<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                (AMENDMENT NO. 1)

                 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                       FOR THE PERIOD ENDED JUNE 30, 2003

                            COMMISSION FILE #0-11321

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

        NEW YORK                                              11-2580136
------------------------                              --------------------------
(State of Incorporation)                              (I.R.S. Employer I.E. No.)

             Six International Drive, Suite 190, Rye Brook, NY 10573
             -------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

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

     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 and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in the Securities Exchange Act Rule 12b-2): Yes [X] No [ ]

         The number of shares outstanding of the Registrant's Common Stock as of
August 5, 2003 was 53,719,935.

<PAGE>

                                EXPLANATORY NOTE

         This amendment (the "Amendment") on Form 10-Q/A constitutes Amendment
No. 1 to the registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2003, filed with the Securities and Exchange Commission on August
14, 2003. In connection with the filing of this Amendment, and pursuant to Rule
12b-15 of the Securities Exchange Act of 1934, as amended, certain currently
dated certifications have been included. This Amendment is the result of
discussions between the registrant's management and the Securities and Exchange
Commission during a normal review of the registrant's filings. The registrant's
report on Form 10-Q for quarterly period ended June 30, 2003 has been amended to
include (i) additional disclosure (A) under the heading "Pyramid Life" within
Consolidated Financial Statements Note 3 - Business Combination, (B) within
Consolidated Financial Statements Note 5 - Reinsurance Transactions and under
the heading "Reinsurance Recapture" within Item 2: Management's Discussion and
Analysis of Financial Condition and Results of Operations and (C) within Item 3:
Quantitative and Qualitative Disclosures About Market Risk, and (ii) a
modification of the "Results of Operations - Consolidated Overview" section
within Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations. This Amendment contains no changes to the consolidated
financial statements as previously reported and does not reflect events
occurring after the filing of the original Form 10-Q, or modify or update those
disclosures affected by subsequent events.

         UNIVERSAL AMERICAN FINANCIAL CORP. HEREBY AMENDS ITS REPORT ON
     FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003 TO READ IN ITS
                          ENTIRETY AS SET FORTH BELOW

<PAGE>

                       UNIVERSAL AMERICAN FINANCIAL CORP.
                                    FORM 10-Q

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                  Page No.
<S>                                                                                               <C>
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Consolidated Balance Sheets                                                                    3
         Consolidated Statements of Operations - Three Months                                           4
         Consolidated Statements of Operations - Six Months                                             5
         Consolidated Statements of Stockholders' Equity and Comprehensive Income                       6
         Consolidated Statements of Cash Flows                                                          7
         Notes to Consolidated Financial Statements                                                  8-19

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations      20-37

Item 3.  Quantitative and Qualitative Disclosure of Market Risk                                     37-39

Item 4.  Controls and Procedures                                                                       39

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                             39

Item 2.  Changes in Securities and Use of Proceeds                                                     39

Item 3.  Defaults Upon Senior Securities                                                               39

Item 4.  Submission of Matters to a Vote of Security Holders                                           40

Item 5.  Other Information                                                                             40

Item 6.  Exhibits and Reports on Form 8-K                                                           40-41

         Signature                                                                                     41

         Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                   42-45
</TABLE>

<PAGE>

                          PART 1. FINANCIAL INFORMATION
                    ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

                       UNIVERSAL AMERICAN FINANCIAL CORP.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           JUNE 30,           DECEMBER 31,
                                                                             2003                 2002
                                                                          -----------         ------------
                                                                                   (unaudited)
                                                                                  (In thousands)
<S>                                                                       <C>                 <C>
ASSETS
Investments
 Fixed maturities available for sale, at fair value
  (amortized cost: 2003, $995,681; 2002, $884,054)                        $ 1,077,462          $  934,950
 Equity securities, at fair value (cost: 2003, $3,029; 2002, $ 1,661)           3,384               1,645
 Policy loans                                                                  26,024              23,745
 Other invested assets                                                          2,226               2,808
                                                                          -----------          ----------
  Total investments                                                         1,109,096             963,148

Cash and cash equivalents                                                     106,964              36,754
Accrued investment income                                                      14,040              11,885
Deferred policy acquisition costs                                             108,988              92,093
Amounts due from reinsurers                                                   217,660             220,100
Due and unpaid premiums                                                         6,233               6,066
Deferred income tax asset                                                       6,297              35,842
Present value of future profits and other amortizing intangible assets         44,055               2,987
Goodwill and other indefinite lived intangible assets                          12,840               7,973
Other assets                                                                   28,013              24,820
                                                                          -----------          ----------
  Total assets                                                              1,654,186           1,401,668
                                                                          ===========          ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Policyholder account balances                                                 355,690             271,578
Reserves for future policy benefits                                           701,631             627,174
Policy and contract claims - life                                               6,937               6,718
Policy and contract claims - health                                           105,165              88,216
Loan payable                                                                   50,000              50,775
Company obligated mandatorily redeemable preferred securities of
 subsidiary trust holding solely junior subordinated debentures                55,000              15,000
Amounts due to reinsurers                                                       5,491               7,285
Other liabilities                                                              43,365              48,153
                                                                          -----------          ----------
  Total liabilities                                                         1,323,279           1,114,899
                                                                          -----------          ----------

STOCKHOLDERS' EQUITY
Common stock (Authorized: 80 million shares,
 issued: 2003, 53.7 million shares;
 2002, 53.2 million shares)                                                       537                 532
Additional paid-in capital                                                    161,074             158,264
Accumulated other comprehensive income                                         51,861              29,887
Retained earnings                                                             117,954              99,406
Less: Treasury stock (2003, 0.1 million shares;
        2002, 0.2 million shares)                                                (519)             (1,320)
                                                                          -----------          ----------
  Total stockholders' equity                                                  330,907             286,769
                                                                          -----------          ----------
  Total liabilities and stockholders' equity                              $ 1,654,186          $1,401,668
                                                                          ===========          ==========

</TABLE>

            See notes to unaudited consolidated financial statements.

                                       3
<PAGE>

               UNIVERSAL AMERICAN FINANCIAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                     THREE MONTHS ENDED JUNE 30,                           2003                  2002
                     ---------------------------                        -----------           -----------
                                                                       (IN THOUSANDS, PER SHARE AMOUNTS IN
                                                                                      DOLLARS)
<S>                                                                     <C>                   <C>
Revenues:
 Direct premiums and policyholder fees earned                           $   183,333           $   144,169
 Reinsurance premiums assumed                                                 6,290                 1,147
 Reinsurance premiums ceded                                                 (68,014)              (79,665)
                                                                        -----------           -----------
   Net premiums and policyholder fees earned                                121,609                65,651

 Net investment income                                                       15,432                14,434
 Net realized gains (losses) on investments                                   1,185                (6,600)
 Fee and other income                                                         2,840                 3,205
                                                                        -----------           -----------
   Total revenues                                                           141,066                76,690
                                                                        -----------           -----------

Benefits, claims and expenses:
 Net increase in future policy benefits                                       4,871                 3,961
 Net claims and other benefits                                               81,600                42,640
 Interest credited to policyholders                                           3,422                 2,606
 Net increase in deferred acquisition costs                                 (11,057)               (6,924)
 Amortization of present value of future profits and other intangibles        1,074                   410
 Commissions                                                                 34,747                28,868
 Commission and expense allowances on reinsurance ceded                     (18,065)              (24,627)
 Interest expense                                                             1,257                   782
 Other operating costs and expenses                                          26,572                24,501
                                                                        -----------           -----------
   Total benefits, claims and expenses                                      124,421                72,217
                                                                        -----------           -----------

Income before taxes                                                          16,645                 4,473
Income tax expense                                                            5,645                 1,155
                                                                        -----------           -----------
Net income                                                              $    11,000           $     3,318
                                                                        ===========           ===========

Earnings per common share:
 Basic                                                                  $      0.21           $      0.06
                                                                        ===========           ===========
 Diluted                                                                $      0.20           $      0.06
                                                                        ===========           ===========
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       4
<PAGE>

               UNIVERSAL AMERICAN FINANCIAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                       SIX MONTHS ENDED JUNE 30,                          2003                  2002
--------------------------------------------------------------------    ---------             ---------
                                                                      (IN THOUSANDS, PER SHARE AMOUNTS IN
                                                                                   DOLLARS)
<S>                                                                   <C>                     <C>
Revenues:
  Direct premiums and policyholder fees earned                          $ 337,979             $ 291,605
  Reinsurance premiums assumed                                             12,739                 2,085
  Reinsurance premiums ceded                                             (149,923)             (163,127)
                                                                        ---------             ---------
     Net premiums and policyholder fees earned                            200,795               130,563

  Net investment income                                                    29,810                28,761
  Net realized gains (losses) on investments                                1,295                (6,457)
  Fee and other income                                                      7,079                 5,989
                                                                        ---------             ---------
     Total revenues                                                       238,979               158,856
                                                                        ---------             ---------

Benefits, claims and expenses:
  Net increase in future policy benefits                                    9,936                 6,531
  Net claims and other benefits                                           132,340                85,286
  Interest credited to policyholders                                        6,555                 5,213
  Net increase in deferred acquisition costs                              (19,308)              (12,856)
  Amortization of present value of future profits and other intangibles     1,195                   832
  Commissions                                                              65,111                57,425
  Commission and expense allowances on reinsurance ceded                  (40,421)              (49,364)
  Interest expense                                                          2,073                 1,588
  Early extinguishment of debt (Note 8)                                     1,766                     -
  Other operating costs and expenses                                       51,436                48,103
                                                                        ---------             ---------
     Total benefits, claims and expenses                                  210,683               142,758
                                                                        ---------             ---------

Income before taxes                                                        28,296                16,098
Income tax expense                                                          9,748                 5,282
                                                                        ---------             ---------
Net income                                                              $  18,548             $  10,816
                                                                        =========             =========

Earnings per common share:
  Basic                                                                 $    0.35             $    0.20
                                                                        =========             =========
  Diluted                                                               $    0.34             $    0.20
                                                                        =========             =========
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       5
<PAGE>

                       UNIVERSAL AMERICAN FINANCIAL CORP.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             ACCUMULATED
                                                                OTHER
                                               ADDITIONAL   COMPREHENSIVE
                                     COMMON     PAID-IN       INCOME /      RETAINED   TREASURY
SIX  MONTHS ENDED JUNE 30,            STOCK     CAPITAL        (LOSS)       EARNINGS    STOCK       TOTAL
--------------------------           -------   ----------   -------------   --------   --------     -----
<S>                                  <C>       <C>          <C>             <C>        <C>         <C>
                2002
Balance, January 1, 2002              $ 528     $155,746      $  5,603      $ 69,279   $  (386)    $230,770

Net income                                -            -             -        10,816         -       10,816
Other comprehensive income (Note 8)       -            -         6,505             -         -        6,505
                                                                                                   --------

Comprehensive income                                                                                 17,321
                                                                                                   --------

Issuance of common stock (Note 9)         3          855             -             -                    858

Stock-based compensation                  -          556             -             -                    556
Repayments of Loans to officers           -           10             -             -         -           10
Treasury shares purchased, at
 cost (Note 9)                            -                          -             -      (699)        (699)
Treasury shares reissued (Note 9)         -           80             -             -       585          665
                                      -----     --------      --------      --------   -------     --------

Balance, June 30, 2002                $ 531     $157,247      $ 12,108      $ 80,095   $  (500)    $249,481
                                      =====     ========      ========      ========   =======     ========

                2003
Balance, January 1, 2003              $ 532     $158,264      $ 29,887      $ 99,406   $(1,320)    $286,769

Net income                                -            -             -        18,548         -       18,548
Other comprehensive income (Note 8)       -            -        21,974             -         -       21,974
                                                                                                   --------

Comprehensive income                                                                                 40,522
                                                                                                   --------

Issuance of common stock (Note 9)         5        2,147             -             -         -        2,152
Stock-based compensation                  -          535             -             -         -          535
Repayments of Loans to officers                      110             -             -         -          110
Treasury shares purchased, at
 cost (Note 9)                            -            -             -             -      (240)        (240)
Treasury shares reissued (Note 9)         -           18             -             -     1,041        1,059
                                      -----     --------      --------      --------   -------     --------

Balance, June 30, 2003                $ 537     $161,074      $ 51,861      $117,954   $  (519)    $330,907
                                      =====     ========      ========      ========   =======     ========
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       6
<PAGE>

               UNIVERSAL AMERICAN FINANCIAL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,                                                             2003         2002
-------------------------                                                           ---------    ---------
                                                                                        (In thousands)
<S>                                                                                 <C>          <C>
Cash flows from operating activities:
Net income                                                                          $  18,548    $  10,816
Adjustments to reconcile net income to net cash provided by operating activities,
 net of balances acquired (see Note 3 - Business Combination):
 Deferred income taxes                                                                  8,490        3,006
 Change in reserves for future policy benefits                                          1,164        4,719
 Change in policy and contract claims                                                   3,221        6,731
 Change in deferred policy acquisition costs                                          (19,308)     (12,856)
 Amortization of present value of future profits and other intangibles                  1,195          832
 Amortization of bond premium                                                          (1,856)      (1,366)
 Amortization of capitalized loan origination fees                                      2,009          265
 Change in policy loans                                                                  (236)         141
 Change in accrued investment income                                                     (934)        (663)
 Change in reinsurance balances                                                        19,330       (5,134)
 Realized losses (gains) on investments                                                (1,295)       6,457
 Change in income taxes payable                                                        (1,771)      (2,396)
 Other, net                                                                            (1,522)      (4,105)
                                                                                    ---------    ---------
Net cash provided (used) by operating activities                                       27,035        6,447
                                                                                    ---------    ---------

