Table of Contents

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2011ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                        toCommission file Number: 0-11321




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

New York(State or other jurisdiction of
incorporation or organization)

11-2580136(I.R.S. Employer
Identification No.)


Six International Drive, Suite 190, Rye Brook, New York 10573(Address of principal executive offices and zip code)

(914) 934-5200(Registrant's telephone number, including area 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 o    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):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


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
April 25, 2011$0.01 par value

75,780,740 shares




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TABLE OF CONTENTS



Item

Description

PagePART I

Financial Information1

Financial Statements:Consolidated Balance Sheets


3Consolidated Statements of OperationsThree Months


4Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)


5Consolidated Statements of Cash Flows


6Notes to Consolidated Financial Statements


72

Management's Discussion and Analysis of Financial Condition and Results of Operations


263

Quantitative and Qualitative Disclosures About Market Risk


374

Controls and Procedures


38PART II

Other Information1

Legal Proceedings


401A

Risk Factors


402

Unregistered Sales of Equity Securities and Use of Proceeds


403

Defaults Upon Senior Securities


404

(Removed & Reserved)


405

Other Information


406

Exhibits


40Signatures


41


1

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Table of Contents

As used in this quarterly report on Form 10-Q, "Universal American," "we," "our," and "us" refer to Universal American Corp. and its
subsidiaries, except where the context otherwise requires or as otherwise indicated.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

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 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 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 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.

2

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Table of Contents

PART I

ITEM 1FINANCIAL STATEMENTS (Unaudited)



UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except number of shares)

March 31,
2011

December 31,
2010ASSETSInvestments:Fixed maturities available for sale, at fair value (amortized cost: 2011, $1,256,233; 2010, $1,388,604;)

$
1,264,567

$
1,398,498Other invested assets


1,454


1,409Total investments


1,266,021


1,399,907Cash and cash equivalents


83,343


65,444Accrued investment income


11,731


12,455Deferred policy acquisition costs


142,452


144,750Reinsurance recoverableslife


584,265


590,253Reinsurance recoverableshealth


124,601


127,931Due and unpaid premiums


168,070


53,332Present value of future profits and other amortizing intangible assets


139,057


144,241Goodwill and other indefinite lived intangible assets


525,673


525,674Income taxes receivable


18,289


CMS contract deposit receivables


17,737


196,584Other Part D receivables


290,260


214,183Advances to agents


31,650


37,022Other assets


155,504


144,234Total assets

$
3,558,653

$
3,656,010LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIESReserves and other policy liabilitieslife

$
577,407

$
582,248Reserves for future policy benefitshealth


408,679


407,312Policy and contract claimshealth


397,351


374,539Premiums received in advance


11,385


16,410Loan payable


232,022


232,872Other long-term debt


110,000


110,000Amounts due to reinsurers


5,998


6,710Income taxes payable





48,983Deferred income tax payable


62,178


61,794Other Part D payables


87,666


107,031Other liabilities


199,989


205,417Total liabilities


2,092,675


2,153,316Commitments and contingencies (Note 12)STOCKHOLDERS' EQUITYPreferred Stock (Authorized: 3 million shares):Series A Preferred Stock (Authorized: 300,000 shares, issued and outstanding: 42,105 shares, liquidation value 2011, $96,463; 2010, $86,105)


42


42Series B Preferred Stock (Authorized: 300,000 shares)





Common stockvoting (Authorized: 200 million shares, issued and outstanding: 2011, 79.3 million shares; 2010, 78.6 million
shares)


793


786Common stocknon-voting (Authorized 30 million shares)





Additional paid-in capital


807,841


801,155Accumulated other comprehensive loss


(2,628
)

(2,469
)Retained earnings


702,371


734,598Less: Treasury Stock (2011, 3.5 million shares; 2010, 2.9 million shares)


(42,441
)

(31,418
)Total stockholders' equity


1,465,978


1,502,694Total liabilities and stockholders' equity

$
3,558,653

$
3,656,010


See Notes to unaudited Consolidated Financial Statements.

3

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        For the Three Months Ended March 31, 2011 and 2010    
 (Unaudited)        (in thousands, per share amounts in dollars)

2011

2010Net premium and policyholder fees earned

$
1,227,823

$
1,497,448Net investment income


13,103


10,797Fee and other income


1,148


4,813Realized loss:Total other-than-temporary impairment losses on securities





(131
)Portion of loss recognized in other comprehensive income





Net other-than-temporary impairment losses on securities recognized in earnings





(131
)Realized loss, excluding other-than-temporary impairment losses on securities


(236
)

(153
)Net realized loss on investments


(236
)

(284
)Total revenues


1,241,838


1,512,774Benefits, claims and expenses:Claims and other benefits


1,126,821


1,334,773Change in deferred acquisition costs


2,298


2,984Amortization of present value of future profits and other amortizing intangible assets


5,184


5,937Commissions


19,876


30,798Reinsurance commissions and expense allowances


(3,195
)

(4,639
)Interest expense


4,675


5,013Other operating costs and expenses


137,896


139,334Total benefits, claims and expenses


1,293,555


1,514,200Loss before income taxes


(51,717
)

(1,426
)Benefit from income taxes


(19,490
)

(2,827
)Net (loss) income

$
(32,227
)
$
1,401(Loss) earnings per common share:Basic

$
(0.41
)
$
0.02Diluted

$
(0.41
)
$
0.02Weighted average shares outstanding:Weighted average common shares outstanding


77,390


84,895Less weighted average treasury shares


(3,092
)

(11,274
)Basic weighted shares outstanding


74,298


73,621Weighted average common equivalent of preferred shares outstanding


4,211


4,211Effect of dilutive securities





306Diluted weighted shares outstanding


78,509


78,138


See
Notes to unaudited Consolidated Financial Statements.

4

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  AND COMPREHENSIVE INCOME (LOSS)        For the Three Months Ended
March 31, 2011 and 2010        (Unaudited)        (in thousands)

Preferred
Stock
Series A

Common
Stock

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
(Loss) Income

Retained
Earnings

Treasury
Stock

Total2010Balance at January 1, 2010

$
42

$
879

$
880,709

$
(7,915
)
$
709,695

$
(133,946
)
$
1,449,464Net income














1,401





1,401Other comprehensive income











3,482








3,482Comprehensive income




















4,883Issuance of common stock





2


1,368











1,370Stock based compensation








1,573











1,573Retire Treasury stock





(100
)

(98,959
)







99,059


Treasury shares purchased, at cost

















(1,256
)

(1,256
)Treasury shares reissued








4,706








8,961


13,667Balance at March 31, 2010

$
42

$
781

$
789,397

$
(4,433
)
$
711,096

$
(27,182
)
$
1,469,7012011Balance at January 1, 2011

$
42

$
786

$
801,155

$
(2,469
)
$
734,598

$
(31,418
)
$
1,502,694Net loss














(32,227
)




(32,227
)Other comprehensive loss











(159
)







(159
)Comprehensive loss




















(32,386
)Issuance of common stock





7


5,258











5,265Stock based compensation








1,498











1,498Treasury shares purchased, at cost

















(10,786
)

(10,786
)Treasury shares reissued








(70
)







(237
)

(307
)Balance at March 31, 2011

$
42

$
793

$
807,841

$
(2,628
)
$
702,371

$
(42,441
)
$
1,465,978


See Notes to unaudited Consolidated Financial Statements.

5

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2011 and 2010

(Unaudited)

(in thousands)

2011

2010Cash flows from operating activities:Net (loss) income

$
(32,227
)
$
1,401Adjustments to reconcile net income to cash provided by operating activities, net of balances sold:Deferred income taxes


470


(4,599
)Realized losses on investments


236


284Amortization of intangible assets


5,184


5,936Net amortization of bond premium


2,250


791Depreciation expense


3,248


4,667Changes in operating assets and liabilities:Deferred policy acquisition costs


2,298


2,984Reserves and other policy liabilitieslife


(4,841
)

(8,501
)Reserves for future policy benefitshealth


1,367


938Policy and contract claimshealth


22,812


124,627Reinsurance balances


8,606


7,716Due and unpaid/advance premium, net


(119,763
)

(150,692
)Income taxes payable/receivable


(67,272
)

(22,840
)Other Part D (payables)/receivables


(95,442
)

(106,727
)Other, net


(3,136
)

(13,031
)Cash used in operating activities


(276,210
)

(157,046
)Cash flows from investing activities:Proceeds from sale or redemption of fixed maturity investments


466,977


44,631Cost of fixed maturity investments purchased


(336,727
)

(6,269
)Purchase of fixed assets


(2,711
)

(2,641
)Other investing activities


(5,697
)

(388
)Cash provided by investing activities


121,842


35,333Cash flows from financing activities:Net proceeds from issuance of common and preferred stock, net of tax effect


5,265


1,370Cost of treasury stock purchases


(10,786
)

(1,256
)Dividends paid to stockholders


(209
)

Receipts from CMS contract deposits


1,099,562


990,103Withdrawals from CMS contract deposits


(920,715
)

(778,355
)Principal repayment on loan payable and other long-term debt


(850
)

(832
)Cash provided by financing activities


172,267


211,030Net increase in cash and cash equivalents


17,899


89,317Cash and cash equivalents at beginning of year


65,444


856,958Cash and cash equivalents at end of year

$
83,343

$
946,275


See
Notes to unaudited Consolidated Financial Statements.

6

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND COMPANY BACKGROUND

Universal American Corp., which we refer to as "we," the "Company," or "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 the growing senior population. Universal American was incorporated in the State of New York in 1981. Collectively, our
insurance company subsidiaries are licensed to sell life, accident and health insurance and annuities in all fifty states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. We
currently sell Medicare Part D prescription drug benefit Plans, known as PDPs, Medicare coordinated care Plans, which we call HMOs, Medicare coordinated care products built around contracted
networks of providers, which we call PPOs, Medicare Advantage private fee-for-service Plans, known as PFFS Plans, Medicare supplement, fixed benefit accident and sickness
insurance, and senior life insurance. We distribute these products through career and independent general agency systems and on a direct to consumer basis.

