	31.1		Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
	31.2		Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.
	32.1		Certification of the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS—XBRL		Instance Document.
	101.SCH—XBRL		Taxonomy Extension Schema Document.
	101.CAL—XBRL		Taxonomy Extension Calculation Linkbase Document.
	101.LAB—XBRL		Taxonomy Extension Label Linkbase Document.
	101.PRE—XBRL		Taxonomy Extension Presentation Linkbase Document.
	101.DEF—XBRL		Taxonomy Extension Definition Linkbase Document.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

	Item	Description

PART I		Financial Information
	1	Financial Statements:
		Consolidated Balance Sheets	3
		Consolidated Statements of Operations—Three Months	4
		Consolidated Statements of Operations—Six Months	5
		Consolidated Statements of Comprehensive (Loss) Income	6
		Consolidated Statements of Stockholders' Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	9
	2	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
	3	Quantitative and Qualitative Disclosures About Market Risk	44
	4	Controls and Procedures	45
PART II		Other Information
	1	Legal Proceedings	47
	1A	Risk Factors	47
	2	Unregistered Sales of Equity Securities and Use of Proceeds	47
	3	Defaults Upon Senior Securities	47
	4	Mine Safety Disclosures	47
	5	Other Information	47
	6	Exhibits	48
		Signatures	49

						Corporate & Other

	Total, Net			Senior Managed Care—Medicare Advantage(1)		Gross			Accumulated write-offs			Net
	(in thousands)
Balance, January 1, 2013	$	242,942		$	77,459	$	165,483		$	—		$	165,483
Acquisitions (dispositions)		—			—		—			—			—
Impairments		(91,742	)		—		—			(91,742	)		(91,742	)
Adjustments		(726	)		—		(726	)		—			(726	)

Balance, June 30, 2013	$	150,474		$	77,459	$	164,757		$	(91,742	)	$	73,015

	Amortized Cost		Fair Value

	(in thousands)
Due in 1 year or less	$	49,367	$	49,891
Due after 1 year through 5 years		360,911		372,152
Due after 5 years through 10 years		208,439		212,550
Due after 10 years		89,578		93,240
Mortgage and asset-backed securities		331,338		335,189

	$	1,039,633	$	1,063,022


Delaware (State or other jurisdiction of incorporation or organization)		27-4683816 (I.R.S. Employer Identification No.)

	Three months ended		Six months ended

	June 30, 2012
	(in thousands)
Total revenues	$	542,062	$	1,126,217

Income before income taxes	$	9,383	$	45,092

Net income	$	5,162	$	26,516

	Fixed Maturities

	(in thousands)
Fair value as of December 31, 2012	$	2,453
Paydowns		(38	)
Unrealized gains included in AOCI(1)(2)		30

Fair value as of March 31, 2013		2,445
Paydowns		(38	)
Unrealized losses included in AOCI(1)(2)		(1	)

Fair value as of June 30, 2013	$	2,406

Options			Weighted Average Exercise Price

Outstanding at January 1, 2013	5,224		$	9.27
Granted	2,069			8.64
Exercised	(61	)		8.33
Forfeited or expired	(1,184	)		9.79

Outstanding at June 30, 2013	6,048		$	8.97

Non-Vested Restricted Stock			Weighted Average Grant-Date Fair Value

Non-vested at January 1, 2013	1,029		$	11.38
Granted	927			8.57
Vested	(282	)		11.53
Forfeited	(286	)		10.98

Non-vested at June 30, 2013	1,388		$	9.55

	Segment	January 1, Balance		Charge to Earnings		Cash Paid			Non-cash			June 30, Balance

	(in thousands)
2013
Workforce reduction	Corporate & Other	$	3,800	$	1,655	$	(2,916	)	$	(33	)	$	2,506
Facility consolidation	Corporate & Other		130		—		—			(6	)		124
Facility consolidation	Traditional		334		—		—			(56	)		278

Total		$	4,264	$	1,655	$	(2,916	)	$	(95	)	$	2,908

	June 30, 2013

	(in thousands)
*Membership*
Southwest HMO		61.3	56.6
Northeast Network		39.3	36.0
Southeast Network		5.8	5.8

Core Markets		106.4	98.4
All Other Network		13.3	16.5
Rural		14.3	16.1

Total Membership		134.0	131.0

Subsidiary	Ordinary		Extraordinary		Total

	(in millions)
Pyramid Life	$	18.4	$	90.0	$	108.4
SelectCare of Texas		15.5		35.8		51.3
American Progressive		14.3		—		14.3
Union Bankers		1.9		11.3		13.2
Constitution Life		4.4		4.4		8.8
SelectCare Health Plans		4.4		—		4.4

	$	58.9	$	141.5	$	200.4

		Effect of Change in Market Interest Rates on Fair Value of Fixed Income Portfolio as of June 30, 2013

June 30, 2013
June 30, 2013		200 Basis Point Decrease		100 Basis Point Decrease		100 Basis Point Increase			200 Basis Point Increase
Fair Value of Fixed Income Portfolio		200 Basis Point Decrease		100 Basis Point Decrease		100 Basis Point Increase			200 Basis Point Increase
(in millions)
$	1,063.0	$	64.3	$	37.2	$	(40.9	)	$	(83.2	)

						Effect of Change in LIBOR on Pre-tax Income for the six months ended June 30, 2013

				Weighted Average Balance Outstanding
Description of Floating Rate Debt	Weighted Average Interest Rate			Weighted Average Balance Outstanding		200 Basis Point Decrease(1)		100 Basis Point Decrease(1)		100 Basis Point Increase			200 Basis Point Increase
	(in millions)
Loan payable		2.39	%	$	130.1	$	0.2	$	0.2	$	(0.7	)	$	(1.3	)

	Three months ended June 30, 2013

	2013							2012
	Gross		Ceded			Net		Gross		Ceded			Net
	(in thousands)
Senior market	$	49,882	$	(10,644	)	$	39,238	$	57,407	$	(12,451	)	$	44,956
Specialty health		12,604		(1,753	)		10,851		14,025		(1,840	)		12,185
Life insurance and annuity		12,358		(8,709	)		3,649		13,780		(9,530	)		4,250

Total premium	$	74,844	$	(21,106	)	$	53,738	$	85,212	$	(23,821	)	$	61,391

	Six months ended June 30, 2013

	2013							2012
	Gross		Ceded			Net		Gross		Ceded			Net
	(in thousands)
Senior market	$	103,262	$	(22,199	)	$	81,063	$	118,802	$	(26,135	)	$	92,667
Specialty health		25,428		(3,363	)		22,065		28,081		(3,526	)		24,555
Life insurance and annuity		24,709		(17,336	)		7,373		27,649		(19,089	)		8,560

Total premium	$	153,399	$	(42,898	)	$	110,501	$	174,532	$	(48,750	)	$	125,782


		UNIVERSAL AMERICAN CORP.
August 9, 2013		/s/ RICHARD A. BARASCH Richard A. Barasch Chief Executive Officer
August 9, 2013		/s/ ROBERT A. WAEGELEIN Robert A. Waegelein President and Chief Financial Officer (Principal Accounting Officer)