Cash flows from investing activities:
 Proceeds from sale or redemption of fixed maturities                                 151,365       93,476
 Cost of fixed maturities purchased                                                  (136,621)    (121,385)
 Proceeds from sale of equity securities                                                  286        1,293
 Cost of equity securities purchased                                                     (427)        (639)
 Change in other invested assets                                                          582          742
 Change in due from / to broker                                                        (1,322)      (5,863)
 Purchase of business, net of cash acquired (Note 3)                                  (56,880)           -
 Other investing activities                                                            (1,515)      (2,921)
                                                                                    ---------    ---------
Net cash used by investing activities                                                 (44,532)     (35,297)
                                                                                    ---------    ---------

Cash flows from financing activities:
 Net proceeds from issuance of common stock                                             2,263          858
 Cost of treasury stock purchases                                                        (240)        (699)
 Change in policyholder account balances                                               45,875        7,813
 Change in reinsurance on policyholder account balances                                   584          844
 Principal repayment on loan payable                                                   (2,825)      (5,250)
 Early extinguishment of debt (Note 10)                                               (62,950)           -
 Issuance of new debt (Note 10)                                                        65,000            -
 Issuance of trust preferred securities (Note 11)                                      40,000            -
                                                                                    ---------    ---------
Net cash provided by financing activities                                              87,707        3,566
                                                                                    ---------    ---------

Net increase (decrease) in cash and cash equivalents                                   70,210      (25,284)

Cash and cash equivalents at beginning of period                                       36,754       47,990
                                                                                    ---------    ---------
Cash and cash equivalents at end of period                                          $ 106,964    $  22,706
                                                                                    =========    =========

Supplemental cash flow information:
 Cash paid during the period for interest                                           $   1,938    $    1,069
                                                                                    =========    ==========
 Cash paid during the period for income taxes                                       $   3,099    $    4,762
                                                                                    =========    ==========
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       7
<PAGE>

               UNIVERSAL AMERICAN FINANCIAL CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The interim financial information herein is unaudited, but in the
opinion of management, includes all adjustments (consisting of normal, recurring
adjustments) necessary to present fairly the financial position and results of
operations for such periods. The results of operations for the three months and
six months ended June 30, 2003 and 2002 are not necessarily indicative of the
results to be expected for the full year. The accompanying consolidated
financial statements and notes should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 2002. Certain
reclassifications have been made to prior year's financial statements to conform
to current period classifications.

         The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP") and
consolidate the accounts of Universal American Financial Corp. ("Universal
American" or the "Parent Company") and its subsidiaries (collectively the
"Company"), American Progressive Life & Health Insurance Company of New York
("American Progressive"), American Pioneer Life Insurance Company ("American
Pioneer"), American Exchange Life Insurance Company ("American Exchange"),
Pennsylvania Life Insurance Company ("Pennsylvania Life"), Peninsular Life
Insurance Company ("Peninsular"), Union Bankers Insurance Company ("Union
Bankers"), Constitution Life Insurance Company ("Constitution"), Marquette
National Life Insurance Company ("Marquette"), Penncorp Life Insurance Company,
a Canadian company ("Penncorp Life (Canada)"), Pyramid Life Insurance Company
("Pyramid Life"), CHCS Services, Inc. and UAFC Statutory Trusts I, II, III and
V.

         Pyramid Life was acquired on March 31, 2003 and its operating results
prior to the date of acquisition are not included in Universal American's
consolidated results of operations.

         Collectively, the insurance company subsidiaries are licensed to sell
life and accident & health insurance and annuities in all fifty states, the
District of Columbia and all the provinces of Canada. The principal insurance
products are Medicare supplement, fixed benefit accident and sickness disability
insurance, long term care, senior life insurance and fixed annuities. The
Company distributes these products through an independent general agency system
and a career agency system. The career agents focus on sales for Pennsylvania
Life, Pyramid Life and Penncorp Life (Canada) while the independent general
agents sell for American Pioneer, American Progressive, Constitution and Union
Bankers. CHCS Services, Inc., the Company's administrative services company,
acts as a service provider for both affiliated and unaffiliated insurance
companies for senior market insurance and non-insurance programs.

2.       RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS 145"). SFAS 145 requires any gain or loss on
extinguishments of debt to be presented as a component of continuing operations
(unless specific criteria are met) whereas SFAS No. 4 required that such gains
and losses be classified as an extraordinary item in determining net income. The
Company adopted these provisions on January 1, 2003, as required. The other
provisions of SFAS No. 145 were not relevant to the Company.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires
costs associated with exit or disposal activities (including restructurings) to
be recognized when the costs are incurred, rather than at a date of commitment
to an exit or disposal plan. This standard nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
Under SFAS 146, a liability related to an exit or disposal activity is not
recognized until such liability has actually been incurred whereas under EITF
Issue No. 94-3 a liability was recognized at the time of a commitment to an exit
or disposal plan. The provisions of this standard

                                       8
<PAGE>

are effective for exit or disposal activities initiated after December 31, 2002.
The Company adopted this standard on January 1, 2003.

         The Company has various stock-based compensation plans for its
employees, directors and agents, which are more fully described in Notes 2 and 8
to the Consolidated Financial Statements included in the Company's 2002 Annual
Report on Form 10-K. In December 31, 2002, the FASB issued SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure" ("SFAS
148"). The Company uses the fair value method of accounting for stock-based
awards granted to agents, however, the intrinsic value method of accounting is
used for stock-based awards granted to employees and directors. Accordingly,
compensation cost is not recognized when the exercise price of an employee's
stock option is equal to or exceeds the fair market value of the stock on the
date the option is granted. SFAS 148 requires companies using the intrinsic
value method of accounting to disclose, on a quarterly basis, the effect on
reported net income and earnings per share if compensation expense was based on
the fair value method of accounting for all stock-based awards. The following
table illustrates the pro forma net income and pro forma earnings per share as
if the Company had applied the fair value based method of accounting to all
stock-based awards during each period presented (using the Black-Scholes
option-pricing model for stock options).

<TABLE>
<CAPTION>
           SIX MONTHS ENDED JUNE 30,                             2003                   2002
           -------------------------                           --------               --------
                                                          (In thousands, except per share amounts)
<S>                                                       <C>                         <C>
Reported net income                                            $ 18,548               $ 10,816
Add back: Stock-based compensation expense included in
 reported net income, net of tax                                    692                    706
Less: Stock based compensation expense determined under
 fair value based method for all awards, net of tax              (1,308)                (1,273)
                                                               --------               --------
Pro forma net income                                           $ 17,933               $ 10,249
                                                               ========               ========

Net income per share:
 Basic, as reported                                            $   0.35               $   0.20
 Basic, pro forma                                              $   0.34               $   0.20

 Diluted, as reported                                          $   0.34               $   0.20
 Diluted, pro forma                                            $   0.33               $   0.19
</TABLE>

         Pro forma compensation expense reflected for prior periods is not
indicative of future compensation expense that would be recorded by the Company
upon its adoption of the fair value based recognition provisions of SFAS 123 on
January 1, 2004. Future expense may vary based upon factors such as the number
of awards granted by the Company, the then-current fair market value of such
awards and the transition provisions adopted.

3.       BUSINESS COMBINATION

         On March 31, 2003, Universal American completed the acquisition of all
of the outstanding common stock of Pyramid Life. In this transaction, the
Company acquired a block of in-force business that the Company believes will be
profitable, as well as a career sales force that is skilled in selling the same
type of senior market insurance products that are currently sold by Universal
American. The purchase price of $57.5 million and transaction costs of $2.4
million were financed with $20.1 million of net proceeds generated from the
refinancing of the Company's credit facility and $39.8 million of cash on hand,
including a portion of the proceeds from the trust preferred offerings completed
by Universal American in December 2002 and March 2003. (See Note 10 - Debt
Refinancing and Note 11 - Trust Preferred Securities).

                                       9
<PAGE>

         Operating results generated by Pyramid Life prior to March 31, 2003,
the date of acquisition, are not included in Universal American's consolidated
financial statements. At the time of closing, the fair value of net tangible
assets of the acquired company amounted to $27.6 million. The excess of the
purchase price over the fair value of net tangible assets acquired was $32.3
million. At March 31, 2003, the Company performed the initial allocation of the
excess to identifiable intangible assets. Based on this initial allocation,
approximately $13.1 million, net of deferred taxes of $7.1 million, was assigned
to the present value of future profits acquired, which has a weighted average
life of 7 years. Approximately $14.3 million, net of deferred taxes of $7.7
million, was assigned to the distribution channel acquired, which has a weighted
average life of 30 years. The distribution channel represents the new sales
production from the career distribution established by Pyramid Life. Pyramid
Life distributes its products on an exclusive basis through 31 Senior Sales
Solution Centers ("SSSC's"). The remaining $4.9 million was assigned to the
value of the trademarks and licenses acquired, which are deemed to have an
indefinite life.

         The consolidated pro forma results of operations, assuming that Pyramid
Life was purchased on January 1, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,        2003         2002
-------------------------      ---------    --------
                                   (In thousands)
<S>                            <C>          <C>
Total revenue                  $ 267,869    $206,526
Income before taxes (1)        $  29,138    $ 14,852
Net income (1)                 $  19,085    $  9,990

Earnings per common share:
    Basic                      $    0.36    $   0.19
    Diluted (1)                $    0.35    $   0.18
</TABLE>

(1) The above pro forma results of operations includes excess amortization of
    capitalized loan fees of $1.9 million in 2003 and $2.4 million in 2002 as a
    result of the assumed refinancing of the existing debt at January 1, 2003
    and 2002, respectively. This additional expense reduced net income by $1.2
    million or $0.02 per diluted share in 2003 and $1.6 million or $0.03 per
    diluted share in 2002. The actual amount of excess amortization reported in
    2003 was $1.8 million. No excess amortization was reported in 2002.

         The pro forma results of operations reflect management's best estimate
based upon currently available information. The pro forma adjustments are
applied to the historical financial statements of Universal American and Pyramid
Life to account for Pyramid Life under the purchase method of accounting. In
accordance with SFAS No. 141, "Business Combinations", the total purchase cost
was allocated to Pyramid Life's assets and liabilities based on their relative
fair values. These allocations are subject to valuations as of the date of the
acquisition based upon appraisals and other information at that time. Although
the time required to identify and measure the fair value of the assets acquired
and liabilities assumed in a business combination will vary with circumstances,
the allocation period should not exceed one year from the consummation of a
business combination. Management has provided its best estimate of the likely
fair values of assets and liabilities for the purpose of this pro forma
information. However, management cannot predict the potential adjustments
resulting from the actual final purchase assumptions, which could result in
differences from these pro forma estimates.

         The pro forma information presented above is for disclosure purposes
only and is not necessarily indicative of the results of operations that would
have occurred had the acquisition been consummated on the dates assumed, nor is
the pro forma information intended to be indicative of Universal American's
future results of operations.

4.       INTANGIBLE ASSETS

         Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill
and Other Intangible Assets", and accordingly ceased all amortization of
goodwill.

                                       10
<PAGE>

         The following table shows the Company's acquired intangible assets that
continue to be subject to amortization and accumulated amortization expense.

<TABLE>
<CAPTION>
                                               JUNE 30, 2003              DECEMBER 31, 2002
                                        --------------------------   --------------------------
                                        GROSS CARRY   ACCUMULATED    GROSS CARRY   ACCUMULATED
                                          AMOUNT      AMORTIZATION     AMOUNT      AMORTIZATION
                                        -----------   ------------   -----------   ------------
                                                              (In thousands)
<S>                                     <C>           <C>            <C>           <C>
Present value of future profits:
 Career Agency                            $20,208       $   664        $     -       $     -
 Senior Market Brokerage                    2,391           828          2,391           657
 Administrative Services                    7,671         6,594          7,671         6,418
Distribution Channel - Career Agency       22,055           184              -             -
                                          -------       -------        -------       -------
   Total                                  $52,325       $ 8,270        $10,062       $ 7,075
                                          =======       =======        =======       =======
</TABLE>

         Estimated future net amortization expense (in thousands) for the
succeeding five years is as follows:

<TABLE>
<S>                                       <C>
2003 - Remainder of year                  $ 2,043
2004                                        4,000
2005                                        3,939
2006                                        3,894
2007                                        3,861
</TABLE>

         The carrying amounts of goodwill and intangible assets with indefinite
lives as of June 30, 2003 and December 31, 2002, are shown below.