On
December 30, 2010, we entered into (i) an Agreement and Plan of Merger (the "CVS Agreement") with CVS Caremark Corporation ("CVS Caremark") and Ulysses Merger Sub,
L.L.C., an indirect wholly-owned subsidiary of CVS Caremark, to provide for the purchase of our Medicare Part D Business by CVS Caremark and (ii) a Separation Agreement with Universal
American Spin Corp., a newly-formed wholly-owned subsidiary of the Company ("Newco"), to provide for the separation of our Medicare Part D Business from our remaining businesses, which include
our Medicare Advantage and Traditional Insurance businesses. We refer to the sale of our Medicare Part D Business to CVS Caremark and related transactions as the "Part D Transaction" or
the "Transactions."

Pursuant
to the CVS Agreement, CVS Caremark will pay Universal American shareholders $1.25 billion plus the excess capital in the entities that operate our Medicare Part D
Business as of December 31, 2010, less the amount of our outstanding debt and trust preferred securities and certain other amounts. On April 27, 2010, the Company's shareholders approved
the adoption of the CVS Agreement. Of the shares voted at the special meeting, over 99% were cast in favor of adoption of the CVS Agreement, representing approximately 90% of the total shares
outstanding and entitled to vote. We expect to close the Part D Transaction on Friday April 29, 2011. Shareholders as of the close of trading on April 29, 2011 will receive $14.00
in cash and one share of New Universal American, a Delaware corporation that will own and operate all of the Company's non-Medicare Part D businesses, including the Medicare
Advantage and Traditional Insurance businesses. At the closing, New Universal American will be renamed "Universal American Corp." and its shares will be listed on the New York Stock Exchange and trade
under the ticker symbol: UAM.

In
connection with the closing of the Part D Transaction, Old Universal American intends to make an election under Section 338(h)(10) of the Internal Revenue Code to
realize its higher tax basis in the assets of New Universal American. In order to qualify to make the Section 338(h)(10) election and increase cash proceeds to shareholders, on April 26,
2011 the Company entered into a Stock Purchase Agreement to sell $40 million of New Universal American preferred stock at the closing of the Part D Transaction. For further description
of the preferred stock, see Note 15Subsequent Events in the Notes to Consolidated Financial Statements.

2. BASIS OF PRESENTATION

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

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2. BASIS OF PRESENTATION (Continued)

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 the insurance and health plan 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. For further information, the
reader of this quarterly report on Form 10-Q should refer to our annual report on Form 10-K for the year ended December 31, 2010, that was filed with the
Securities and Exchange Commission, or the SEC, on March 1, 2011. The results of operations for the three months ended March 31, 2011 and 2010 are not necessarily indicative of the
results to be expected for the full year.

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Medicare Advantage products, 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 2Summary of
Significant
Accounting Policies in the Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2010.

3. RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS

Deferred Acquisition Costs:On September 29, 2010, ASU 2010-26,Accounting for Costs Associated with
Acquiring or Renewing Insurance Contractswas ratified by the Financial Accounting Standards Board, known as FASB. The ASU amendsFASB ASC
Topic944,Financial ServicesInsurance.This guidance changes the accounting for costs associated with acquiring or
renewing insurance contracts in response to diversity in practice in the capitalization of those costs. Under the new guidance, deferrable costs will be limited to incremental direct costs of a
successful contract acquisition incurred with independent third parties and the portion of the total employee compensation and payroll-related fringe benefits related to time spent performing
specified acquisition activities (e.g., underwriting, policy issuance and processing) for successful acquisition efforts. Companies will have a choice between prospective and retrospective
adoption; the election must be made at the reporting entity level. The new guidance will be effective for fiscal years beginning after December 15, 2011. Management has not yet determined the
impact of adoption of this new guidance on our consolidated financial position or results of operations.

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS (Continued)

Fair Value Disclosures:In January 2010, the FASB issued ASC Update No. 2010-06,Fair Value
Measurements
and Disclosures, which updates ASC 820-10-20,Fair Value Measurements and Disclosures.The new
literature requires disclosures about transfers into and out of Levels 1 and 2 fair value measurements and clarifies existing fair value disclosures about the level of disaggregation and about
inputs and valuation techniques used to measure fair value. These new rules impact disclosures only and had no impact on our consolidated financial position or results of operations. The new rules
also require additional disclosures regarding Level 3 fair value measurements which are effective for reporting periods beginning after December 15, 2010. Management has implemented
these new disclosure requirements in this filing on Form 10-Q.

4. INVESTMENTS

The amortized cost and fair value of fixed maturity investments are as follows:

March 31, 2011Classification

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

$
39,829

$
207

$
(92
)
$


$
39,944Government sponsored agencies


22,182


1,222


(108
)




23,296Other political subdivisions


141,090


379


(3,147
)




138,322Corporate debt securities


529,121


12,972


(3,679
)




538,414Foreign debt securities


97,398


1,230


(538
)




98,090Residential mortgage-backed securities


243,639


7,807


(2,172
)




249,274Commercial mortgage-backed securities


91,525


125


(1,924
)




89,726Other asset-backed securities


91,449


2,128


(3,130
)

(2,946
)

87,501$
1,256,233

$
26,070

$
(14,790
)
$
(2,946
)
$
1,264,567


9

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. INVESTMENTS (Continued)



December 31, 2010Classification

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

$
75,543

$
247

$
(598
)
$


$
75,192Government sponsored agencies


81,097


1,954


(88
)




82,963Other political subdivisions


154,348


350


(3,514
)




151,184Corporate debt securities


585,629


13,883


(4,252
)




595,260Foreign debt securities


104,554


888


(808
)




104,634Residential mortgage-backed securities


197,033


8,468


(1,364
)




204,137Commercial mortgage-backed securities


91,674


151


(2,102
)




89,723Other asset-backed securities


98,726


2,965


(2,896
)

(3,390
)

95,405$
1,388,604

$
28,906

$
(15,622
)
$
(3,390
)
$
1,398,498


(1)Other-than-temporary
impairments.


At
March 31, 2011, gross unrealized losses on mortgage-backed and asset-backed securities totaled $10.2 million, consisting primarily of unrealized losses of
$5.8 million on subprime residential mortgage loans, as discussed below, $2.4 million related to other residential mortgage-backed securities and $1.4 million related to
obligations of commercial mortgage-backed securities. The fair value of a majority of the subprime securities is depressed due to the expected deterioration of collectability of the underlying
mortgages. The fair value of the other securities is primarily due to changes in interest rates. Management and the Investment Committee have evaluated these holdings, with input from our investment
managers, and do not believe further other-than-temporarily impairment to be warranted.

The
amortized cost and fair value of fixed maturity investments at March 31, 2011 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.

Amortized
Cost

Fair
Value(in thousands)Due in 1 year or less

$
51,211

$
52,790Due after 1 year through 5 years


441,957


448,781Due after 5 years through 10 years


306,267


307,216Due after 10 years


30,185


29,279Mortgage and asset-backed securities


426,613


426,501$
1,256,233

$
1,264,567


10

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. INVESTMENTS (Continued)

The
fair value and unrealized loss as of March 31, 2011 and December 31, 2010 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

TotalMarch 31, 2011

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

$
16,960

$
(92
)
$


$


$
16,960

$
(92
)Government sponsored agencies


4,604


(108
)







4,604


(108
)Other political subdivisions


120,827


(3,147
)







120,827


(3,147
)Corporate debt securities


234,040


(3,583
)

1,007


(96
)

235,047


(3,679
)Foreign debt securities


41,275


(538
)







41,275


(538
)Residential mortgage-backed securities


119,500


(1,753
)

732


(419
)

120,232


(2,172
)Commercial mortgage-backed securities


68,700


(1,005
)

1,919


(919
)

70,619


(1,924
)Other asset-backed securities


37,302


(559
)

15,535


(5,517
)

52,837


(6,076
)Total fixed maturities

$
643,208

$
(10,785
)
$
19,193

$
(6,951
)
$
662,401

$
(17,736
)Total number of securities in an unrealized loss position

















245




Less than 12 Months

12 Months or Longer

TotalDecember 31, 2010

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

$
39,345

$
(598
)
$


$


$
39,345

$
(598
)Government sponsored agencies


48,057


(88
)







48,057


(88
)Other political subdivisions


139,968


(3,514
)







139,968


(3,514
)Corporate debt securities


260,968


(4,162
)

1,014


(90
)

261,982


(4,252
)Foreign debt securities


68,776


(808
)







68,776


(808
)Residential mortgage-backed securities


61,774


(1,280
)

813


(84
)

62,587


(1,364
)Commercial mortgage-backed securities


65,375


(1,011
)

1,813


(1,091
)

67,188


(2,102
)Other asset-backed securities


29,657


(496
)

15,561


(5,790
)

45,218


(6,286
)Total fixed maturities

$
713,920

$
(11,957
)
$
19,201

$
(7,055
)
$
733,121

$
(19,012
)Total number of securities in an unrealized loss position

















236


11

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. INVESTMENTS (Continued)

Subprime Residential Mortgage Loans

We hold securities with exposure to subprime residential mortgages, or mortgage loans to borrowers with weak credit profiles. The
significant decline in U.S. housing prices and relaxed underwriting standards by some subprime loan originators have led to higher delinquency and loss rates, resulting in a significant reduction in
the market valuation of these securities sector wide.

As
of March 31, 2011, we held subprime securities with par values of $22.1 million, an amortized cost of $21.6 million and a fair value of $15.7 million
representing approximately 1.2% of our cash and invested assets, with collateral comprised substantially of first lien mortgages in senior or senior mezzanine level tranches, with an average
Standard & Poor's, or equivalent, rating of A+.