<TABLE>
<CAPTION>
                                           2003          2002
                                          -------       -------
                                             (In thousands)
<S>                                       <C>           <C>
Career Agency                             $ 4,867       $     -
Senior Market Brokerage                     3,893         3,893
Administrative Services                     4,080         4,080
                                          -------       -------
  Total                                   $12,840       $ 7,973
                                          =======       =======
</TABLE>

5.       REINSURANCE RECAPTURE

         Effective April 1, 2003, American Pioneer entered into agreements to
recapture approximately $48 million of Medicare supplement business that had
been reinsured to Transamerica Occidental Life Insurance Company, Reinsurance
Division ("TARe") under two quota share contracts. In 1996, American Pioneer
entered into two reinsurance treaties with TARe. Pursuant to the first of these
contracts American Pioneer ceded to TARe 90% of approximately $50 million of
annualized premium then currently in force that it acquired from First National
Life Insurance Company in 1996. Under the second contract, as subsequently
amended, American Pioneer agreed to cede to TARe 75% of certain new business
from October 1996 through December 31, 2000. As of April 1, 2003, approximately
$27 remained ceded under the First National treaty and approximately $16 million
remained ceded under the new business treaty.

         As part of an effort to exit certain non-core lines of business In
2002, TARe approached the Company in 2002 to determine our interest in
recapturing the two treaties. Under the terms of the recapture agreements, TARe
transferred approximately $18 million in cash to American Pioneer to cover the
statutory reserves recaptured by American Pioneer. No ceding allowance was paid
by American Pioneer in the recapture and American Pioneer currently retains 100%
of the risks on the $48 million of Medicare supplement business. There was no
gain or loss reported on the recapture of these agreements.

                                       11
<PAGE>

6.       EARNINGS PER SHARE

         The reconciliation of the numerators and the denominators of the basic
and diluted EPS is as follows:

<TABLE>
<CAPTION>
                                                   INCOME           SHARES         PER SHARE
        THREE MONTHS ENDED JUNE 30,              (NUMERATOR)     (DENOMINATOR)      AMOUNT
---------------------------------------------    -----------     -------------     ---------
                                                 (In thousands, per share amounts in dollars)
<S>                                              <C>             <C>               <C>
                  2003
Weighted average common stock outstanding                            53,466
Less: Weighted average treasury shares                                  (89)
                                                                     ------

Basic EPS:
Net income applicable to common shareholders      $  11,000          53,377         $ 0.21
                                                  =========                         ======

Effect of Dilutive Securities                                         1,220
                                                                     ------

Diluted EPS:
Net income applicable to common
 shareholders plus assumed conversions            $  11,000          54,597         $ 0.20
                                                  =========          ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                   INCOME           SHARES         PER SHARE
        THREE MONTHS ENDED JUNE 30,              (NUMERATOR)     (DENOMINATOR)      AMOUNT
--------------------------------------------     -----------     -------------     ---------
                                                 (In thousands, per share amounts in dollars)
<S>                                              <C>             <C>               <C>
                    2002
Weighted average common stock outstanding                            53,065
Less: Weighted average treasury shares                                  (64)
                                                                     ------

Basic EPS:
Net income applicable to common shareholders       $ 3,318           53,001         $ 0.06
                                                   =======                          ======

Effect of Dilutive Securities                                         1,546
                                                                     ------

Diluted EPS:
Net income applicable to common
 shareholders plus assumed conversions             $ 3,318           54,547         $ 0.06
                                                   =======           ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                   INCOME           SHARES         PER SHARE
         SIX MONTHS ENDED JUNE 30,               (NUMERATOR)     (DENOMINATOR)      AMOUNT
---------------------------------------------    -----------     -------------     ---------
                                                 (In thousands, per share amounts in dollars)
<S>                                              <C>             <C>               <C>
                    2003
Weighted average common stock outstanding                            53,361
Less: Weighted average treasury shares                                 (175)
                                                                     ------

Basic EPS:
Net income applicable to common shareholders      $  18,548          53,186         $ 0.35
                                                  =========                         ======

Effect of Dilutive Securities                                         1,198
                                                                     ------

Diluted EPS:
Net income applicable to common
 shareholders plus assumed conversions            $  18,548          54,384         $ 0.34
                                                  =========          ======         ======
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                   INCOME           SHARES         PER SHARE
SIX MONTHS ENDED JUNE 30,                        (NUMERATOR)     (DENOMINATOR)      AMOUNT
--------------------------------------------     -----------     -------------     ---------
                                                 (In thousands, per share amounts in dollars)
<S>                                              <C>             <C>               <C>
                    2002
Weighted average common stock outstanding                            52,979
Less: Weighted average treasury shares                                  (93)
                                                                     ------

Basic EPS:
Net income applicable to common shareholders      $  10,816          52,886         $ 0.20
                                                  =========                         ======

Effect of Dilutive Securities                                         1,493
                                                                     ------

Diluted EPS:
Net income applicable to common
 shareholders plus assumed conversions            $  10,816          54,379         $ 0.20
                                                  =========          ======         ======
</TABLE>

7.       INVESTMENTS

         Fixed maturity securities are classified as investments available for
sale and are carried at fair value, with the unrealized gain or loss, net of tax
and other adjustments (deferred policy acquisition costs), included in
accumulated other comprehensive income.

<TABLE>
<CAPTION>
                                                         GROSS        GROSS
                                           AMORTIZED   UNREALIZED   UNREALIZED      FAIR
               CLASSIFICATION                COST        GAINS        LOSSES        VALUE
---------------------------------------    ---------   ----------   ----------    ----------
                                                            (In thousands)
<S>                                        <C>          <C>         <C>           <C>
JUNE 30, 2003
US Treasury securities
 and obligations of US government          $  71,002    $  2,227      $      -    $   73,229
Corporate debt securities                    469,465      47,600        (1,720)      515,345
Foreign debt securities (1)                  195,525      21,527          (130)      216,922
Mortgage- and asset-backed securities        259,689      13,787        (1,510)      271,966
                                           ---------    --------      --------    ----------
                                           $ 995,681    $ 85,141      $ (3,360)   $1,077,462
                                           =========    ========      ========    ==========
DECEMBER 31, 2002
US Treasury securities
 and obligations of US government          $  90,189    $  1,670      $     (9)   $   91,850
Corporate debt securities                    374,087      30,323        (1,667)      402,743
Foreign debt securities (1)                  166,689      10,072          (216)      176,545
Mortgage- and asset-backed securities        253,089      12,621        (1,898)      263,812
                                           ---------    --------      --------    ----------
                                           $ 884,054    $ 54,686      $ (3,790)   $  934,950
                                           =========    ========      ========    ==========
</TABLE>

(1) Primarily Canadian dollar denominated bonds owned by our Canadian insurance
    subsidiary.

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

<TABLE>
<CAPTION>
                                               JUNE 30, 2003
                                           AMORTIZED     FAIR
                                             COST        VALUE
                                           ---------   ----------
                                               (In thousands)
<S>                                        <C>         <C>
Due in 1 year or less                      $  27,556   $   27,838
Due after 1 year through 5 years             141,441      150,150
Due after 5 years through 10 years           342,797      383,976
Due after 10 years                           224,199      243,532
Mortgage- and asset-backed securities        259,688      271,966
                                           ---------   ----------
                                           $ 995,681   $1,077,462
                                           =========   ==========
</TABLE>

         During the six months ended June 30, 2003, the Company wrote down the
value of certain fixed maturity securities by $0.2 million. During the six
months ended June 30, 2002, the Company wrote down the value of certain fixed
maturity securities by $9.1 million (1.0% of investments), primarily as a

                                       13
<PAGE>

result of the impairment of our WorldCom holdings, that were subsequently sold
in July 2002. These write downs represent management's estimate of other than
temporary declines in value and were included in net realized gains on
investments in our consolidated statement of operations.

8.       COMPREHENSIVE INCOME

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

<TABLE>
<CAPTION>
     THREE MONTHS ENDED JUNE 30,                      2003                              2002
---------------------------------------   ----------------------------     -------------------------------
                                           BEFORE      TAX     NET OF       BEFORE       TAX       NET OF
                                            TAX      EXPENSE    TAX          TAX       EXPENSE      TAX
                                           AMOUNT   (BENEFIT)  AMOUNT       AMOUNT    (BENEFIT)    AMOUNT
                                           ------   --------   ------       ------    ---------    ------
                                                                   (In thousands)
<S>                                       <C>       <C>        <C>         <C>        <C>         <C>
Net unrealized gain arising
 during the year (net of deferred
 acquisition cost adjustment)             $ 30,604  $  10,710  $ 19,894    $ 14,834   $  5,192    $  9,642
Less:
Reclassification adjustment
 for losses (gains) included in net
 income                                     (1,185)      (414)     (771)      6,600      2,309       4,291
                                          --------  ---------  --------    --------   --------    --------
Net unrealized gains                        29,419     10,296    19,123      21,434      7,501      13,933

Currency translation adjustments             4,611      1,614     2,997       2,108        731       1,377
                                          --------  ---------  --------    --------   --------    --------

Other comprehensive income                $ 34,030  $  11,910  $ 22,120    $ 23,542   $  8,232    $ 15,310
                                          ========  =========  ========    ========   ========    ========
</TABLE>

<TABLE>
<CAPTION>
     SIX MONTHS ENDED JUNE 30,                        2003                              2002
--------------------------------------    ----------------------------     -------------------------------
                                           BEFORE      TAX     NET OF       BEFORE       TAX       NET OF
                                            TAX      EXPENSE    TAX          TAX       EXPENSE      TAX
                                           AMOUNT   (BENEFIT)  AMOUNT       AMOUNT    (BENEFIT)    AMOUNT
                                           ------   --------   ------       ------    ---------    ------
                                                                   (In thousands)
<S>                                       <C>       <C>        <C>         <C>        <C>         <C>
Net unrealized gain arising
 during the year (net of deferred
 acquisition cost adjustment)             $ 27,522  $   9,628  $ 17,894    $  1,391   $    485    $    906
Less:
Reclassification adjustment
 for losses (gains) included in net
 income                                     (1,295)      (453)     (842)      6,457      2,261       4,196
                                          --------  ---------  --------    --------   --------     -------
Net unrealized gains                        26,227      9,175    17,052       7,848      2,746       5,102
Currency translation adjustments             7,573      2,651     4,922       2,160        757       1,403
                                          --------  ---------  --------    --------   --------     -------
Other comprehensive income                $ 33,800  $  11,826  $ 21,974    $ 10,008   $  3,503    $  6,505
                                          ========  =========  ========    ========   ========    ========
</TABLE>

9.       STOCKHOLDERS' EQUITY

         Common Stock

         The par value of common stock is $.01 per share with 80,000,000 shares
authorized for issuance. Changes in the number of shares of common stock issued
were as follows:

<TABLE>
<CAPTION>
                                                                 2003         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Common stock issued, beginning of year                        53,184,381   52,799,899
Stock options exercised                                          311,750      224,302
Agent stock award                                                 37,368       69,789
Stock purchases pursuant to Agents' Stock Purchase Plan          178,486       21,950
                                                              ----------   ----------
Common stock issued, end of period                            53,711,985   53,115,940
                                                              ==========   ==========
</TABLE>

         Treasury Stock

         The Board of Directors approved a plan to repurchase up to 1 million
shares of Company stock in the open market. The primary purpose of the plan is
to fund employee stock bonuses. During the three months ended June 30, 2003, the
Company acquired 41,988 shares in the open market for a cost of $0.2

                                       14
<PAGE>

million at a weighted average market price of $5.72 per share and distributed
189,635 shares in the form of employee bonuses at a weighted average market
price of $5.58 per share, at the date of distribution. During the six months
ended June 30, 2003, the Company acquired 104,295 shares in the open market for
a cost of $0.7 million at a weighted average market price of $6.70 per share and
distributed 103,216 shares in the form of officer and employee bonuses at a
weighted average market price of $6.45 per share at the date of distribution.

         Accumulated Other Comprehensive Income

         The components of accumulated other comprehensive income are as
follows:

<TABLE>
<CAPTION>
                                                        JUNE 30,     DECEMBER 31,
                                                         2003           2002
                                                       ---------     ------------
                                                              (in thousands)
<S>                                                    <C>           <C>
Net unrealized appreciation on investments             $  82,136      $  50,880
Deferred acquisition cost adjustment                      (7,350)        (2,320)
Foreign currency translation gains (losses)                5,000         (2,574)
Deferred tax on the above                                (27,925)       (16,099)
                                                       ---------      ---------
  Accumulated other comprehensive income               $  51,861      $  29,887
                                                       =========      =========
</TABLE>

10.      DEBT REFINANCING

         Prior Credit Facility

         As of January 1, 2003, the outstanding balance of the Company's
existing loan was $50.8 million. In January 2003, the Company made a scheduled
principal payment of $2.8 million, and in March, 2003 made a principal payment
of $5.0 million from a portion of the proceeds from the issuance of Trust
Preferred securities (see Note 9 - Trust Preferred Securities). These payments
reduced the outstanding balance to $42.9 million, which was repaid from the
proceeds of the new loan obtained in connection with the acquisition of Pyramid
Life. The early extinguishment of the existing debt resulted in the immediate
amortization of the capitalized loan origination fees relating to that debt,
causing a pre-tax expense of approximately $1.8 million.

         New Credit Facility

         In connection with the acquisition of Pyramid Life (see Note 3 -
Business Combination), the Company obtained a new credit facility on March 31,
2003 to repay the existing loan and provide funds for the acquisition of Pyramid
Life. This $80 million credit facility consists of a $65 million term loan which
was drawn to fund the acquisition and a $15 million revolving loan facility none
of which has been drawn as of June 30, 2003. The facility calls for interest at
the London Interbank Offering Rate for one, two or three months ("LIBOR"), at
the option of the Company, plus 300 basis points (currently 4.1%). Due to the
variable interest rate for this loan, the Company would be subject to higher
interest costs if short-term interest rates rise. Principal repayments are
scheduled over a five-year period with a final maturity date of March 31, 2008.
The Company incurred loan origination fees of approximately $2.1 million, which
were capitalized and will be amortized on a straight-line basis over the life of
the loan. The Company pays an annual commitment fee of 50 basis points on the
unutilized facility. The obligations of the Company under the new credit
facility are secured by 100% of the common stock of the Company's U.S. insurance
subsidiaries and 65% of the Company's Canadian subsidiary. In addition, the
obligations are guaranteed by CHCS Services Inc. and other direct and indirect
subsidiaries of the Company (collectively the "Guarantors") and secured by all
of the assets of each of the Guarantors.

         In accordance with the Credit Agreement, 50% of the net proceeds from
the $30 million Trust Preferred securities issued in May 2003 were used to pay
down the new term loan. Future scheduled principal payments were reduced as a
result of this paydown, primarily in 2006 and 2007. In July 2003, the Company
made a regularly scheduled principal payment of $2.0 million, During the six
months ended June 30, 2003, the Company paid $0.7 million in interest and fees
in connection with the new credit facility and $1.0 million in connection with
the prior credit facility. During the six months ended June 30, 2002, the
Company paid $0.8 million in connection with the prior credit facility.

                                       15
<PAGE>

         The following table shows the schedule of remaining principal payments
(in thousands) on the Company's new term loan, as of June 30, 2003, with the
final payment in March 2008:

<TABLE>
<S>                           <C>
2003 - Remainder of year      $  6,094
2004                             8,613
2005                             9,919
2006                            10,262
2007                            11,050
2008                             4,062
                              --------
 Total                        $ 50,000
                              ========
</TABLE>

11.      TRUST PREFERRED SECURITIES

         Separate subsidiary trusts of the Company (the "Trusts") have issued a
combined $55.0 million in thirty year trust preferred securities (the "Capital
Securities") as detailed in the following table:

<TABLE>
<CAPTION>
  Maturity            Amount                               Spread       Rate as of
    Date              Issued              Term           Over LIBOR    June 30, 2003
--------------    --------------    -----------------    ----------    -------------
                  (In thousands)
<S>               <C>               <C>                  <C>           <C>
December, 2032       $ 15,000       Fixed/Floating(2)       400            5.3%
March, 2033            10,000       Floating                400            5.3%
May, 2033              15,000       Floating                420            5.5%
May, 2033              15,000       Fixed/Floating          (1)            7.4%
                     --------
                     $ 55,000
                     ========
</TABLE>

(1) The rate on this issue is fixed at 7.4% for the first five years, after
    which it is converted to a floating rate equal to LIBOR plus 410 bps.

(2) On July 1, 2003, Universal American entered into a swap agreement whereby we
    will pay a fixed rate of 6.7% in exchange for the floating rate of LIBOR
    plus 400 bps. The swap contract ends in December 2007.

         The Trust will have the right to call the Capital Securities at par
after five years from the date of issuance. The proceeds from the sale of the
Capital Securities, together with proceeds from the sale by the Trust of its
common securities to the Company, were invested in thirty year floating rate
junior subordinated deferrable interest debentures of the Company (the "Junior
Subordinated Debt"). A portion of the proceeds were used to pay down existing
debt in connection with the acquisition of Pyramid Life (see Note 3 - Business
Combination), with the balance to be held for general corporate purposes.

         The Capital Securities represent an undivided beneficial interest in
the Trust's assets, which consist solely of the Junior Subordinated Debt.
Holders of Capital Securities have no voting rights. The Company owns all of the
common securities of the Trust. Holders of both the Capital Securities and the
Junior Subordinated Debt are entitled to receive cumulative cash distributions
accruing from the date of issuance, and payable quarterly in arrears at a
floating rate equal to the three-month LIBOR plus a spread. The floating rate
resets quarterly and is limited to a maximum of 12.5% during the first sixty
months. Due to the variable interest rate for this security the Company would be
subject to higher interest costs if short-term interest rates rise. The Capital
Securities are subject to mandatory redemption upon repayment of the Junior
Subordinated Debt at maturity or upon earlier redemption. The Junior
Subordinated Debt is unsecured and ranks junior and subordinate in right of
payment to all present and future senior debt of the Company and is effectively
subordinated to all existing and future obligations of the Company's
subsidiaries. The Company has the right to redeem the Junior Subordinated Debt
after five years from the date of issuance.

         The Company has the right at any time, and from time to time, to defer
payments of interest on the Junior Subordinated Debt for a period not exceeding
20 consecutive quarters up to the debentures' maturity date. During any such
period, interest will continue to accrue and the Company may not declare

                                       16
<PAGE>

or pay any cash dividends or distributions on, or purchase, the Company's
capital stock nor make any principal, interest or premium payments on or
repurchase any debt securities that rank equally with or junior to the Junior
Subordinated Debt. The Company will have the right at any time to dissolve the
Trust and cause the Junior Subordinated Debt to be distributed to the holders of
the Capital Securities. The Company has guaranteed, on a subordinated basis, all
of the Trust's obligations under the Capital Securities including payment of the
redemption price and any accumulated and unpaid distributions to the extent of
available funds and upon dissolution, winding up or liquidation but only to the
extent the Trust has funds available to make such payments. The Capital
Securities have not been and will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and will only be offered and sold under
an applicable exemption from registration requirements under the Securities Act.

         During the six months ended June 30, 2003, the Company paid $0.6
million in interest in connection with the trust preferred securities.

12.      STATUTORY CAPITAL AND SURPLUS REQUIREMENTS

         The insurance subsidiaries are required to maintain minimum amounts of
capital and surplus as required by regulatory authorities. Each of the insurance
subsidiaries' statutory capital and surplus exceeds its respective minimum
requirement. However, substantially more than such minimum amounts are needed to
meet statutory and administrative requirements of adequate capital and surplus
to support the current level of the Insurance Subsidiaries' operations. At June
30, 2003, the statutory capital and surplus, including asset valuation reserve,
of the U.S. insurance subsidiaries totaled $110.5 million. Statutory net income
for the six months ended June 30, 2003 was $5.1 million, which included net
realized gains of $0.4 million.

         The National Association of Insurance Commissioners ("NAIC") imposes
regulatory risk-based capital ("RBC") requirements on life insurance
enterprises. At June 30, 2003 all of the Insurance Subsidiaries maintained
ratios of total adjusted capital to RBC in excess of the Authorized Control
Level.

         Penncorp Life (Canada) reports to Canadian regulatory authorities based
upon Canadian statutory accounting principles that vary in some respects from
U.S. statutory accounting principles. Canadian net assets based upon Canadian
statutory accounting principles were C$57.8 million (US$44.4 million) as of June
30, 2003. Penncorp Life (Canada) maintained a Minimum Continuing Capital and
Surplus Requirement Ratio ("MCCSR") in excess of the minimum requirement at June
30, 2003.

13.      BUSINESS SEGMENT INFORMATION

         The Company's principal business segments are: Career Agency, Senior
Market Brokerage and Administrative Services. The Company also reports the
corporate activities of our holding company in a separate segment. A description
of these segments follows:

CAREER AGENCY -- The Career Agency segment is comprised of the operations of
Pennsylvania Life, Penncorp Life (Canada), and, beginning March 31, 2003,
Pyramid Life. Pennsylvania Life and Pyramid Life operate in the United States,
while Penncorp Life (Canada) operates exclusively in Canada. This segment's
products include supplemental senior health insurance, fixed benefit accident
and sickness disability insurance, life insurance and annuities and are
distributed by career agents under contract with either Pennsylvania Life,
Pyramid Life or Penncorp Life (Canada).

SENIOR MARKET BROKERAGE -- This segment includes the operations of our other
insurance subsidiaries, primarily American Pioneer, American Progressive,
Constitution and Union Bankers which distribute senior market products through
non-exclusive general agency and brokerage distribution systems. The products
include Medicare supplement/select, other senior supplemental health (long term
care), senior life insurance and annuities.

ADMINISTRATIVE SERVICES -- CHCS Services, Inc. acts as a third party
administrator and service provider for both affiliated and unaffiliated
insurance companies, primarily with respect to senior market insurance

                                       17
<PAGE>

and non-insurance products. The services provided include policy underwriting
and issuance, telephone and face-to-face verification, policyholder services,
claims adjudication, case management, care assessment and referral to health
care facilities.

CORPORATE -- This segment reflects the activities of our holding company,
including the payment of interest on our debt, certain senior executive
compensation, and the expense of being a public company.

         Intersegment revenues and expenses are reported on a gross basis in
each of the operating segments but eliminated in the consolidated results. These
intersegment revenues and expenses affect the amounts reported on the individual
financial statement line items, but are eliminated in consolidation and do not
change operating income before taxes. The significant items eliminated include
intersegment revenue and expense relating to services performed by the
Administrative Services segment for the Career Agency and Senior Market
Brokerage segments and interest on notes issued by the Corporate segment to the
other operating segments.

Financial results by segment are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,               2003                        2002
------------------------------   -------------------------    ------------------------
                                                 Segment                     Segment
                                              Income (Loss)               Income (Loss)
                                  Segment        Before       Segment        Before
                                  Revenue     Income Taxes    Revenue     Income Taxes
                                 ---------    ------------    --------    ------------
                                                      (In thousands)
<S>                              <C>          <C>             <C>         <C>
Career Agency                    $  73,801     $    9,720     $ 40,024     $   7,758
Senior Market Brokerage             63,448          5,352       40,167         3,091
Administrative Services             11,499          2,632       10,016         1,800
                                 ---------     ----------     --------     ---------
 Subtotal                          148,748         17,704       90,207        12,649
Corporate                               30         (2,244)           3        (1,576)
Intersegment revenues               (8,897)             -       (6,920)            -
                                 ---------     ----------     --------     ---------
 Segment operating total (1)       139,881         15,460       83,290        11,073
Adjustments to segment total
 Net realized gains (1)              1,185          1,185       (6,600)       (6,600)
                                 ---------     ----------     --------     ---------

Total                            $ 141,066     $   16,645     $ 76,690     $   4,473
                                 =========     ==========     ========     =========
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,                 2003                        2002
-----------------------------    -------------------------    ------------------------
                                                 Segment                     Segment
                                              Income (Loss)               Income (Loss)
                                  Segment        Before       Segment        Before
                                  Revenue     Income Taxes    Revenue     Income Taxes
                                 ---------    ------------    --------    ------------
                                                      (In thousands)
<S>                              <C>          <C>             <C>         <C>
Career Agency                    $ 115,140     $   19,190     $ 79,788     $  14,965
Senior Market Brokerage            115,912          8,408       79,843         7,246
Administrative Services             24,308          5,197       19,712         3,676
                                 ---------     ----------     --------     ---------
 Subtotal                          255,360         32,795      179,343        25,887
Corporate                               70         (5,794)         222        (3,332)
Intersegment revenues              (17,746)             -      (14,252)            -
                                 ---------     ----------     --------     ---------
 Segment operating total (1)       237,684         27,001      165,313        22,555
Adjustments to segment total
 Net realized gains (1)              1,295          1,295       (6,457)       (6,457)
                                 ---------     ----------     --------     ---------

Total                            $ 238,979     $   28,296     $158,856     $  16,098
                                 =========     ==========     ========     =========
</TABLE>

                                       18
<PAGE>

(1)  We evaluate the results of operations of our segments based on operating
     income by segment. Operating revenue and income excludes realized gains and
     losses. This differs from generally accepted accounting principles, which
     includes the effect of realized gains and losses in the determination of
     total revenue and net income. Management believes that realized gains and
     losses are not indicative of overall operating trends. The schedule above
     reconciles our segment revenue to total revenue and operating income to net
     income in accordance with generally accepted accounting principles.

Identifiable assets by segment are as follows:

<TABLE>
<CAPTION>
                               JUNE 30,      DECEMBER 31,
                                 2003            2002
                              ----------     ------------
                                    (In thousands)
<S>                           <C>            <C>
Career Agency                 $  870,182      $  683,720
Senior Market Brokerage          729,917         707,967
Administrative Services           18,051          19,332
                              ----------      ----------
 Subtotal                      1,618,150       1,411,019
Corporate                        453,678         375,219
Intersegment assets (1)         (417,642)       (384,570)
                              ----------      ----------

Total Assets                  $1,654,186      $1,401,668
                              ==========      ==========
</TABLE>

(1)  Intersegment assets include the elimination of the parent holding company's
     investment in its subsidiaries as well as the elimination of other
     intercompany balances.