The
following table presents our exposure to subprime residential mortgages by vintage year.

Vintage Year

Amortized
Cost

Fair
Value

Gross
Unrealized
Losses & OTTI(in thousands)2003

$
184

$
77

$
(107
)2004


201


86


(115
)2005


14,174


11,803


(2,371
)2006


7,000


3,749


(3,251
)Totals

$
21,559

$
15,715

$
(5,844
)


We
continuously review our subprime holdings stressing multiple variables, such as cash flows, prepayment speeds, default rates and loss severity, and comparing current base case loss
expectations to the loss required to incur a principal loss, or breakpoint. We expect delinquency and loss rates in the subprime mortgage sector to continue to increase in the near term but at a
decreasing rate. Those securities with a greater variance between the breakpoint and base case can withstand this further deterioration. Based on the analysis of the remaining subprime holdings at
March 31, 2011, we do not believe these holdings are other-than-temporarily impaired.

During
the quarter ended March 31, 2011, we did not recognize any other-than-temporary impairment on any securities. During the quarter ended
March 31, 2010, we recognized OTTI of $131,000.

12

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. INVESTMENTS (Continued)

Gross
realized gains and gross realized losses included in the Consolidated Statements of Operations are as follows:

For the three months
ended March 31,2011

2010(in thousands)Realized gains:Fixed maturities

$
2,773

$
568Other


2


2,775


568Realized losses:Fixed maturities, excluding OTTI


(2,770
)

(721
)OTTI on fixed maturities





(131
)Interest rate swap


(241
)

(3,011
)

(852
)Net realized gains (losses)

$
(236
)
$
(284
)


The
amount of other-than-temporary impairments recognized in earnings on securities for which a portion of the other-than-temporary
impairments related to other factors was recognized in accumulated other comprehensive income (loss) remained consistent with prior periods for the three months ended March 31, 2011 and 2010 at
$1.2 million and $7.8 million, respectively.

5. FAIR VALUE MEASUREMENTS

We carry fixed maturity investments, equity securities and interest rate swaps 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 ofFair Value Measurements and Disclosures
Topic, ASC 820-10.



The following section applies the ASC 820-10 fair value hierarchy and disclosure requirements to our financial instruments
that we carry at fair value. 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.

Level 1
observable inputs reflect quoted prices for identical assets or liabilities in active markets that we have the ability to access at the measurement date. We currently have
no Level 1 securities.

Level 2
observable inputs, other than quoted prices included in Level 1, reflect the asset or liability or prices for similar assets and liabilities. Most debt securities
and some preferred stocks are model priced by vendors using observable inputs and we classify them within Level 2. Derivative instruments that are priced using models with observable market
inputs, such as interest rate swap contracts, are also reflected as Level 2.

13

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. FAIR VALUE MEASUREMENTS (Continued)

Level 3
valuations are derived from techniques in which one or more of the significant inputs, such as assumptions about risk, are unobservable. Generally, Level 3
securities are less liquid securities such as highly structured or lower quality asset-backed securities, known as ABS, and private placement equity securities. Because Level 3 fair values, by
their nature, contain unobservable market inputs, as there is no observable market for these assets and liabilities, we must use considerable judgment to determine the Level 3 fair values.
Level 3 fair values represent our best estimate of an amount that we could realize in a current market exchange absent actual market exchanges.

The
following table presents our assets and liabilities that are carried at fair value by hierarchy levels, as of March 31, 2011 (in thousands):

Total

Level 1

Level 2

Level 3Assets:Fixed maturties, available for sale

$
1,264,567

$


$
1,261,831

$
2,736Liabilities:Interest rate swaps

$
12,894

$


$
12,894

$



In
many situations, inputs used to measure the fair value of an asset or liability position may fall into different levels of the fair value hierarchy. In these situations, we will
determine the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value.



The valuation methodologies used to determine the fair values of assets and liabilities under the "exit price" notion of ASC
820-10 reflect market participant objectives and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. We determine
the fair value of our financial assets and
liabilities based upon quoted market prices where available. Fair values of our interest rate swap liabilities reflect adjustments for counterparty credit quality, our credit standing, liquidity and,
where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments listed in the above table.



We determine the fair value of the majority of our fixed maturities using third party pricing service market prices. The following are
examples of typical inputs used by third party pricing services:



14

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. FAIR VALUE MEASUREMENTS (Continued)



Based
on the typical trading volumes and the lack of quoted market prices for fixed maturities, third party pricing services will normally derive the security prices through recent
reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported
trades, the third party pricing services may use matrix or model processes to develop a security price where the pricing services develop future cash flow expectations based upon collateral
performance, discounted at an estimated market rate. The pricing for mortgage-backed and asset-backed securities reflects estimates of the rate of future prepayments of principal over the remaining
life of the securities. The pricing services derive these estimates based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels
projected for the underlying collateral.

We
have analyzed the third party pricing services' valuation methodologies and related inputs, and have also evaluated the various types of securities in our investment portfolio to
determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Based on the results of this evaluation and investment class analysis, we
classified each price into Level 1, 2, or 3. We classified most prices provided by third party pricing services into Level 2 because the inputs used in pricing the securities are market
observable.

Due
to a general lack of transparency in the process that brokers use to develop prices, we have classified most valuations that are based on broker's prices as Level 3. We may
classify some valuations as Level 2 if we can corroborate the price. We have also classified internal model priced securities, primarily consisting of private placement asset-backed securities,
as Level 3 because this model pricing includes significant non-observable inputs. We have classified private placement equity securities as Level 3 due to the lack of
observable inputs.



We report interest rate swaps in other liabilities on our consolidated balance sheets at fair value. Their fair value is based on the
present value of cash flows as determined by the LIBOR forward rate curve and credit spreads, including our own credit.

We
have classified interest rate swaps as Level 2. We have determined their valuations using pricing models with inputs that are observable in the market or can be derived
principally from or corroborated by observable market data.

15

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. FAIR VALUE MEASUREMENTS (Continued)

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

Fixed
Maturities(in thousands)Fair value as of December 31, 2010

$
7,238Sales


(765
)Transfer Out(3)


(3,727
)Realized Gain/Loss


1Unrealized losses included in AOCI(1),(2)


(11
)Fair value as of March 31, 2011

$
2,736


(1)AOCI:
Accumulated other comprehensive income(2)Unrealized
gains/losses represent losses from changes in values of Level 3 financial instruments only for the periods in which the instruments are
classified as Level 3.(3)Transfer
of four securities from Level 3 to Level 2 due to observable inputs.


6. EARNINGS PER COMMON SHARE COMPUTATION

We calculate earnings per common share using the two-class method. This method requires that we allocate net income between net income attributable to participating preferred
stock and net income attributable to common stock, based on the dividend and earnings participation provisions of the preferred stock. Basic earnings per share excludes the dilutive effects of stock
options outstanding during the periods and is equal to net income attributable to common stock divided by the weighted average number of common shares outstanding for the periods.

For
the three months ended March 31, 2011 and 2010, we allocated earnings between common and participating preferred stock as follows:

Three months ended
March 31,2011

2010(in thousands)Net (loss) income attributable to common stock

$
(30,499
)
$
1,325Undistributed (loss) income allocated to participating preferred stock


(1,728
)

76Net (loss) income

$
(32,227
)
$
1,401


The
calculation of the diluted loss per common share for the quarter ended March 31, 2011, presented in the consolidated statements of operations excludes 1,456,000 common stock
equivalents from stock options and unvested restricted stock that are potentially dilutive because to include them would be antidilutive when reporting a net loss.

16

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7. SHARE REPURCHASE PLAN

We have approved share repurchase plans that have authorized us to repurchase up to $175 million of shares of our common stock. Through December 31, 2009, we had
repurchased 13.4 million shares of our common stock for an aggregate amount of $132.7 million, under these programs. There have been no share repurchases since December 31, 2009
under these programs. As of March 31, 2011, we have $42.3 million that remains available to repurchase additional shares under these plans. However, share repurchases are also limited by
the remaining available restricted payments under our 2007 Credit Facility, as amended, which limits share repurchases, dividends and other restricted payments to an aggregate of $300 million.
Currently, we have $11.2 million remaining available under this restricted payment limit. We are not obligated to repurchase any specific number of shares under the programs or to make
repurchases at any specific time or price.

Changes
in treasury stock were as follows (in thousands except share data):

For the three months ended March 31,2011

2010Shares

Amount

Weighted
Average
Cost Per
Share

Shares

Amount

Weighted
Average
Cost Per
ShareTreasury stock, beginning of year


2,945,848

$
31,418

$
10.67


13,538,081

$
133,946

$
9.89Retirement of treasury stock











(10,000,000
)

(99,059
)

9.91Shares repurchased


508,166


10,786


21.23


85,148


1,256


14.75Shares distributed in the form of employee bonuses


23,340


237


10.16


(956,640
)

(8,961
)

9.37Treasury stock, end of year


3,477,354

$
42,441

$
12.21


2,666,589

$
27,182

$
10.19


As
a result of our share repurchase program we had accumulated 13.5 million shares of common stock in treasury as of December 31, 2010. We retired 10 million shares
on March 15, 2010, reducing treasury stock by $99.1 million and reducing additional paid-in-capital by $95.6 million and retained earnings by
$3.4 million, with no impact on total consolidated stockholders' equity.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

March 31,
2011

December 31,
2010(in thousands)Net unrealized gains on investments

$
11,284

$
13,284Gross unrealized OTTI


(2,946
)

(3,390
)Fair value of interest rate swap


(12,381
)

(13,693
)Deferred income tax benefit on the above


1,415


1,330Total accumulated other comprehensive loss

$
(2,628
)
$
(2,469
)


17

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Continued)

The
components of other comprehensive income (loss) and the related tax effects for each component are as follows:

Three months ended March 31,2011

2010Before Tax
Amount

Tax Expense
(Benefit)

Net of Tax
Amount

Before Tax
Amount

Tax Expense
(Benefit)

Net of Tax
Amount(in thousands)Net unrealized (loss) gain arising during the period (net of deferred acquisition costs)

$
(1,792
)
$
(627
)
$
(1,165
)
$
6,263

$
2,192

$
4,071Reclassification adjustment for losses included in income


(236
)

(83
)

(153
)

(284
)

(99
)

(185
)Net unrealized (loss) gain arising during the period


(1,556
)

(544
)

(1,012
)

6,547


2,291


4,256Cash flow hedge


1,312


459


853


(1,190
)

(416
)

(774
)Other comprehensive (loss) gain

$
(244
)
$
(85
)
$
(159
)
$
5,357

$
1,875

$
3,482


9. STOCK-BASED COMPENSATION

We have various stock-based incentive plans for our employees, non-employee directors and agents. We issue shares upon the exercise of options granted under these plans.
Detailed information for activity in our stock-based incentive plans can be found in Note 21Stock-Based Compensation in the Notes to Consolidated Financial Statements in our annual
report on Form 10-K for the year ended December 31, 2010.

The
compensation expense that has been included in other operating costs and expenses for these plans and the related tax benefit were as follows:

Three Months Ended
March 31,2011

2010(in thousands)Stock-based compensation expense by type:Stock options

$
1,587

$
1,572Restricted stock awards


1,850


1,833Total stock-based compensation expense


3,437


3,405Tax benefit recognized


678


1,192Stock-based compensation expense, net of tax

$
2,759

$
2,213


18

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. STOCK-BASED COMPENSATION (Continued)



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

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

Quarter ended
March 31, 2010Weighted-average grant date fair value

$5.41Risk free interest rates

1.87%-2.13%Dividend yields

0.0%Expected volatility

54.49%-54.91%Expected lives of options (in years)

3.3-3.8


During
the quarter ended March 31, 2011, we did not grant any new stock option awards.

We
did not capitalize any cost of stock-based compensation for our employees or non-employee directors. 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 three months ended March 31, 2011 is set forth below:

Options
(in thousands)

Weighted
Average
Exercise
PriceOutstanding, January 1, 2011


5,564

$
12.97Granted





Exercised


(648
)

12.11Forfeited or expired


(43
)

12.56Outstanding, March 31, 2011


4,873

$
13.09Exercisable, March 31, 2011


3,516

$
13.20


The
total intrinsic value of options exercised during the first three months of 2011 was $6.0 million and the total intrinsic value of options exercised during the first three
months of 2010 was $1.0 million. As of March 31, 2011, the total compensation cost related to non-vested awards not yet recognized was $6.5 million, which we expect to
recognize over a weighted average period of 0.9 years.

We
received proceeds of $7.8 million from the exercise of stock options during the first three months of 2011 and proceeds of $1.2 million from the exercise of stock
options during the first three months of 2010. ASC 718-10 also requires us to report the benefits of tax deductions in excess of recognized compensation cost as a financing cash flow. We
recognized $2.6 million of financing cash flows for these excess tax deductions for the three months ended March 31, 2011 and $0.2 million for the three months ended
March 31, 2010.

19

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. STOCK-BASED COMPENSATION (Continued)



In accordance with our 1998 Incentive Compensation Plan, we may grant restricted stock to our officers and non-officer
employees and directors. We have issued restricted stock grants which vest ratably over three and four-year periods, and some restricted stock grants have contained portions that vest
immediately. We value restricted stock awards at an amount equal to the market price of our common stock on the date of grant and generally issue restricted stock out of treasury shares. We recognize
compensation expense for restricted stock awards on a straight line basis over the vesting period. A summary of the status of our non-vested restricted stock awards is set forth below:

Non-vested Restricted Stock

Shares
(in thousands)

Weighted
Average
Grant-Date
Fair ValueNon-vested at beginning of period


897

$
13.41Granted





Vested


(235
)

12.86Forfeited


(18
)

12.91Non-vested at end of period


644

$
13.63


The
total fair value of shares of restricted stock vested during the three months ended March 31, 2011 was $4.8 million and the total fair value of shares of restricted
stock vested during the three months ended March 31, 2010 was $1.8 million.

During
2009, the Board of Directors approved a performance share award program for certain of our officers. In general, the performance shares vest at the end of a three-year
period. The actual number of shares earned at the conclusion of the vesting period can vary from 0% to 150% of the target award, based on our total shareholder return relative to a group of peer
companies that were selected prior to the award. Compensation expense is recognized on a straight line basis over the vesting period. Prior to vesting, previously recognized compensation expense may
be reversed in the event a grantee resigns, however, once the vesting date is reached, previously recognized expense may not be changed, even if the actual award varies from the target. In connection
with this program, we awarded 449,900 performance shares to officers during 2010. We did not award any performance shares during the quarter ended March 31, 2011.

20

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. MEDICARE PART D

The following table provides balances due from (to) CMS by Plan year:

March 31, 2011

December 31, 2010Plan Year

Reinsurance/
Low-income
Cost
Subsidy(1)

Risk
Corridor(2)

Total
Due from (to)
CMS

Reinsurance/
Low-income
Cost
Subsidy(1)

Risk
Corridor(2)

Total
Due from (to)
CMS(in thousands)2011

$
(189,272
)
$
87,983

$
(101,289
)
$


$


$
2010


174,932


(26,156
)

148,776


164,583


(24,479
)

140,1042009(3)


347


(317
)

30


329


(317
)

122008(3)


3,340


(71
)

3,269


3,283


(99
)

3,1842007(4)


21,627


12,017


33,644


21,627


12,138


33,7652006(4)


6,763


3,024


9,787


6,762


3,274


10,036Total due (to) from CMS

$
17,737

$
76,480

$
94,217

$
196,584

$
(9,483
)
$
187,101


(1)Amounts
reported in CMS contract deposit receivables in the Consolidated Balance Sheets.(2)Amounts
reported in Due and unpaid premiums in the Consolidated Balance Sheets.(3)Amounts
reported for the 2009 and 2008 plan years are 100% reserved and reported within Claims Reserves.(4)In
December 2010, CMS announced that the 2006 and 2007 plan years will be reopened and settled based upon PDEs submitted to CMS through January 30,
2011.


11. DERIVATIVE INSTRUMENTSCASH FLOW HEDGE

On December 4, 2007, we entered into two separate interest rate swap agreements, one with Citibank, N.A. and one with Calyon Corporate and Investment Bank, on a total notional
amount of $250 million, where we pay an average locked-in fixed rate of 4.14% and receive a floating rate based on LIBOR to hedge the variability of cash flows to be paid under our
credit facility. At inception, we determined that the critical terms of the hedging instrument and the hedged forecasted transaction were the same and we designated these swaps as cash flow hedges,
with changes in the fair value reflected in other comprehensive income and the unrealized loss on these hedges in accumulated other
comprehensive income. We perform periodic assessments of hedge effectiveness by verifying and documenting whether the critical terms of the hedging instrument and the forecasted transaction have
changed during the period, rather than by quantifying the relevant changes in cash flows.

Due
primarily to the $78.1 million debt prepayment made in the third quarter of 2010 and subsequent scheduled principal payments, the outstanding principal balance on the hedged
Credit Facility was reduced to $232.0 million at March 31, 2011, $18.0 million lower than the original $250 million notional amounts on the swaps. As a result, this portion
of the swaps was deemed ineffective and the notional amount on one of the swaps was decreased by $18.0 million, $0.9 million in the first quarter of 2011. In addition, we evaluated the
likelihood of additional debt paydowns prior to the scheduled maturity of the Credit Facility and the related interest rate swaps in September 2012, and

21

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Table of Contents

UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

11. DERIVATIVE INSTRUMENTSCASH FLOW HEDGE (Continued)

in
the first quarter of 2011 we recorded a realized loss of $0.2 million on the portion of the swaps that would be considered ineffective as hedges.

The
unrealized loss on the effective portion of the swap totaling $12.4 million and $13.7 million at March 31, 2011 and 2010, respectively is reflected in
accumulated other comprehensive loss. The combined fair value of these swaps was a $12.9 million liability at March 31, 2011 and a $14.0 million liability at December 31,
2010. We have reflected this fair value in other liabilities.

In
connection with the swap transaction executed with Citibank, N.A., we are required to post collateral when we are in a net liability position. The collateral amount required is based
on the fair value of the swap including net accrued interest less a $1 million threshold amount as determined by our credit rating of BB+. Should we be downgraded or cease to be rated by S&P or
Moody's, the threshold amount would be reduced to zero and we would need to post $1 million in additional collateral. This collateral is reflected in cash and cash equivalents and was
$5.3 million as of March 31, 2011 and $6.1 million as of December 31, 2010. The swap agreements and our credit facility are described in more detail in
Note 15Derivative InstrumentsInterest Rate Swaps and Note 13Loan Payable in the Notes to Consolidated Financial Statements in our annual report on
Form 10-K for the year ended December 31, 2010.

12. COMMITMENTS AND CONTINGENCIES



Plaintiff Arthur Tsutsui filed a shareholder derivative action (the "Tsutsui Action") on December 30, 2005, in the Supreme Court
for New York State, Westchester County. The remaining defendants in Tsutsui v. Barasch, et al., index no. 05-22523, are officers Richard A. Barasch and Robert A. Waegelein, former
officer Gary W. Bryant, as well as the three directors affiliated with Capital Z Partners who were sitting on our board of directors as of the time the complaint was filed. The Tsutsui Action alleged
that the same alleged misstatements that were the subject of earlier shareholder actions, which have now all been dismissed or voluntarily withdrawn, constituted a breach of fiduciary duty by the
officer defendants and the directors that caused the Company to sustain damages. The Tsutsui Action also sought recovery of any proceeds derived by the officer and director defendants from the sale of
our stock that the plaintiff claims was in breach of their fiduciary duties. The parties have entered into a stipulation of settlement to resolve the action which was approved by the Court on
April 15, 2011. As previously disclosed, under the terms of the Stipulation of Settlement, the Company has agreed to enhance existing corporate governance provisions concerning trades in the
Company's stock by officers and directors and will pay $450,000 to plaintiff's counsel for attorneys' fees.