14.      FOREIGN OPERATIONS

         A portion of the operations of the Company's Career Agency segment is
conducted in Canada through Penncorp Life (Canada). These assets and liabilities
are located in Canada where the insurance risks are written. Revenues, excluding
capital gains, of the Career Agency segment by geographic area are as follows:

<TABLE>
<CAPTION>
                    THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                    ---------------------------    -------------------------
                      2003              2002         2003            2002
                    ---------        ----------    ---------       ---------
                     (In thousands, in US$'s)       (In thousands, in US$'s)
<S>                 <C>               <C>          <C>             <C>
Revenues
 United States      $  57,832         $  26,134    $  84,073       $  52,156
 Canada                15,969            13,890       31,067          27,632
                    ---------         ---------    ---------       ---------
  Total             $  73,801         $  40,024    $ 115,140       $  79,788
                    =========         =========    =========       =========
</TABLE>

         Total assets and liabilities of Penncorp Life (Canada), which are
located entirely in Canada, are as follows:

<TABLE>
<CAPTION>
                    JUNE 30,         DECEMBER 31,
                      2003               2002
                    ---------        ------------
                      (In thousands, in US$'s)
<S>                 <C>              <C>
Assets              $ 215,199         $  175,365
                    =========         ==========
Liabilities         $ 150,697         $  124,843
                    =========         ==========
</TABLE>

15.      SUBSEQUENT EVENT

         Effective July 1, 2003, Universal American entered into an agreement
with Swiss Re and its newly acquired subsidiary, Guarantee Reserve Life
Insurance Company ("Guarantee Reserve"), to acquire Guarantee Reserve's
marketing organization (including all rights to do business with its field
force), to reinsure all future life insurance business on a 50% quota share
basis and to reinsure a portion of the existing accident and health business. In
addition, Universal American will perform the administration of this business,
beginning July 1, 2003.

                                       19
<PAGE>

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

FORWARD LOOKING STATEMENTS

         Certain statements in this report or incorporated by reference into
this report and oral statements made from time to time by our representatives
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
statements not based on historical information. They relate to future
operations, strategies, financial results or other developments. In particular,
statements using verbs such as "expect," "anticipate," "believe" or similar
words generally involve forward-looking statements. Forward-looking statements
include statements about development and distribution of our products,
investment spreads or yields, the impact of proposed or completed acquisitions,
the adequacy of reserves or the earnings or profitability of our activities.
Forward-looking statements are based upon estimates and assumptions that are
subject to significant business, economic and competitive uncertainties, many of
which are beyond our control and are subject to change. These uncertainties can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements. Whether or not actual results
differ materially from forward-looking statements may depend on numerous
foreseeable and unforeseeable risks and uncertainties, some of which relate
particularly to our business, such as our ability to set adequate premium rates
and maintain adequate reserves, our ability to compete effectively and our
ability to grow our business through internal growth as well as through
acquisitions. Other risks and uncertainties may be related to the insurance
industry generally or the overall economy, such as regulatory developments,
industry consolidation and general economic conditions and interest rates. We
disclaim any obligation to update forward-looking statements.

INTRODUCTION

         The following discussion and analysis presents a review of Universal
American and its subsidiaries as of June 30, 2003 and December 31, 2002 and its
results of operations for the three months and six months ended June 30, 2003
and 2002. This Management's Discussion and Analysis of Financial Condition and
Results of Operation should be read in conjunction with the consolidated
financial statements as well as the MD&A included in the Company's 2002 Annual
Report on Form 10-K.

         We own ten insurance companies (collectively, the "Insurance
Subsidiaries"): American Progressive Life & Health Insurance Company of New York
("American Progressive"), American Pioneer Life Insurance Company ("American
Pioneer"), American Exchange Life Insurance Company ("American Exchange"),
Constitution Life Insurance Company ("Constitution"), Marquette National Life
Insurance Company ("Marquette"), Peninsular Life Insurance Company
("Peninsular"), Pennsylvania Life Insurance Company ("Pennsylvania Life"),
Penncorp Life Insurance Company ("Penncorp Life (Canada)"), Pyramid Life
Insurance Company ("Pyramid Life") and Union Bankers Insurance Company ("Union
Bankers"). Collectively, the insurance company subsidiaries are licensed to sell
life and accident and health insurance in all fifty states, the District of
Columbia and all the provinces of Canada. In addition to the Insurance
Subsidiaries, we own a third party administrator, CHCS Services, Inc., that
administers senior market business for more than 40 unaffiliated insurance
companies, and also administers such business for our own companies. Pyramid
Life was acquired on March 31, 2003 and its operating results prior to the date
of acquisition are not included in Universal American's consolidated results of
operations.

OVERVIEW

         Our principal business segments are: Career Agency, Senior Market
Brokerage and Administrative Services. We also report the corporate activities
of our holding company in a separate segment. A description of these segments
follows:

                                       20
<PAGE>

CAREER AGENCY -- The Career Agency segment is comprised of the operations of
Pennsylvania Life, Penncorp Life (Canada), and, beginning March 31, 2003,
Pyramid Life.. Pennsylvania Life and Pyramid Life operate in the United States,
while Penncorp Life (Canada) operates exclusively in Canada. This segment's
products include supplemental senior health insurance, fixed benefit accident
and sickness disability insurance, life insurance, and annuities and are
distributed by career agents who are under contract with Pennsylvania Life,
Pyramid Life or Penncorp Life (Canada).

SENIOR MARKET BROKERAGE -- This segment includes the operations of our other
insurance subsidiaries, primarily American Pioneer, American Progressive,
Constitution and Union Bankers that distribute senior market products through
non-exclusive general agency and brokerage distribution systems. The products
include Medicare supplement/select, other senior supplemental health (long term
care), senior life insurance and annuities.

ADMINISTRATIVE SERVICES -- CHCS Services, Inc. acts as a third party
administrator and service provider for both affiliated and unaffiliated
insurance companies, primarily with respect to senior market insurance and
non-insurance products. The services provided include policy underwriting and
issuance, telephone and face-to-face verification, policyholder services, claims
adjudication, case management, care assessment and referral to health care
facilities.

CORPORATE -- This segment reflects the activities of our holding company,
including the payment of interest on our debt, certain senior executive
compensation, and the expense of being a public company.

         Intersegment revenues and expenses are reported on a gross basis in
each of the operating segments. These intersegment revenue and expenses affect
the amounts reported on the individual financial statement line items, but are
eliminated in consolidation and do not change operating income before taxes. The
significant items eliminated include intersegment revenue and expense relating
to services performed by the Administrative Services segment for the Career
Agency and Senior Market Brokerage segments and interest on notes issued by the
Corporate segment to the other operating segments.

CRITICAL ACCOUNTING POLICIES

         Our consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of our financial statements in conformity with GAAP requires us to
make estimates and assumptions that affect the amounts of assets and liabilities
and disclosures of assets and liabilities reported by us at the date of the
financial statements and the revenues and expenses reported during the reporting
period. As additional information becomes available or actual amounts become
determinable, the recorded estimates may be revised and reflected in operating
results. Actual results could differ from those estimates. Accounts that, in our
judgment, are most critical to the preparation of our financial statements
include policy liabilities and accruals, deferred policy acquisition costs,
valuation of certain investments, intangible assets and deferred taxes. There
have been no changes in our critical accounting policies during 2003. Refer to
"Critical Accounting Policies" in the Company's 2002 Annual Report on Form 10-K
for information on accounting policies that the Company considers critical in
preparing its consolidated financial statements.

SIGNIFICANT TRANSACTIONS

         Acquisition of Marketing Organization

         Effective July 1, 2003, Universal American entered into an agreement
with Swiss Re and its newly acquired subsidiary, Guarantee Reserve Life
Insurance Company ("Guarantee Reserve"), to acquire Guarantee Reserve's
marketing organization (including all rights to do business with its field
force), to reinsure all future life insurance business on a 50% quota share
basis and to reinsure a portion of the existing accident and health business. In
addition, Universal American will perform the administration of this business,
beginning July 1, 2003.

                                       21
<PAGE>

         Reinsurance Recapture

         Effective April 1, 2003, American Pioneer entered into agreements to
recapture approximately $48 million of Medicare supplement business that had
been reinsured to Transamerica Occidental Life Insurance Company, Reinsurance
Division ("TARe") under two quota share contracts. In 1996, American Pioneer
entered into two reinsurance treaties with TARe. Pursuant to the first of these
contracts American Pioneer ceded to TARe 90% of approximately $50 million of
annualized premium then currently in force that it acquired from First National
Life Insurance Company in 1996. Under the second contract, as subsequently
amended, American Pioneer agreed to cede to TARe 75% of certain new business
from October 1996 through December 31, 2000. As of April 1, 2003, approximately
$27 remained ceded under the First National treaty and approximately $16 million
remained ceded under the new business treaty.

         As part of an effort to exit certain non-core lines of business In
2002, TARe approached the Company in 2002 to determine our interest in
recapturing the two treaties. Under the terms of the recapture agreements, TARe
transferred approximately $18 million in cash to American Pioneer to cover the
statutory reserves recaptured by American Pioneer. No ceding allowance was paid
by American Pioneer in the recapture and American Pioneer currently retains 100%
of the risks on the $48 million of Medicare supplement business. There was no
gain or loss reported on the recapture of these agreements.

         Pyramid Life Acquisition

         On March 31, 2003, Universal American acquired all of the outstanding
common stock of Pyramid Life. Pyramid Life specializes in selling health and
life insurance products to the senior market, including Medicare supplement,
long term care, life insurance, and annuities. Pyramid Life markets its products
in 26 states through a career agency sales force of over 1,100 agents operating
out of 33 Senior Solutions Sales Centers. As of the closing, Pyramid Life had
approximately $120 million of premium in force. In the Pyramid Life acquisition
the Company acquired a block of in-force business that the Company believes will
be profitable, as well as a career sales force that is skilled in selling the
same type of senior market insurance products that are currently sold by
Universal American. During 2002, Pyramid Life agents produced more than $25
million of annualized new sales. We believe this acquisition will add further
scale and efficiencies to our operations in the senior market. Following a
transition period that we estimate will take one year, the Pyramid Life business
will be administered in our cost-effective and efficient service center.
Operating results generated by Pyramid Life prior to the date of acquisition are
not included in Universal American's consolidated financial statements. Refer to
Consolidated Financial Statements Note 3 - Business Combinations for additional
information on the acquisition.

         Debt Refinancing

         In connection with the acquisition of Pyramid Life (see Consolidated
Financial Statements Note 3 - Business Combination), the Company refinanced its
existing credit facility. On March 31, 2003, the Company entered into an $80
million credit facility consisting of a $65 million term loan and a $15 million
revolving loan facility. None of the revolving loan facility was drawn as of
June 30, 2003 (Refer to Consolidated Financial Statement Note 8 - Debt
Refinancing). The Company used the proceeds from the new term loan to repay the
balance outstanding on its existing term loan. The early extinguishment of the
existing debt resulted in the immediate amortization of the capitalized loan
origination fees relating to that debt, resulting in a pre-tax expense of
approximately $1.8 million. In June 2003 a portion ($15.0 million) of the
proceeds from Trust preferred issuances were used to reduce the balance of the
term loan to $50.0 million.

                                       22
<PAGE>

         Trust Preferred Issuances

         During the six months ended June 30, 2003, the Company issued $40.0
million of fixed and floating rate trust preferred securities through subsidiary
trusts, bringing the total outstanding to $55.0 million. These securities have
terms similar to those issued in December 2002. A portion of the proceeds was
used to repay our existing debt and the balance was retained at the parent
company for general corporate purposes (for more detailed information, see
Consolidated Financial Statements Note 9 - Trust Preferred Securities).

         Acquisition of Block of Business

         In November 2002 we entered into an agreement with Nationwide Life
Insurance Company ("Nationwide") to acquire, through a 100% quota share
reinsurance agreement, Nationwide's individual Medicare supplement policies
representing approximately $20.0 million of annualized premium in force. In
connection with this transaction, administration of the business was transferred
to CHCS Services, Inc.

RESULTS OF OPERATIONS - CONSOLIDATED OVERVIEW

         The following table reflects each of our segments' operating income(1)
and contains a reconciliation to reported net income:

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED      SIX MONTHS ENDED
                                                    JUNE 30,              JUNE 30,
                                              -------------------    -------------------
                                                2003       2002       2003        2002
                                              --------    -------    -------    --------
                                                            (In thousands)
<S>                                           <C>         <C>        <C>        <C>
Segment Operating Income (1):
 Career Agency                                $  9,720    $ 7,758    $19,190    $ 14,965
 Senior Market Brokerage                         5,352      3,091      8,408       7,246
 Administrative Services                         2,632      1,800      5,197       3,676

Corporate & Eliminations                        (2,244)    (1,576)    (5,794)     (3,332)

Realized gains (losses) on investments           1,185     (6,600)     1,295      (6,457)
                                              --------    -------    -------    --------

Income before taxes                             16,645      4,473     28,296      16,098

Income taxes (2)                                 5,645      1,155      9,748       5,282
                                              --------    -------    -------    --------

Net income                                    $ 11,000    $ 3,318    $18,548    $ 10,816
                                              ========    =======    =======    ========

Per share data (diluted):
Net income                                    $   0.20    $  0.06    $  0.34    $   0.20
                                              ========    =======    =======    ========
</TABLE>

(1) We evaluate the results of operations of our segments based on operating
     income by segment. Operating income at the segment level excludes realized
     gains and losses. This differs from generally accepted accounting
     principles, which includes the effect of realized gains and losses in the
     determination of net income. Management believes that realized gains and
     losses are not indicative of overall operating trends at the segment level.
     The schedule above reconciles our segment operating income to net income in
     accordance with generally accepted accounting principles.