We
are subject to legal proceedings, claims, and litigation arising in the ordinary course of business, including claims for medical, disability, life insurance and other benefits. In
some cases, plaintiffs seek punitive damages. While the outcome of these matters is currently not determinable, we do not 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.



In July 2009 and March 2010, we received subpoenas from the Department of Health and Human Services, Office of Inspector General, known
as HHS-OIG, requesting documents related to marketing,

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. COMMITMENTS AND CONTINGENCIES (Continued)

sales
and enrollment practices for our Today's Health Medicare HMO Plans which are offered in the State of Wisconsin. We are cooperating with HHS-OIG in connection with their
investigation.

Laws
and regulations governing Medicare 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 has been exercising increased oversight and regulatory authority over our Medicare businesses. Compliance with such laws and regulations is subject to CMS audit,
other governmental review and investigation and significant interpretation. There can be no assurance that we will be found to be in compliance with all such laws and regulations in connection with
these audits, reviews and investigations. Failure to be in compliance can subject us to significant regulatory action including significant fines, penalties or operating restrictions on our business,
including, without limitation, suspension of our ability to market to and enroll new members in our Medicare plans and exclusion from Medicare and other state and federal healthcare programs. On
November 19, 2010, CMS notified us that we were suspended from marketing to and enrolling new members in our Medicare Advantage plans, effective December 5, 2010. According to CMS, the
suspension relates primarily to agent oversight and market conduct issues and will remain in effect until CMS is satisfied that we have corrected the issues and they are not likely to recur. The
suspension does not affect current members in our Medicare Advantage plans, nor does it affect the marketing, enrollment or membership in our stand-alone Medicare Prescription Drug plans. We are
working diligently to resolve these issues with CMS as quickly as possible. Further, on February 25, 2011, we received the final performance audit and inspection report from CMS with respect to
its audit of our Medicare Advantage and Medicare Part D contracts conducted during 2010. The audit report noted deficiencies with respect to both our Medicare Advantage and Medicare
Part D contracts, including prescription drug formulary administration, coverage determinations and appeals, grievances, enrollment and disenrollment, premium billing and compliance plan
deficiencies. On April 25, 2011, we filed with CMS a summary of the corrective actions that were taken with respect to these audit findings. Failure to correct the deficiencies noted in the
February 25, 2011 audit report or to otherwise be in compliance with applicable laws and regulations could result in CMS imposing additional sanctions on us including penalties, fines or other
operating restrictions, including termination of our right to participate in the Medicare program, which could have a material adverse effect on our business, financial condition and results of
operations.

13. BUSINESS SEGMENT INFORMATION

Our business segments are based on product and consist of



Our
remaining segment, Corporate & Other, includes the activities of our holding company, along with the operations formerly reported in the Senior Administrative Services
segment.

We
closed the sale of CHCS during the second quarter of 2010 (see "Sale of CHCS" in Note 14 of Notes to Consolidated Financial Statements). The sale eliminated substantially all
of the business operations of our Senior Administrative Services segment. As a result, beginning with our June 30, 2010 quarterly report on Form 10-Q, we began to report
current and historical results of our former Senior Administrative Services and Corporate segments in one segment called Corporate & Other.

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

13. BUSINESS SEGMENT INFORMATION (Continued)

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 services performed by Corporate & Other segment for our other segments and interest on notes payable or receivable between the
Corporate & Other segment and the operating segments.

Financial
data by segment, with a reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and net income in accordance with U.S. generally
accepted accounting principles is as follows:

Three months ended March 31,2011

2010Revenues

Income(Loss)
Before
Income Taxes

Revenues

Income(Loss)
Before
Income Taxes(in thousands)Senior Managed CareMedicare Advantage

$
519,057

$
6,407

$
785,047

$
47,603Medicare Part D


647,692


(43,399
)

644,220


(31,986
)Traditional Insurance


74,611


(78
)

80,289


(5,699
)Corporate & Other


683


(14,411
)

9,187


(11,060
)Intersegment revenues


31





(5,685
)

Adjustments to segment amounts:Net realized losses(1)


(236
)

(236
)

(284
)

(284
)Total

$
1,241,838

$
(51,717
)
$
1,512,774

$
(1,426
)


(1)We
evaluate the results of operations of our segments based on income before realized gains and losses and income taxes. We believe that realized gains and
losses are not indicative of overall operating trends.


14. OTHER DISCLOSURES

Income Taxes:Our effective tax rate was a benefit of 37.7% for the first quarter of 2011, compared to a benefit of 198.3% for
the first quarter of
2010. The change in the effective rate for the three months ended March 31, 2011 compared with the same period in 2010 is attributable to $0.5 million of non-recurring tax
benefits recognized during the first quarter of 2011 compared to $2.3 million recognized in the first quarter of 2010. The 2011 benefits were primarily related to state income tax refunds. The
2010 benefits were recognized upon the completion of examinations by the Internal Revenue Service and were attributable to pre-acquisition tax returns of MemberHealth, Inc.

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.
As of March 31, 2011, all of our primary reinsurers were rated "A-" (Excellent) or better by A.M. Best with the exception of one reinsurer. For that reinsurer,

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UNIVERSAL AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. OTHER DISCLOSURES (Continued)

which
is not rated, a trust containing assets at 106% of reserve levels is maintained. We do not know of any instances where any of our reinsurers have been unable to pay any policy claims on any
reinsured business.

Sale of CHCS:On April 26, 2010, we entered into an agreement to sell the outstanding common stock of CHCS, our
administrative services
company, to Patni Americas, Inc, a wholly-owned subsidiary of Patni Computer Systems Limited (NYSE: PTI), for $6.0 million in cash, subject to an adjustment for any net working capital
remaining at CHCS on the closing date. The transaction closed on June 9, 2010, with an effective date of April 1, 2010. The operations of CHCS are included in consolidated results up to
the effective date of the sale. The total consideration was approximately $7.5 million. Our carrying value of the assets disposed of in connection with the sale of CHCS was approximately
$7.1 million, including $4.4 million of goodwill. We recognized an immaterial loss on the disposition after consideration of transaction costs of approximately $0.3 million.

15. SUBSEQUENT EVENTS

On April 26, 2011, the Company and UAC Holding Inc., a wholly-owned subsidiary of the Company (together with the Company, the "Sellers"), entered into a Stock Purchase
Agreement to sell 1,600,000 shares of Series A Mandatorily Redeemable Preferred Stock to be issued by Universal American Spin Corp., a wholly-owned subsidiary of the Company ("New Universal
American"), par value $0.01 per share, with a liquidation preference of $25.00 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $40 million. The sale of the
shares of Series A Preferred Stock by the Sellers is conditioned upon the satisfaction or waiver of all of the conditions to the closing of the Company's sale of its Medicare Part D
business (the "Part D Transaction") to CVS Caremark Corporation ("CVS Caremark") set forth in the Agreement and Plan of Merger, dated December 30, 2010, by and among the Company, CVS
Caremark and Ulysses Merger Sub, L.L.C., as amended on March 30, 2011 (the "CVS Agreement"). The issuance by New Universal American, and the subsequent sale by the Sellers, of the shares of
Series A Preferred Stock is expected to occur on April 29, 2011.

Dividends
on the Series A Preferred Stock are cumulative from the date of original issue and will be payable quarterly in arrears on the 30th day of January, April, July
and October of each year, commencing July 2011, when, as and if declared by New Universal American's board of directors. Dividends will be payable out of amounts legally available therefor at a rate
equal to 8.50% per annum of the stated liquidation preference.

At
the sixth anniversary of the date of the issuance of the Series A Preferred Stock, the Series A Preferred Stock will be redeemed in whole, out of amounts legally
available therefore, at a redemption price of $25.00 per share plus an amount equal to all accumulated and unpaid dividends thereon to the date of redemption, whether or not declared.

The
proceeds from the sale of the Series A Preferred Stock by the Sellers will be used to pay a portion of the existing indebtedness of the Company at the closing of the
Part D Transaction, thereby increasing the cash payment to the Company's shareholders.

The
shares of Series A Preferred Stock will be completed through a private placement to the purchasers as accredited investors and pursuant to the exemptions from the registration
requirements of the Securities Act of 1933, as amended, provided by Section 4(2) thereof and Regulation D promulgated thereunder.

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

Introduction

The following discussion and analysis presents a review of our financial condition as of March 31, 2011 and our results of
operations for the three months ended March 31, 2011 and 2010. 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, 2010. You should also read the following analysis in conjunction with the Risk Factors contained in our annual report on
Form 10-K for the year ended December 31, 2010, as supplemented by the risk factors set forth in Part II, Item 1A "Risk Factors" below.

Part D Sale Transaction



Membership

The following table presents our membership in Medicare Advantage and Part D segments as of March 31, 2011 and 2010.

As of March 31,Membership by Segment

2011

2010(in thousands)Medicare AdvantagePFFS


89


199Network-based (HMO and PPO)


84


88Total Medicare Advantage


173


287Total Part D


1,850


1,877Total Membership


2,023


2,164


Medicare
Advantage membership decreased 114,000 compared to March 31, 2010. This decline was expected, as we were required to terminate approximately 60,000 members as a result of
the network requirements of the Medicare Improvements for Patients and Providers Act of 2008, known as MIPPA. Further, due to lapsation and the limited ability to add new members during the 2011
Annual Election Period as a result of CMS sanctions, membership declined by an additional 54,000 members.

Healthcare Reform

In March 2010, President Obama signed into law The Patient Protection and Affordable Care Act and The Health Care and Education
Reconciliation Act of 2010 (which we collectively refer to as the "Affordable Care Act") which enacts 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 aspects of the Affordable Care Act are currently being challenged in the judicial system. In addition,

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Congress
may withhold the funding necessary to implement the new reforms or attempt to replace the legislation with amended provisions or repeal it altogether.

Certain
significant provisions of the Affordable Care Act that will impact our business include, among others, reduced Medicare Advantage reimbursement rates, gradual closing of the
coverage gap, or "donut hole" on Medicare Part D, implementation of quality bonus for Star Ratings, stipulated minimum medical loss ratios, shortened annual enrollment period,
non-deductible federal premium taxes assessed to health insurers, coding intensity adjustments with mandatory minimums and a limitation on the federal tax deductibility of compensation
earned by individuals. The Health Care Reform Legislation is discussed more fully under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended
December 31, 2010.

Results of OperationsConsolidated Overview

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

Three months ended
March 31,2011

2010(in thousands)Senior Managed CareMedicare Advantage(1)

$
6,407

$
47,603Medicare Part D(1)


(43,399
)

(31,986
)Traditional Insurance(1)


(78
)

(5,699
)Corporate(1)


(14,411
)

(11,060
)Net realized losses on investments(1)


(236
)

(284
)Losses before provision for income taxes(1)


(51,717
)

(1,426
)Benefit from income taxes


(19,490
)

(2,827
)Net (loss) income

$
(32,227
)
$
1,401(Loss) earnings per common share (diluted)

$
(0.41
)
$
0.02


(1)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 before income taxes to net income in accordance with U.S. GAAP.




Our net loss for the three months ended March 31, 2011 was $32.2 million, or $0.41 per diluted share, compared to net
income of $1.4 million, or $0.02 per diluted share for the three months ended March 31, 2010. Our effective tax rate was a benefit of 37.7% for the first quarter of 2011 compared with a
benefit of 198.3% for the first quarter of 2010. The effective rate for the three months ended March 31, 2011 includes $0.5 million of non-recurring tax benefits recognized
during the first quarter of 2011 compared to $2.3 million recognized in the first quarter of 2010. The 2011 benefits were primarily related to state income tax refunds. The 2010 benefits were
recognized upon the completion of examinations by the Internal Revenue Service and were attributable to pre-acquisition tax returns of MemberHealth, Inc. Excluding the
non-recurring tax benefits, our effective tax rate was 36.8% and 36.9% for the three months ended March 31, 2011 and 2010, respectively.

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Our
Senior Managed CareMedicare Advantage segment generated income before income taxes of $6.4 million for the three months ended March 31, 2011, a decrease of
$41.2 million compared to the three months ended March 31, 2010. The decrease in earnings was driven by a 37% decrease in the member months for the three months ended March 31,
2011 compared to the three months ended March 31, 2010 caused by the decline in membership along with a 220 basis point
increase in the medical expense ratio, primarily related to unfavorable prior period development reported in 2011, compared with favorable prior period development in 2010. In addition, 2011 included
approximately $4.0 million of expenses incurred in corrective actions addressing items noted by CMS in their sanctions.

Our
Medicare Part D segment generated a loss before income taxes of $43.4 million for the first quarter of 2011, compared to a loss of $32.0 million for the first
quarter of 2010, an increase of $11.4 million. The impact from increased seasonality caused by the change in the 2011 benefit design noted above and an increase in general expenses accounted
for the increase in loss before income taxes and was partially offset by the lower amount of negative prior period development of $2.4 million in the first quarter of 2011, compared to
$4.1 million in negative prior period development with respect to the first quarter of 2010.

The
loss before income taxes for our Traditional Insurance segment decreased by $5.6 million compared to the three months ended March 31, 2010, driven by higher net
investment income, improved benefit ratios in the specialty health line of business and lower expenses.

The
loss before income taxes from our Corporate & Other segment increased by $3.4 million for the first quarter of 2011 compared to the first quarter of 2010. This was due
primarily to $2.1 million of transaction-related costs incurred in 2011 in connection with the sale of Part D to CVS Caremark along with $1.5 million related to the loss of
earnings from our TPA which was sold in the second quarter of 2010.

Segment ResultsSenior Managed CareMedicare Advantage

Three months ended
March 31,2011

2010(in thousands)Net premiums

$
511,252

$
777,831Net investment and other income


7,805


7,216Total revenue


519,057


785,047Medical expenses


434,059


643,369Amortization of intangible assets


999


1,140Commissions and general expenses


77,592


92,935Total benefits, claims and other deductions


512,650


737,444Segment income before income taxes

$
6,407

$
47,603


Our
Senior Managed CareMedicare Advantage segment includes the operations of our Medicare coordinated care Plans including PPOs and HMOs as well as our rural and
network-based PFFS business, which provides coverage to Medicare beneficiaries in 45 states. Our HMOs offer
coverage to Medicare beneficiaries primarily in Southeastern Texas and the area surrounding Dallas/Ft. Worth, 15 counties in Oklahoma and 4 counties in Wisconsin.

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Our Senior Managed CareMedicare Advantage segment generated income before income taxes of $6.4 million for the
three months ended March 31, 2011, a decrease of $41.2 million compared to the three months ended March 31, 2010. The decrease in earnings was driven by a 37% decrease in the
member months for the three months ended March 31, 2011 compared to the three months ended March 31, 2010 caused by the decline in membership along with a 220 basis point increase in the
medical expense ratio.

Membership.Membership in our Medicare Advantage plans declined by 114,000 members from March 31, 2010 to March 31, 2011. As
a result
of the network requirements of MIPPA, we were required to terminate approximately 60,000 members as of January 1, 2011. Further, due to lapsation and the limited ability to add new members
during the 2011 Annual Election Period as a result of the CMS sanctions, membership declined by an additional 54,000 members, resulting in membership of approximately 173,000 as of March 31,
2011.

Net Premiums.Net premiums for the Senior Managed CareMedicare Advantage segment decreased by $266.6 million compared to the
three months ended March 31, 2010, primarily due to the decline in membership and related lower member months. In addition, our ongoing chart review process resulted in a $3.1 million
favorable premium adjustment related to 2010 risk scores recorded during the first quarter 2011 compared to a $13.4 million favorable adjustment of 2009 risk scores recorded during the first
quarter 2010.

Medical expenses.Medical expenses decreased by $209.3 million compared to the first quarter of 2010, as a result of the decrease
in member
months. The medical expense ratio increased to 84.9% for the first quarter of 2011 from 82.7% for the same period in 2010. During the first quarter of 2011, there were
$6.1 million net unfavorable items related to prior periods compared to $7.7 million of favorable development in the first quarter of 2010 in addition to the net premium adjustments
discussed above.

Commissions and general expenses.Commissions and general expenses for the three months ended March 31, 2011 decreased
$15.3 million
compared to the three months ended March 31, 2010, primarily as the result of the decreased level of membership. The ratio of commissions and general expenses to net premiums increased to 15.2%
in the first quarter of 2011 compared to 11.9% in first quarter of 2010, primarily as a result of lower scale and expenses of approximately $4.0 million incurred in corrective actions
addressing items noted by CMS in their sanctions.

Segment ResultsMedicare Part D

Three months ended
March 31,2011

2010(in thousands)Direct and assumed premiums

$
561,478

$
539,029Risk corridor adjustment/government reinsurance


86,305


104,023Direct and assumed premiums after risk corridor adjustment


647,783


643,052Ceded premiums


(125
)

58Net premiums


647,658


643,110Net investment and other income


34


1,110Total revenue


647,692


644,220Pharmacy benefits


637,585


628,998Amortization of intangibles


4,012


4,012Commissions and general expenses


49,494


43,196Total benefits, claims and other deductions


691,091


676,206Segment loss before income taxes

$
(43,399
)
$
(31,986
)


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Reported
results for our Medicare Part D segment are subject to anticipated seasonality during a given calendar year. This is due to the nature of the standard
benefit design under Medicare Part D. Consequently, this business generally incurs higher claims experience in the first two quarters of the year while beneficiaries are in the deductible and
initial coverage phases of the benefit design. As the beneficiary reaches the coverage gap and catastrophic phases of the benefit design, the Plan experiences lower claims liability which is generally
in the last two quarters of the year. As a result, we generally anticipate a pattern of net losses from our Medicare Part D segment during the early part of the year, with a
break-even point during the third quarter and most of the segment's net income earned during the fourth quarter resulting in a pattern of increasing reported net income.

Primarily
as a result of a change we made to our enhanced plan benefit design for the 2011 plan year, we expect to experience a greater degree of seasonality in our Medicare
Part D segment throughout 2011 as compared to 2010, with a higher loss expected in the first quarter followed by a shift toward higher seasonal profitability expected for the remainder of the
year, namely in the fourth quarter. For a discussion of the accounting for our Medicare Part D segmentsee Note 3 of the Notes to Consolidated Financial Statements in our
annual report on Form 10-K for the year ended December 31, 2010.



Our Medicare Part D segment generated a loss before income taxes of $43.4 million for the first quarter of 2011, compared
to a loss of $32.0 million for the first quarter of 2010, an increase of $11.4 million. The impact from increased seasonality caused by the change in the 2011 benefit design noted above
and an increase in general expenses accounted for the increase in loss before income taxes and was partially offset by the lower amount of negative prior period development of $2.4 million in
the first quarter of 2011, compared to $4.1 million in negative prior period development with respect to the first quarter of 2010.