(2) The effective tax rates were 33.9% and 25.8% for the quarters ended June 30,
     2003 and 2002, respectively and 34.5% and 32.8% for the six months ended
     June 30, 2003 and 2002, respectively.

Three months ended June 30, 2003 and 2002

         Net income for the second quarter of 2003 increased by $7.7 million to
$11.0 million compared to the second quarter months of 2002. During the second
quarter of 2003, we recognized realized gains of $1.2 million compared to
realized losses of $6.6 million in 2002. The difference in realized gains, net
of tax, represents $5.1 million of the $7.7 million increase noted above. The
losses in 2002 were primarily as a result of the impairment of our WorldCom
holdings.

                                       23
<PAGE>

         Operating results for the Career Agency segment improved by $2.0
million, or 24%, to $9.7 million in the second quarter of 2003 compared to the
second quarter of 2002, primarily as a result of the acquisition of Pyramid.

         Operating results for the Senior Market Brokerage segment increased by
$2.3 million, or 73%, to $5.4 million compared to the second quarter of 2002,
primarily as a result of improved loss ratios for our Medicare supplement
business.

         Operating income for the Administrative Services segment improved by
$0.8 million, or 46%, compared to the second quarter of 2002. This improvement
is primarily a result of growth in premiums managed and the scheduled reduction
in the amortization of the present value of future profits ("PVFP"). Earnings
before interest, taxes, depreciation and amortization ("EBITDA") for this
segment increased $0.6 million, or 25%, compared to the second quarter of 2002.

         The operating loss from the Corporate segment increased by $0.7
million, or 43%, compared to the second quarter of 2002, due primarily to the
increase in financing costs. In connection with the acquisition of Pyramid, we
refinanced our debt and we issued trust preferred securities. Our combined
outstanding debt was $105 million at June 30, 2003 compared to $56 million at
June 30, 2002. See Liquidity section for additional details.

Six months ended June 30, 2003 and 2002

         Net income for the first six months of 2003 increased by $7.7 million
to $18.5 million compared to the first six months of 2002. During the six months
ended June 30, 2003, we recognized realized gains of $1.3 million compared to
realized losses of $6.5 million in 2002. The difference in realized gains, net
of tax, represents $5.0 million of the $7.7 million increase noted above. The
losses in 2002 were primarily a result of the impairment of our WorldCom
holdings.

         In connection with the acquisition of Pyramid Life, we refinanced our
credit facility. As a result of the repayment of our existing debt, we were
required to write off the unamortized portion of the fees we incurred for that
debt. This resulted in a non-cash charge of $1.8 million (the "financing
charge"), which is included in the operating loss of the Corporate segment.

         Operating results for the Career Agency segment improved by $4.2
million, or 28%, to $19.2 million in the first six months of 2003 compared to
the first six months of 2002, primarily as a result of the acquisition of
Pyramid, as well as the improvement in loss ratios from our Canadian business.

         The Senior Market Brokerage segment improved its operating results by
$1.2 million, or 16%, to $8.4 million compared to the first six months of 2002.
This improvement is the result of the increase in our net retained business and
improvement in our Medicare supplement/select loss ratios. However, this was
partially offset by an increase in claims, during the first quarter of 2003
relating to the discontinued block of Florida home health care policies.

         Operating income for the Administrative Services segment improved by
$1.5 million, or 41%, compared to the first six months of 2002. This improvement
is primarily a result of growth in premiums managed, the increase in fees for
underwriting of long term care policies for third party clients and the
scheduled reduction in the amortization of the PVFP. EBITDA for this segment
increased $1.1 million, or 22%, compared to the first six months of 2002.

         The operating loss from the Corporate segment increased by $2.4
million, or 73%, compared to the first six months of 2002, due primarily to the
financing charge, as noted above, as well as an overall increase in financing
costs.

                                       24
<PAGE>

SEGMENT RESULTS - CAREER AGENCY

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED       SIX MONTHS ENDED
                                                              JUNE 30,               JUNE 30,
                                                        -------------------    --------------------
                                                          2003       2002        2003        2002
                                                          ----       ----        ----        ----
                                                                      (In thousands)
<S>                                                     <C>         <C>        <C>         <C>
Net premiums and policyholder fees:
 Life and annuity                                       $  8,254    $ 3,589    $ 12,123    $  7,334
 Accident & health                                        55,870     27,923      84,699      55,718
                                                        --------    -------    --------    --------
 Net premiums                                             64,124     31,512      96,822      63,052
Net investment income                                      9,589      8,343      18,116      16,487
Other income                                                  88        169         202         249
                                                        --------    -------    --------    --------
 Total revenue                                            73,801     40,024     115,140      79,788
                                                        --------    -------    --------    --------

Policyholder benefits                                     43,899     19,912      63,409      40,094
Interest credited to policyholders                         1,318        671       2,381       1,307
Change in deferred acquisition costs                      (6,114)    (3,781)    (10,734)     (7,008)
Amortization of present value of future profits              848          -         848           -
Commissions and general expenses, net of allowances       24,130     15,464      40,046      30,430
                                                        --------    -------    --------    --------
 Total benefits, claims and other deductions              64,081     32,266      95,950      64,823
                                                        --------    -------    --------    --------

 Segment operating income                               $  9,720    $ 7,758    $ 19,190    $ 14,965
                                                        ========    =======    ========    ========
</TABLE>

Three months ended June 30, 2003 and 2002

         Pre-tax operating results for the Career Agency segment improved by
$2.0 million, or 24%, to $9.7 million in the second quarter of 2003 compared to
the second quarter of 2002, primarily as a result of the acquisition of Pyramid
Life.

         REVENUES. Net premiums for the quarter increased by $32.6 million, or
104%, to $64.1 million for the segment compared to the second quarter of 2002.
Pyramid Life added $31.7 million during the current quarter. Canadian premiums
accounted for approximately 21% of the net premiums of this segment for the
second quarter of 2003 and 35% of the net premiums for the second quarter of
2002. Net Canadian premiums increased approximately $1.6 million, however, the
percentage of Canadian premiums dropped as a result of the premiums added from
the Pyramid Life business. The Career agents also sold $15.7 million of fixed
annuities during the second quarter of 2003, compared to $5.5 million in 2002.
Annuity deposits are not reported as premiums for GAAP.

         Net investment income increased by approximately $1.2 million, or 15%,
compared to the second quarter of 2002. The increase is due to an increase in
the segment's invested assets from the acquisition of Pyramid Life, as well as
the increase in the sale of annuities, offset by a decrease in overall
investment yields.

         BENEFITS, CLAIMS AND OTHER DEDUCTIONS. Policyholder benefits, including
the change in reserves, increased by $24.0 million compared to the second
quarter of 2002. Pyramid Life added $22.9 million during the current quarter.
The balance of the increase relates to an increase in the loss ratios for the
U.S. disability business. Interest credited increased by $0.6 million, due to
the increase in annuity balances as a result of the continued strong sales.

         The increase in deferred acquisition costs was approximately $2.3
million more in the second quarter of 2003, compared to the increase in the
second quarter of 2002. This is directly related to the increase in the new
business added by Pyramid Life, as well as continued strong sales of annuities
generated by the segment during 2003.

         The amortization expense relates to the intangibles acquired in the
Pyramid Life transaction.

         Commissions and general expenses increased by approximately $8.7
million, or 56%, in the second quarter of 2003 compared to 2002. The increase
relates primarily the Pyramid Life business.

                                       25
<PAGE>

Six months ended June 30, 2003 and 2002

         Pre-tax operating results for the Career Agency segment improved by
$4.2 million, or 28%, to $19.2 million in the first six months of 2003 compared
to the first six months of 2002, primarily as a result of the acquisition of
Pyramid Life, as well as improvement in loss ratios from our Canadian business.

         REVENUES. Net premiums for the period increased by approximately $33.8
million, or 54%, for the segment compared to the first six months of 2002,
primarily as a result of the premiums from the Pyramid Life business. Canadian
premiums accounted for approximately 28% of the net premiums of this segment for
the first six months of 2003 and 35% of the net premiums for the first six
months of 2002. Net Canadian premiums increased approximately $2.7 million,
however, the percentage of Canadian premiums dropped as a result of the premiums
added from the Pyramid Life business. The Career agents also sold $32.2 million
of fixed annuities during the first six months of 2003, compared to $10.0
million in 2002. Annuity deposits are not reported as premiums for GAAP.

         Net investment income increased by approximately $1.6 million, or 10%,
compared to the first six months of 2002. The increase is due to an increase in
the segment's invested assets from the acquisition of Pyramid Life, as well as
the increase in the sale of annuities, offset by a decrease in overall
investment yields.

         BENEFITS, CLAIMS AND OTHER DEDUCTIONS. Policyholder benefits, including
the change in reserves, increased by $23.3 million, or 58% compared to the first
six months of 2002. The increase relates primarily to the Pyramid Life business
added in 2003. Interest credited increased by $1.1 million, due to the increase
in annuity balances as a result of the continued strong sales.

         The increase in deferred acquisition costs was approximately $3.7
million more in the first six months of 2003, compared to the increase in the
first six months of 2002. This is directly related to the increase in the new
business added by Pyramid Life, as well as continued strong sales of annuities
generated by the segment during 2003.

         Commissions and general expenses increased by approximately $9.6
million, or 32%, in the first six months of 2003 compared to 2002. The increase
relates primarily to the Pyramid Life business, as well as the increase in new
business.

SEGMENT RESULTS - SENIOR MARKET BROKERAGE

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED       SIX MONTHS ENDED
                                                              JUNE 30,               JUNE 30,
                                                        -------------------    --------------------
                                                          2003       2002        2003        2002
                                                          ----       ----        ----        ----
                                                                      (In thousands)
<S>                                                     <C>         <C>        <C>         <C>
Net premiums and policyholder fees:
 Life and annuity                                       $  5,004    $ 4,936    $  9,249    $  9,538
 Accident & health                                        52,482     29,203      94,725      57,973
                                                        --------    -------    --------    --------
 Net premiums                                             57,486     34,139     103,974      67,511
Net investment income                                      5,866      5,980      11,773      12,107
Other income                                                  96         48         165         225
                                                        --------    -------    --------    --------
 Total revenue                                            63,448     40,167     115,912      79,843
                                                        --------    -------    --------    --------

Policyholder benefits                                     42,571     26,689      78,867      51,723
Interest credited to policyholders                         2,105      1,935       4,174       3,906
Change in deferred acquisition costs                      (4,943)    (3,143)     (8,574)     (5,848)
Amortization of present value of future profits              138         32         171          75
Commissions and general expenses, net of allowances       18,225     11,563      32,866      22,741
                                                        --------    -------    --------    --------
 Total benefits, claims and other deductions              58,096     37,076     107,504      72,597
                                                        --------    -------    --------    --------

 Segment operating income                               $  5,352    $ 3,091    $  8,408    $  7,246
                                                        ========    =======    ========    ========
</TABLE>

                                       26
<PAGE>

         The table below details the gross premiums and policyholder fees before
reinsurance for the major product lines in the Senior Market Brokerage segment
and the corresponding average amount of premium retained. We reinsure a
substantial portion of all of our Senior Market Brokerage products to
unaffiliated third party reinsurers under various quota share agreements.
Medicare supplement/select written premium is reinsured under quota share
reinsurance agreements ranging between 25% and 75% based upon the geographic
distribution. We have also acquired various blocks of Medicare supplement
premium, which we reinsure under quota share reinsurance agreements ranging from
50% to 100%. Under our reinsurance agreements, we reinsure the claims incurred
and commissions on a pro rata basis and receive additional expense allowances
for policy issue, administration and premium taxes. In 2002 and 2003, we
increased our retention on Medicare supplement new business, causing the
percentage of net retained premium to increase as seen below. Additionally, the
recapture of the TARe treaties, effective April 1, 2003, increased the net
retained premium.

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED JUNE 30,
                                         ------------------------------------------
                                                 2003                  2002
                                          GROSS        NET       GROSS       NET
                                         PREMIUMS    RETAINED   PREMIUMS   RETAINED
                                         ---------   --------   --------   --------
                                                     (In thousands)
<S>                                      <C>         <C>        <C>        <C>
Medicare supplement acquired             $  42,649      41%     $ 35,870      4%
Medicare supplement/select written          63,415      47%       59,930     38%
Other senior supplemental health             6,769      60%        6,328     59%
Other health                                 3,024      41%        3,619     45%
Senior life insurance                        3,478      70%        3,275     73%
Other life                                   3,363      65%        3,199     69%
                                         ---------              --------
Total gross premiums                     $ 122,698      47%     $112,223     30%
                                         =========              ========
</TABLE>

<TABLE>
<CAPTION>
                                                 SIX MONTHS ENDED JUNE 30,
                                         ------------------------------------------
                                                 2003                  2002
                                          GROSS        NET       GROSS       NET
                                         PREMIUMS    RETAINED   PREMIUMS   RETAINED
                                         ---------   --------   --------   --------
                                                     (In thousands)
<S>                                      <C>         <C>        <C>        <C>
Medicare supplement acquired             $  87,670      33%     $ 75,310      6%
Medicare supplement/select written         130,000      43%      120,058     36%
Other senior supplemental health            13,263      60%       12,415     60%
Other health                                 5,728      43%        7,069     48%
Senior life insurance                        6,070      65%        5,552     71%
Other life                                   6,864      77%        7,225     76%
                                         ---------              --------
Total gross premiums                     $ 249,595      42%     $227,629     30%
                                         =========              ========
</TABLE>

Three months ended June 30, 2003 and 2002

         Operating results for the Senior Market Brokerage segment increased by
$2.3 million, or 73%, to $5.4 million compared to the second quarter of 2002.