Net Premiums.Direct and assumed premiums, excluding risk corridor for the first quarter of 2011, increased by $22.4 million, or
4.1%, versus
the first quarter of 2010. The increase in direct and assumed premiums, excluding risk corridor, was primarily attributable to an increase in member premium rates and risk-adjusted direct
subsidy rates paid by CMS, and was partially offset by a decrease in membership of 27,000 members. The increase in member premium rates was attributable to the bids we submitted for the 2011 Plan year
that contained higher rates, which is directly related to the corresponding increase in benefit cost trend and a planned bid increase in benefits offered to members in our enhanced plans.
Risk-adjusted direct subsidy rates increased as a result of a change in methodology pertaining to the CMS recalibration of the prescription drug hierarchical condition category for 2011.
Risk-adjusted rates are determined by CMS based upon the member's health status and are described in further detail in Note 3 of the Notes to Consolidated Financial Statements in
our annual report on Form 10-K for the year ended December 31, 2010.

The
risk corridor adjustment calculation compares the target amount of prescription drug costs (limited to costs under the standard coverage as defined by CMS) less rebates in our annual
Plan bid to actual experience. The $17.7 million decrease in risk corridor adjustment for the first quarter of 2011 versus the comparable period in 2010 was primarily attributed to favorable
pharmacy benefits experience realized on our standard plan versus the bid. See further discussion of the risk corridor adjustment under "Critical Accounting Policies" in our annual report on
Form 10-K for the year ended December 31, 2010.

Pharmacy Benefits.Pharmacy benefits for the first quarter of 2011, increased by $8.6 million, or 1.4%, compared to the first
quarter of 2010,
and the ratio of pharmacy benefits to net premium after risk corridor adjustment was 98.4% and 97.8% for the first quarters of 2011 and 2010, respectively. Pharmacy benefits increased as a percentage
of net premiums due to price increases imposed by pharmaceutical manufacturers which are customary and were consistent with historical experience.

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Commissions and general expenses.Commissions and general expenses for the first quarter of 2011 totaled $49.5 million, or 8.8% of
direct and
assumed premium, excluding risk corridor compared to $43.2 million, or 8.0%, for the comparable period in 2010. The increase in the ratio of commissions and general expenses to net premium,
excluding risk corridor was attributable to planned investment in operating improvements scheduled for 2011.

Segment ResultsTraditional Insurance

Three months ended
March 31,2011

2010(in thousands)Net premiums

$
68,862

$
76,505Net investment income


5,738


3,243Other income


11


541Total revenue


74,611


80,289Policyholder benefits


55,175


62,405Change in deferred acquisition costs


2,298


2,984Amortization of intangible assets


174


716Commissions and general expenses, net of allowances


17,042


19,883Total benefits, claims and other deductions


74,689


85,988Segment loss before income taxes

$
(78
)
$
(5,699
)




The loss before income taxes for our Traditional Insurance segment decreased by $5.6 million compared to the three months ended
March 31, 2010, driven by higher net investment income, improved benefit ratios in the specialty health line of business and lower expenses.

The
following tables detail premium for the segment by major lines of business:

Premium

Three months ended March 31,2011

2010Gross

Ceded

Net

Gross

Ceded

Net(in thousands)Senior market

$
67,953

$
(16,472
)
$
51,481

$
78,680

$
(19,485
)
$
59,195Specialty health


15,708


(2,186
)

13,522


17,126


(2,525
)

14,601Life insurance and annuity


17,662


(13,803
)

3,859


16,158


(13,449
)

2,709Total premium

$
101,323

$
(32,461
)
$
68,862

$
111,964

$
(35,459
)
$
76,505


Revenue.Net premium declined by $7.6 million or 10.0% from the first quarter of 2010. This is primarily the result of the
continued effect of
lapsation on our Medicare supplement and specialty health in-force business, offset partially by the increase in our retained senior life block of business. Net investment income increased
by $2.5 million due to a higher overall portfolio yield resulting from a restructuring of the investment portfolio beginning in mid-2010.

Policyholder benefits.Policyholder benefits declined by $7.2 million, or 11.6%, compared to the first quarter of 2010. This
decline was
principally due to the overall decline of insurance in-force in the senior market and specialty health lines of business, as well as improvement in the specialty health policyholder
benefit ratios. For the three months ended March 31, 2011, the policyholder benefit ratio

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for
specialty health declined to 94.8%, compared with 101.6% for the same period last year due to lower frequency and severity of new claims. The Medicare supplement policyholder benefit ratio
increased to 78.7%, compared with 77.5% for the same period last year primarily as a result of prior period development. Additionally, the net amortization of deferred acquisition costs decreased
$0.7 million compared to the same period last year, driven by the continued lapsation of the blocks of business discussed above.

Commissions and general expenses, net of allowances.The following table details the components of commission and general expenses, net
of
allowances:

Three months ended
March 31,2011

2010(in thousands)Commissions

$
9,706

$
11,516Other operating costs


11,482


13,884Reinsurance allowances


(4,146
)

(5,517
)Commissions and general expenses, net of allowances

$
17,042

$
19,883


Total
commissions and general expenses, net of allowances, decreased by $2.8 million compared to the first quarter of 2010. Commission expense decreased $1.8 million
compared to the same period in the prior year, due to the continued aging of our in-force renewal premium which pays lower commissions as the duration of the policies increase and the
decline in the amount of business in-force. Other operating costs decreased $2.4 million for the quarter ended March 31, 2011, compared to the first quarter of 2010. This is primarily
due to savings associated with the outsourcing of certain administrative services previously provided by our CHCS subsidiary that was sold during the second quarter of 2010, as well as cost reductions
implemented to align with the lower levels of business in-force. Allowances received from reinsurers decreased $1.4 million for the first quarter of 2011 from the first quarter of
2010. This is primarily due to the reduction in-inforce and corresponding decrease in expense allowances in addition to lower commission allowances as a result in the reduction of gross commissions as
discussed above.

Segment ResultsCorporate & Other

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

Three months ended
March 31,2011

2010(in thousands)Interest expense

$
4,675

$
5,013Amortization of capitalized loan origination fees


504


380Stock-based compensation expense


3,437


3,405Other parent company expenses, net revenues


5,595


3,599Net loss (gain)Senior Administrative Services


200


(1,337
)Segment loss before income taxes

$
14,411

$
11,060


The
sale of CHCS during the second quarter of 2010 (for further discussion, see"Sale of CHCS"in Note 14 of Notes to Consolidated
Financial Statements), eliminated substantially all of the business operations of our former Senior Administrative Services segment. As a result, beginning with the June 30, 2010 quarterly
report on Form 10-Q, we began to report current and historical results of the former Senior Administrative Services and Corporate segments in one segment called Corporate &
Other.

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The loss before income taxes from our Corporate & Other segment increased by $3.4 million, or 30%, for the first quarter
of 2011 compared to the first quarter of 2010. This was due primarily to $2.1 million of transaction-related costs incurred in 2011 in connection with the sale of Part D to CVS Caremark
along with $1.5 million related to the loss of earnings from our TPA which was sold in the second quarter of 2010.

Liquidity and Capital Resources

Sources and Uses of Liquidity to the Parent Company, Universal American Corp.We require cash at our parent company to support the
growth of our
insurance and HMO subsidiaries, meet our obligations under our credit facility, fund potential growth through acquisitions of other companies or blocks of business, 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:



Insurance and HMO subsidiariesSurplus Note, Dividends and Capital Contributions.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. 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.

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.

At
March 31, 2011, we held cash and cash equivalents totaling $83 million and fixed maturity securities that could readily be converted to cash with carrying values of
$1,265 million at our insurance companies and HMO subsidiaries. We believe that this level of liquidity is sufficient to meet our obligations and pay expenses.

In
2007, our wholly-owned subsidiary, The Pyramid Life Insurance Company issued $60.0 million of surplus notes payable to our parent company, which bear interest at an average
fixed rate of 7.5%. The Notes are repayable beginning March 29, 2009 provided that capital and surplus are sufficient to maintain risk-based capital levels of 450% or greater in the
immediate prior year end. At December 31, 2010, Pyramid's risk-based capital ratio was below 450%, and therefore no payments of principal or interest have been made or accrued to
date.

Capital
contributions to and dividends from our Insurance subsidiaries are made through our unregulated holding company, UAC Holding, Inc. ("UACH"). UACH did not make capital
contributions to the insurance subsidiaries during the first three months of 2011. In March 2011, our

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wholly-owned
subsidiary, Constitution Life Insurance Company, declared and accrued a dividend of $11.7 million to UACH. The dividend was subsequently paid in April 2011.

Capital
contributions to and dividends from our HMO subsidiaries are made through our managed care holding company, Heritage Health Systems, Inc.("HHSI"). In March 2011, HHSI made
a capital contribution of $360,000 to Today's Options of Oklahoma, Inc. No dividends were declared by or paid to HHSI from its subsidiaries during the first quarter of 2011.

PBM and HMO third-party administrator cash flows.The primary sources of liquidity for these subsidiaries are fees collected from
clients 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 holding company.

Debt principal and interestCredit Facility, Swaps and Other Long Term Debt.We currently have a credit facility consisting of a
$350 million term loan and a $150 million revolver (the "2007 Credit Facility"). This Credit Facility has customary covenants and requirements including a leverage ratio test, minimum
risk based capital requirements for our insurance companies and, under certain conditions, the ability to pose limitations on certain investments, dispositions and our ability to make restricted
payments. We are in compliance with all covenants in the Credit Agreement.

The
credit facility, as amended, provides us with the ability to make a total of $300 million of restricted payments, in exchange for prepayments of Term Loan principal and
increases in borrowing spreads. In August 2010, we announced and paid a special cash dividend totaling $156 million and, per the terms of the July 2010 Amendment, made prepayments of term loan
principal of $78 million. As of March 31, 2011, $232.0 million was outstanding under the term loan agreement and the weighted average interest rate on the term loan portion of the
credit facility was 1.43%. All $232.0 million of the term loan outstanding has been swapped from a LIBOR-based floating rate to an average fixed rate of 4.14% (see Note 11 Derivative InstrumentsCash Flow
Hedgesand the ensuing paragraph), resulting in a total blended interest rate of 5.26% as of
March 31, 2011. We pay a commitment fee on the unutilized revolving loan facility at an annualized rate of 25 basis points. We had not drawn on the revolving loan facility as of the date of
this report. We made regularly scheduled principal payments totaling $0.6 million, principal payments of $0.2 million in connection with restricted payments and interest payments
totaling $0.8 million during the three months ended March 31, 2011.