         REVENUES. Gross premium written for the Senior Market portfolio
products have increased $10.5 million, or 9%, over the second quarter of 2002.
The increase in gross premium includes a $3.5 million, or 6%, increase in
Medicare supplement/select written, as a result of continued new sales, rate
increases and better than assumed persistency. Medicare supplement acquired
increased by $6.8 million, or 19%, due primarily to the premiums from the
Nationwide block of business acquired in November 2002. These increases are
offset by a decrease of $0.6 million in other health premium, primarily as a
result of anticipated lapsation.

         Net premiums for the second quarter of 2003 increased by approximately
$23.3 million, or 68%, to $57.5 million compared to 2002. Net premiums grew
faster than gross premiums as a result of the recapture of the TARe treaties,
the acquisition of the Nationwide business, and our decision to reinsure

                                       27
<PAGE>

less premium and retain more risk. As a result, the net amount of premium
retained increased from 30% in 2002 to 47% in 2003.

         Net investment income decreased by $0.1 million compared to the second
quarter of 2002. Although we increased the segment's invested assets, net
investment income decreased due to an overall decline in reinvestment yields.

         BENEFITS, CLAIMS AND OTHER DEDUCTIONS. Policyholder benefits, including
the change in reserves, increased by approximately $15.9 million, or 60%, to
$42.6 million compared to the second quarter of 2002. The increase is due
primarily to the increase in our net retained business as a result of the
recapture of the TARe treaties, our acquisition of the Nationwide block of
business and the increase in our net retained premium. However, during the
second quarter of 2003, loss ratios on our Medicare supplement business improved
from 71.9% in the second quarter of 2002 to 70.0% in the second quarter of 2003.
In addition, we continued to see improvement in the results of the discontinued
Florida home healthcare block of business.

         Interest credited increased by $0.2 million due to the increase in
annuity balances as a result of strong sales of annuities.

         The increase in deferred acquisition costs in the second quarter of
2003 was approximately $1.8 million more than in the second quarter of 2002. The
increase relates primarily to our higher retention on new business.

         Commissions and other operating expenses increased by approximately
$6.7 million, or 58%, in the second quarter of 2003 compared to 2002. The
following table details the components of commission and other operating
expenses:

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,                               2003        2002
---------------------------                             --------    --------
                                                           (In thousands)
<S>                                                     <C>         <C>
Commissions                                             $ 20,641    $ 20,355
Other operating costs                                     14,824      15,159
Reinsurance allowances                                   (17,240)    (23,951)
                                                        --------    --------

Commissions and general expenses, net of allowances     $ 18,225    $ 11,563
                                                        ========    ========
</TABLE>

         The ratio of commissions to gross premiums decreased to 16.8% during
the second quarter of 2003, from 18.1% in 2002, as a result of the growth in the
in force renewal premium from better persistency and rate increases. Other
operating costs as a percentage of gross premiums decreased to 12.1% during the
second quarter of 2003 compared to 13.5% in 2002. Commission and expense
allowances received from reinsurers as a percentage of the premiums ceded also
decreased to 26.4% during the second quarter of 2003 compared to 30.6% in 2002,
primarily due to the reduction in new business ceded, the recapture of the TARe
treaties, and the affects of normal lower commission allowances on a growing
base of renewal ceded business.

Six months ended June 30, 2003 and 2002

         The Senior Market Brokerage segment improved its operating results by
$1.2 million, or 16%, to $8.4 million compared to the first six months of 2002.
This improvement is the result of the increase in our net retained business and
improvement in our Medicare supplement/select loss ratios. However, this was
partially offset by an increase in claims, during the first quarter of 2003,
compared to the first quarter of 2002, relating to the discontinued block of
Florida home health care policies.

         REVENUES. Gross premium written increased $22.0 million, or 10%, to
$250.0 million over the first six months of 2002. The increase in gross premium
written over the first six months of 2002 was primarily due to an 8%, or $9.9
million increase, on Medicare supplement/select business written by the
Insurance Subsidiaries as a result of continued new sales, rate increases and
better than assumed

                                       28
<PAGE>

persistency. The increase was partially offset by excess lapsation of a block of
Connecticut Medicare supplement business in the first quarter of 2003. Medicare
supplement acquired premiums increased by $12.4 million, or 16%, due primarily
to the premiums from the Nationwide block of business assumed, beginning in
November 2002. We also experienced a 7%, or $0.8 million, increase in other
senior supplemental health premium and a 9%, or $0.5 million, increase in senior
life insurance premium. These increases are offset by a decrease of $1.3 million
in other health premium, primarily as a result of anticipated lapsation.

         Net premiums for the first six months of 2003 increased by
approximately $36.5 million, or 54%, compared to 2002. Net premiums grew faster
than gross premiums as a result of the recapture of the TARe treaties, the
acquisition of the Nationwide business, and our decision to reinsure less
premium and retain more risk. As a result, the net amount of premium retained
increased from 30% in 2002 to 42% in 2003.

         Net investment income decreased by $0.3 million compared to the first
six months of 2002. Although we increased the segment's invested assets, net
investment income decreased due to an overall decline in reinvestment yields.

         BENEFITS, CLAIMS AND OTHER DEDUCTIONS. Policyholder benefits, including
the change in reserves, increased by approximately $27.1 million, or 52%,
compared to the first six months of 2002. The increase is due primarily to the
increase in our net retained business as a result of the recapture of the TARe
treaties, our acquisition of the Nationwide block of business and the increase
in our net retained premium. Additionally, we experienced an increase in losses
on the discontinued Florida home healthcare block of business over the first six
months of 2002, as well as favorable experience and reserve development on
certain runoff blocks of business in the first quarter of 2002 that did not
repeat in 2003. However, during the first six months of 2003, loss ratios on our
Medicare supplement business improved from 73.6% in the first six months of 2002
to 71.3% in 2003.

         Interest credited to policyholders increased by $0.3 million due to the
increase in annuity balances as a result of strong sales of annuities.

         The increase in deferred acquisition costs was approximately $2.7
million more in the first six months of 2003, compared to the increase in the
first six months of 2002. The increase relates primarily to our higher retention
on new business and was offset by the accelerated amortization of the deferred
costs relating to the excess lapsation on the block of Connecticut Medicare
supplement policies.

         Commissions and other operating expenses increased by approximately
$10.1 million, or 45%, in the first six months of 2003 compared to 2002. The
following table details the components of commission and other operating
expenses:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,                                 2003        2002
-------------------------                               --------    --------
                                                           (In thousands)
<S>                                                     <C>         <C>
Commissions                                             $ 41,546    $ 40,580
Other operating costs                                     30,298      30,211
Reinsurance allowances                                   (38,978)    (48,050)
                                                        --------    --------

Commissions and general expenses, net of allowances     $ 32,866    $ 22,741
                                                        ========    ========
</TABLE>

         The ratio of commissions to gross premiums decreased to 16.6% during
the first six months of 2003, from 17.8% in 2002, as a result of the growth in
the in force renewal premium from better persistency and rate increases. Other
operating costs as a percentage of gross premiums decreased to 12.1% during the
first six months of 2003 compared to 13.3% in 2002. Commission and expense
allowances received from reinsurers as a percentage of the premiums ceded also
decreased to 26.8% during the first six months of 2003 compared to 30.0% in
2002, primarily due to the reduction in new business ceded, the recapture of the
TARe treaties, and the affects of normal lower commission allowances on a
growing base of renewal ceded business.

                                       29
<PAGE>

SEGMENT RESULTS - ADMINISTRATIVE SERVICES

The following table details the service fee revenue earned by our Administrative
Services segment:

<TABLE>
<CAPTION>
                                                                           THREE MONTHS          SIX MONTHS
                                                                           ENDED JUNE 30,      ENDED JUNE 30,
                                                                        ------------------   ------------------
                                                                          2003      2002       2003      2002
                                                                          ----      ----       ----      ----
                                                                                     (In thousands)
<S>                                                                     <C>        <C>       <C>        <C>
Affiliated Fee Revenue
  Medicare supplement                                                   $  5,723   $ 4,289   $ 11,637   $ 8,423
  Long term care                                                             647       630      1,319     1,238
  Other health insurance                                                      88        20        169        46
  Life insurance                                                             196        95        388       190
                                                                        --------   -------   --------   -------

  Total Affiliated Revenue                                                 6,654     5,034     13,513     9,897
                                                                        --------   -------   --------   -------

Unaffiliated Fee Revenue
  Medicare supplement                                                      2,220     2,232      4,406     4,574
  Long term care                                                           1,626     1,861      4,366     3,386
  Other health insurance                                                      35       111         73       235
  Non-insurance products                                                     450       284        726       659
  Non-insurance assistance                                                   486       385      1,193       723
                                                                        --------   -------   --------   -------

  Total Unaffiliated Revenue                                               4,817     4,873     10,764     9,577
                                                                        --------   -------   --------   -------

Service fee and other income                                              11,471     9,907     24,277    19,474
Net investment income                                                         28       109         31       238
                                                                        --------   -------   --------   -------
  Total revenue                                                           11,499    10,016     24,308    19,712
                                                                        --------   -------   --------   -------

Amortization of present value of future profits                               87       378        175       757
General expenses                                                           8,780     7,838     18,936    15,279
                                                                        --------   -------   --------   -------
  Total expenses                                                           8,867     8,216     19,111    16,036
                                                                        --------   -------   --------   -------

  Segment operating income                                                 2,632     1,800      5,197     3,676

Depreciation, amortization and interest                                      497       698        958     1,387
                                                                        --------   -------   --------   -------
  Earnings before interest, taxes, depreciation and amortization (1)    $  3,129   $ 2,498   $  6,155   $ 5,063
                                                                        ========   =======   ========   =======
</TABLE>

(1) In addition to segment operating income, we also evaluate the results of our
     Administrative Services segment based on earnings before interest, taxes,
     depreciation and amortization ("EBITDA"), which is not in accordance with
     generally accepted accounting principles.

Three months ended June 30, 2003 and 2002

         Operating income for the Administrative Services segment improved by
$0.8 million, or 46%, compared to the second quarter of 2002. This improvement
is primarily a result of growth in premiums managed and the scheduled reduction
in the amortization of the present value of future profits ("PVFP"). Earnings
before interest, taxes, depreciation and amortization ("EBITDA") for this
segment increased $0.6 million, or 25%, compared to the second quarter of 2002.

         Administrative Service fee revenue increased by $1.6 million, or 16%,
as compared to the second quarter of 2002. Affiliated service fee revenue
increased by $1.6 million compared to the second quarter of 2002 as a result of
the increase in Medicare supplement business in force at our insurance
subsidiaries.

         General expenses for the segment increased by $0.9 million, or 12%, due
primarily to the increase in business.

                                       30
<PAGE>

         The amortization of PVFP relates primarily to the acquisition of
American Insurance Administration Group, Inc. ("AIAG"). The PVFP was established
when AIAG was acquired in January 2000 and is being amortized in proportion to
the expected profits from the contracts in force on the date of acquisition.
During the second quarter of 2003, the scheduled amortization of PVFP was
approximately $0.3 million lower than the second quarter of 2002.

Six months ended June 30, 2003 and 2002

         Operating income for the Administrative Services segment improved by
$1.5 million, or 41%, compared to the first six months of 2002. This improvement
is primarily a result of the growth in premiums managed, the in fees for
underwriting of long term care policies for third party clients, including the
underwriting work we performed for the consortium that is offering long term
care to employees of the federal government and their families, and the
scheduled reduction in the amortization of the PVFP. EBITDA for this segment
increased $1.1 million, or 22%, compared to the first six months of 2002.

         Administrative Service fee revenue increased by $4.8 million, or 25%,
compared to the first six months of 2002. Affiliated service fee revenue
increased by $3.7 million compared to the first six months of 2002 as a result
of the increase in Medicare supplement business in force at our insurance
subsidiaries. Unaffiliated service fee revenue increased by approximately $1.1
million primarily due to an increase in the fees for underwriting of long term
care policies for our third party clients, including the underwriting work we
performed for the consortium. However, the open enrollment period for this
program has wound down, and we will seek to replace this business with
additional services for our existing and recently acquired new clients

         General expenses for the segment increased by $3.7 million, or 24%, due
primarily to the increase in business and the cost to bring new clients on line.

         During the first six months of 2003, the scheduled amortization of PVFP
was approximately $0.6 million lower than the comparable period of 2002.