On
December 4, 2007, we entered into two separate interest rate swap agreements on a total notional amount of $250 million, where we pay an average locked-in
fixed rate of 4.14% and receive a floating rate based on LIBOR. In the first three months of 2011, we paid a net amount of $2.3 million in association with these swap agreements. Due primarily
to the $78 million debt prepayment made in the third quarter of 2010, the outstanding principal balance on the hedged Credit Facility was reduced to $232.0 million at March 31,
2011; $18.0 million lower than the original $250 million notional amounts on the swaps. As a result, this portion of the swaps was deemed ineffective and the notional amount on one of
the swaps was decreased by $18.0 million, $0.9 million in the first quarter of 2011, to $107.0 million. In addition, we evaluated the likelihood of additional debt paydowns prior
to
the scheduled maturity of the Credit Facility and the related interest rate swaps in September 2012, and realized a loss of $0.2 million on this ineffective portion of the swap in the first
quarter of 2011. No other terms of the swaps were changed.

In
2003 and 2007, we formed statutory business trusts, in order to issue a combined $125.0 million in thirty year trust preferred securities, with $110 million currently
outstanding. $60 million of these securities have floating interest rates based on LIBOR and are currently at an average rate of 4.37%. The remaining $50 million is fixed at 7.68% until
March 2012. We made interest payments on the trust preferred securities totaling $1.6 million during the three months ended March 31, 2011.

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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
March 31, 2011, approximately 98% of our fixed maturity investments had investment grade ratings from S&P or Moody's.

In
2010, we began investing our cash in longer duration securities, including corporate bonds, asset-backed securities and municipal securities. As a result, cash equivalents represent
approximately 10% of our portfolio at March 31, 2011 and December 31, 2010. In the aggregate, approximately 24% of our cash and invested assets are in securities backed by the U.S.
government or its agencies, as compared with 26% at December 31, 2010. The aggregate credit quality of our total investment portfolio was AA at March 31, 2011 compared with
AA- at December 31, 2010.

The
net yields on our cash and invested assets increased to 3.7% for the three months ended March 31, 2011, from 2.3% for the three months ended March 31, 2010. The overall
increase in yield is primarily due to a change in the mix of assets from the investing of our cash and equivalents into higher yielding fixed maturity securities.

For
additional information on Liquidity and Capital Resources, please refer to our annual report on form 10-K for the year ended December 31, 2010.

Critical Accounting Policies

There have been no changes in our critical accounting policies during the current quarter. For a description of significant accounting
policies, see Note 3Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in our annual report on Form 10-K for
the year ended December 31, 2010.



The following table presents the components of the change in our liability for policy and contract claimshealth for the
three months ended March 31, 2011:

March 31,
2011(in thousands)Balance at beginning of year

$
374,539Less reinsurance recoverable


(14,337
)Net balance at beginning of year


360,202Incurred related to:Current Year


1,123,140Prior Year Development


1,828Total Incurred


1,124,968Paid related to:Current Year


808,686Prior Year


289,385Total paid


1,098,071Net balance at end of year


387,099Plus reinsurance recoverable


10,252Balance at end of period

$
397,351


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Policy and contract claimshealth increased by $22.8 million at March 31, 2011 from December 31, 2010. This increase was
primarily attributable to higher claims payable with regards to timing of the payment of claims and seasonality of the Part D business, offset in part by lower reserves due to lower membership
for our Medicare Advantage business. Due to the nature of the plan design, the Medicare Part D business generally incurs higher claims experience in the first two quarters of the year while
beneficiaries are in the deductible and initial coverage phases of the benefit design. As the beneficiary reaches the coverage gap and catastrophic phases of the benefit design, the Plan experiences
lower claims liability which is generally in the last two quarters of the year.

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
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 three months ended March 31, 2011, claim reserves settled for $1.8 million more than estimated at December 31, 2010. Prior period development represents
less than 0.1% of the incurred claims recorded in 2010.

Sensitivity Analysis

The following table illustrates the sensitivity of our accident and health IBNR payable at March 31, 2011 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%

$
1,193


-3%

$
(9,388
)-2%


795


-2%


(6,259
)-1%


398


-1%


(3,129
)1%


(397
)

1%


3,1292%


(795
)

2%


6,2593%


(1,192
)

3%


9,388


(1)Reflects
estimated potential changes in medical and other expenses payable, caused by changes in completion factors for incurred months prior to the most
recent three months.(2)Reflects
estimated potential changes in medical and other expenses payable, caused by changes in annualized claims trend used for the estimation of per
member per month incurred claims for the most recent three months.


Effects of Recently Issued and Pending Accounting Pronouncements

A summary of other recent and pending accounting pronouncements is provided in Note 3 of the Consolidated Financial Statements
in the quarterly report on Form 10-Q under the caption "Recently Issued and Pending Accounting Pronouncements." We do not anticipate any material impact from the future adoption of
the pending accounting pronouncements discussed in that Note.

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ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 as well as the cost of our variable rate debt.

Investment Interest Rate Sensitivity

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 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 March 31, 2011, and with all other variables held constant. The following table summarizes the impact of the assumed changes in market interest
rates.

March 31, 2011

Effect of Change in Market Interest Rates on Fair Value
of Fixed Income Portfolio as of March 31, 2011Fair Value of
Fixed Income Portfolio

200 Basis
Point Decrease

100 Basis
Point Decrease

100 Basis
Point Increase

200 Basis
Point Increase(in millions)$1,264.6

$99.7

$61.2

$(40.6)

$(92.9)


Debt

We pay interest on our term loan and a portion of our trust preferred securities based on LIBOR over one, two, three or six month
interest periods. Due to the variable interest rate, we would be subject to higher interest costs if short-term interest rates rise. We have attempted to mitigate our exposure to adverse
interest rate movements by fixing the rate on a portion of our loan payable through the use of cash flow swaps and our trust preferred securities through the contractual terms of the security at
inception. At March 31, 2011, we have fixed the rate on a total of $282.0 million, or 82%, of our debt, including all $232.0 million of our loan payable balance and
$50 million of our trust preferred securities.

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 three months
ended March 31,

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2011,
and with all other variables held constant. The following table summarizes the impact of changes in LIBOR.

Effect of Change in LIBOR on Pre-tax Income
for the three months ended March 31, 2011Weighted
Average
Balance
OutstandingDescription of Floating Rate Debt

Weighted
Average
Interest Rate

200 Basis
Point
Decrease(1)

100 Basis
Point
Decrease(1)

100 Basis
Point
Increase

200 Basis
Point
Increase(in millions)Other long-term debt


4.36
%
$
60.0

$
0.1

$
0.1

$
(0.2
)
$
(0.3
)


(1)During
the first three months of 2011, the LIBOR rate on our other long term debt was approximately 30 basis points. As a result, for the purposes of this
illustration, decreases in monthly rates over this period have been limited to the year to date average of 30 basis points on our other long term debt.


As
noted above, we have fixed the interest rate on $282.0 million of our $342.0 million of total debt outstanding, leaving $60 million of the debt exposed to rising
interest rates, as of March 31, 2011. We had approximately $83 million of cash and cash equivalents as of March 31, 2011. We anticipate that any increase or decrease in the
interest cost of our debt as a result of an increase in interest rates will be mitigated by an increase or decrease in the net investment income from our cash and cash equivalents.

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.

ITEM 4CONTROLS AND PROCEDURES



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

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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 March 31, 2011. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2011, 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 March 31, 2011 that have
materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

ITEM 1LEGAL PROCEEDINGS

For information relating to litigation affecting us, please see Note 12Commitments and Contingencies of the Notes
to Consolidated Financial Statements in Part IItem 1 of this report, which is incorporated into this Part IIItem 1Legal Proceedings
by reference.

ITEM
1ARISK FACTORS

Information concerning certain risks and uncertainties appears in Part I, Item 1A "Risk Factors" of the Company's annual
report on Form 10-K for the year ended December 31, 2010. You should carefully consider these risks and uncertainties, which could materially affect our business, financial
position and results of operations.

There
have been no material changes in our risk factors from those set forth in such SEC reports.

ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We have approved share repurchase plans that have authorized us to repurchase up to $175 million of shares of our common stock.
Through December 31, 2009, we had repurchased 13.4 million shares of our common stock for an aggregate amount of $132.7 million, under these programs. There have been no share
repurchases since December 31, 2009 under these programs. As of March 31, 2011, we have $42.3 million that remains available to repurchase additional shares under these plans.
However, share repurchases are also limited by the remaining available restricted payments under our 2007 Credit Facility, which, giving effect to the July 27, 2010 Amendment, limits share
repurchases, dividends and other restricted payments to an aggregate of $300 million. Currently, we have $11.2 million remaining available under this restricted payment limit. We are not
obligated to repurchase any specific number of shares under the programs or to make repurchases at any specific time or price.

Recent Sales of Unregistered Securities

None.

ITEM 3DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4(REMOVED & RESERVED)

ITEM 5OTHER INFORMATION

None.

ITEM 6EXHIBITS

Each exhibit identified below is filed as a part of this report.

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.


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SIGNATURES

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.

UNIVERSAL AMERICAN CORP.April 28, 2011

/s/ RICHARD A. BARASCHRichard A. Barasch Chief Executive OfficerApril 28, 2011

/s/ ROBERT A. WAEGELEINRobert A. Waegelein Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)


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