SEGMENT RESULTS - CORPORATE

The following table presents the primary components comprising the segment's
operating loss:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED     SIX MONTHS ENDED
                                                            JUNE 30,            JUNE 30,
                                                      ------------------    ------------------
                                                        2003       2002      2003       2002
                                                        ----       ----      ----       ----
                                                                   (In thousands)
<S>                                                   <C>         <C>       <C>        <C>
Interest cost on outstanding debt                     $  1,257    $  782    $ 2,073    $ 1,588
Amortization of capitalized loan origination fees          114       133        243        265
Stock-based compensation expense                            91       160        182        320
Other parent company expenses, net                         782       501      1,530      1,159
                                                      --------    ------    -------    -------

 Segment operating loss                               $  2,244    $1,576    $ 4,028    $ 3,332
                                                      ========    ======    =======    =======
</TABLE>

Three months ended June 30, 2003 and 2002

         The operating loss from the Corporate segment increased by $0.7
million, or 43%, compared to the second quarter of 2002, due primarily to the
increase in financing costs. In connection with the acquisition of Pyramid Life,
we refinanced our debt and we issued trust preferred securities. Our combined
outstanding debt was $105 million at June 30, 2003 compared to $56 million at
June 30, 2002. See Liquidity section for additional details.

Six months ended June 30, 2003 and 2002

         The operating loss from the Corporate segment increased by $0.7
million, or 21%, compared to the first six months of 2002, due primarily to the
increase in financing costs.

                                       31
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Our capital is used primarily to support the retained risks and growth
of our insurance company subsidiaries and to support our parent company as an
insurance holding company. In addition, we use capital to fund our growth
through acquisitions of other companies, blocks of insurance or administrative
service business.

         We require cash at our parent company to meet our obligations under our
credit facility and our outstanding debentures held by our subsidiary
Pennsylvania Life. In January 2002, our parent company issued a debenture to
Pennsylvania Life in conjunction with the transfer of the business of
Pennsylvania Life's Canadian Branch to Penncorp Life (Canada). We anticipate
funding the repayment of the debenture from dividends of Penncorp Life (Canada).
We also require cash to pay the operating expenses necessary to function as a
holding company (applicable insurance department regulations require us to bear
our own expenses), and to meet the costs of being a public company.

         We believe that our current cash position, the availability of our new
$15.0 million revolving credit facility, the expected cash flows of our
administrative service company and the surplus note interest payments from
American Exchange (as explained below) can support our parent company
obligations for the foreseeable future. However, there can be no assurance as to
our actual future cash flows or to the continued availability of dividends from
our insurance company subsidiaries.

         Contractual Obligations and Commercial Commitments

         Prior Credit Facility

         As of January 1, 2003, the outstanding balance of the Company's
existing loan was $50.8 million. In January 2003, the Company made a scheduled
principal payment of $2.8 million, and in March 2003 made a principal payment of
$5.0 million from a portion of the proceeds from the issuance of Trust Preferred
securities (see Note 11 - Trust Preferred Securities). These payments reduced
the outstanding balance to $42.9 million, which was repaid from the proceeds of
the new loan obtained in connection with the acquisition of Pyramid Life. The
early extinguishment of the existing debt resulted in the immediate amortization
of the capitalized loan origination fees relating to that debt, causing a
pre-tax expense of approximately $1.8 million.

         New Credit Facility

         In connection with the acquisition of Pyramid Life (see Note 3 -
Business Combination), the Company obtained a new credit facility on March 31,
2003 to repay the existing loan and provide funds for the acquisition of Pyramid
Life. This $80 million credit facility consists of a $65 million term loan which
was drawn to fund the acquisition and a $15 million revolving loan facility none
of which has been drawn as of June 30, 2003. The facility calls for interest at
the London Interbank Offering Rate for one, two or three months ("LIBOR"), at
the option of the Company, plus 300 basis points (currently 4.1%). Due to the
variable interest rate for this loan, the Company would be subject to higher
interest costs if short-term interest rates rise. Principal repayments are
scheduled over a five-year period with a final maturity date of March 31, 2008.
The Company incurred loan origination fees of approximately $2.1 million, which
were capitalized and will be amortized on a straight-line basis over the life of
the loan. The Company pays an annual commitment fee of 50 basis points on the
unutilized facility. The obligations of the Company under the new credit
facility are secured by 100% of the common stock of the Company's U.S. insurance
subsidiaries and 65% of the Company's Canadian subsidiary. In addition, the
obligations are guaranteed by CHCS Services Inc. and other direct and indirect
subsidiaries of the Company (collectively the "Guarantors") and secured by all
of the assets of each of the Guarantors.

         In accordance with the Credit Agreement, 50% of the net proceeds from
the $30 million trust preferred securities issued in May 2003 were used to pay
down the new term loan. Future scheduled principal payments were reduced as a
result of this paydown, primarily in 2006 and 2007. In July 2003, the Company
made a regularly scheduled principal payment of $2.0 million. During the six
months ended

                                       32
<PAGE>

June 30, 2003, the Company paid $0.7 million in interest and fees in connection
with the new credit facility and $1.0 million in connection with the prior
credit facility. During the six months ended June 30, 2002, the Company paid
$0.8 million in connection with the prior credit facility.

         The following table shows the schedule of remaining principal payments
(in thousands) on the Company's new term loan, as of June 30, 2003, with the
final payment in April 2008:

<TABLE>
<S>                              <C>
2003 - Remainder of year         $  6,094
2004                                8,613
2005                                9,919
2006                               10,262
2007                               11,050
2008                                4,062
                                 --------
 Total                           $ 50,000
                                 ========
</TABLE>

         Trust Preferred Securities

         Separate subsidiary trusts, of the company (the "Trusts") issued a
combined $55.0 million in thirty year trust preferred securities (the "Capital
Securities") as detailed in the following table:

<TABLE>
<CAPTION>
  Maturity           Amount                             Spread      Rate as of
    Date             Issued             Term          Over LIBOR   June 30, 2003
--------------   --------------   -----------------   ----------   -------------
                 (In thousands)
<S>              <C>              <C>                 <C>          <C>
December, 2032       $15,000      Fixed/Floating(2)       400           5.3%
March, 2033           10,000      Floating                400           5.3%
May, 2033             15,000      Floating                420           5.5%
May, 2033             15,000      Fixed/Floating          (1)           7.4%
                     -------
                     $55,000
                     =======
</TABLE>

(1)  The rate on this issue is fixed at 7.4% for the first five years, after
     which it is converted to a floating rate equal to LIBOR plus 410 bps.

(2)  On July 1, 2003, Universal American entered into a swap agreement whereby
     we will pay a fixed rate of 6.7% in exchange for the floating rate of LIBOR
     plus 400 bps. The swap contract ends in December 2007.

         The Trust will have the right to call the Capital Securities at par
after five years from the date of issuance. The proceeds from the sale of the
Capital Securities, together with proceeds from the sale by the Trust of its
common securities to the Company, were invested in thirty year floating rate
junior subordinated deferrable interest debentures of the Company (the "Junior
Subordinated Debt"). A portion of the proceeds were used to pay down existing
debt in connection with the acquisition of Pyramid Life (see Note 3 - Business
Combination), with the balance to be held for general corporate purposes.

         The Capital Securities represent an undivided beneficial interest in
the Trust's assets, which consist solely of the Junior Subordinated Debt.
Holders of Capital Securities have no voting rights. The Company owns all of the
common securities of the Trust. Holders of both the Capital Securities and the
Junior Subordinated Debt are entitled to receive cumulative cash distributions
accruing from the date of issuance, and payable quarterly in arrears at a
floating rate equal to the three-month LIBOR plus a spread. The floating rate
resets quarterly and is limited to a maximum of 12.5% during the first sixty
months. Due to the variable interest rate for this security the Company would be
subject to higher interest costs if short-term interest rates rise. The Capital
Securities are subject to mandatory redemption upon repayment of the Junior
Subordinated Debt at maturity or upon earlier redemption. The Junior
Subordinated Debt is unsecured and ranks junior and subordinate in right of
payment to all present and future senior debt of the Company and is effectively
subordinated to all existing and future obligations of the Company's
subsidiaries. The Company has the right to redeem the Junior Subordinated Debt
after five years from the date of issuance.

                                       33
<PAGE>

         The Company has the right at any time, and from time to time, to defer
payments of interest on the Junior Subordinated Debt for a period not exceeding
20 consecutive quarters up to the debentures' maturity date. During any such
period, interest will continue to accrue and the Company may not declare or pay
any cash dividends or distributions on, or purchase, the Company's capital stock
nor make any principal, interest or premium payments on or repurchase any debt
securities that rank equally with or junior to the Junior Subordinated Debt. The
Company will have the right at any time to dissolve the Trust and cause the
Junior Subordinated Debt to be distributed to the holders of the Capital
Securities. The Company has guaranteed, on a subordinated basis, all of the
Trust's obligations under the Capital Securities including payment of the
redemption price and any accumulated and unpaid distributions to the extent of
available funds and upon dissolution, winding up or liquidation but only to the
extent the Trust has funds available to make such payments. The Capital
Securities have not been and will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and will only be offered and sold under
an applicable exemption from registration requirements under the Securities Act.

         During the six months ended June 30, 2003, the Company paid $0.6
million in interest in connection with the trust preferred securities.

         Affiliated Obligations of the Parent Company

         In connection with an agreement entered into in 1996 under which
American Pioneer became a direct subsidiary of our holding company rather than
an indirect subsidiary owned through American Progressive, our holding company
issued $7.9 million in debentures to American Progressive. The balance of $2.0
million was redeemed in May 2003. Our holding company paid interest on the
outstanding debentures quarterly at a rate of 8.5%. During the six months ended
June 30, 2003, our parent holding company paid $0.1 million in interest on these
debentures to American Progressive. The interest on these debentures is
eliminated in consolidation.

         In January 2002, our parent company issued a debenture to Pennsylvania
Life in connection with the transfer of the business of Pennsylvania Life's
Canadian Branch to Penncorp Life (Canada). Our parent company paid $2.2 million
in principal during 2003, reducing the outstanding balance to $11.9 million as
of June 30, 2003. Principal and interest payments are made quarterly. The
debenture is scheduled to be repaid in full by the third quarter of 2005. During
2003, our parent holding company paid $0.6 million in interest on these
debentures. The interest on these debentures is eliminated in consolidation.
Dividends from Penncorp Life (Canada) funded the interest and principal paid on
the debenture to date and it is anticipated that they will fund all future
payments made on this debenture.

         Lease Obligations

         We are obligated under certain lease arrangements for our executive and
administrative offices in New York, Florida, Texas, and Ontario, Canada. Annual
minimum rental commitments, subject to escalation, under non-cancelable
operating leases (in thousands) are as follows:

<TABLE>
<S>                          <C>
2003 - Remainder of year     $  1,003
2004                            1,807
2005                            1,279
2006                            1,145
2007 and thereafter             3,764
                             --------
          Totals             $  8,998
                             ========
</TABLE>

         In addition to the above, Pennsylvania Life is the named lessee on
approximately 40 properties occupied by Career Agents for uses as field offices.
The agents reimburse rent for these field offices. The total annual rent
obligation for these field offices is approximately $633,000.

                                       34
<PAGE>

         Administrative Service Company

         Liquidity for our administrative service company is measured by its
ability to pay operating expenses. The primary source of liquidity is fees
collected from clients. We believe that the sources of cash for our
administrative service company exceed scheduled uses of cash and results in
amounts available to dividend to our parent holding company. We measure the
ability of the administrative service company to pay dividends based on its
earnings before interest, taxes, depreciation and amortization ("EBITDA").
EBITDA for our administrative services segment was $6.2 million for the six
months ended June 30, 2003.

         Insurance Subsidiary - Surplus Note

         Cash generated by our insurance company subsidiaries will be made
available to our holding company, principally through periodic payments of
principal and interest on the surplus note owed to our holding company by our
subsidiary, American Exchange Life. As of June 30, 2003, the principal amount of
the surplus note was $60.0 million. The note bears interest to our parent
holding company at LIBOR plus 375 basis points. We anticipate that the surplus
notes will be primarily serviced by dividends from Pennsylvania Life, a wholly
owned subsidiary of American Exchange, and by tax-sharing payments among the
insurance companies that are wholly owned by American Exchange and file a
consolidated Federal income tax return. No dividends have been paid to American
Exchange during the six months ended June 30, 2003. No principal payments were
made during 2003. During the first six months of 2003, American Exchange paid
$1.5 million in interest on the surplus notes to our holding company.

         Insurance Subsidiaries

         Our insurance subsidiaries are required to maintain minimum amounts of
capital and surplus as determined by statutory accounting practices. As of June
30, 2003, each insurance company subsidiary's statutory capital and surplus
exceeded its respective minimum requirement. However, substantially more than
these minimum amounts are needed to meet statutory and administrative
requirements of adequate capital and surplus to support the current level of our
insurance subsidiaries' operations. As of June 30, 2003 the statutory capital
and surplus, including asset valuation reserves, of our U.S. domiciled insurance
subsidiaries totaled $110.5 million.

         The National Association of Insurance Commissioners has developed, and
state insurance regulators have adopted, risk-based capital requirements on life
insurance enterprises. As of June 30, 2003 all of our insurance company
subsidiaries maintained ratios of total adjusted capital to risk-based capital
in excess of the minimum trigger point for regulatory action.

         Penncorp Life (Canada) is subject to Canadian capital requirements and
reports its results to Canadian regulatory authorities based upon Canadian
statutory accounting principles that vary in some respects from U.S. statutory
accounting principles. Canadian net assets based upon Canadian statutory
accounting principles were C$59.8 million (US$44.4 million) as of June 30, 2003.
Penncorp Life (Canada) maintained a minimum continuing capital and surplus
requirement ratio in excess of the minimum requirement as of June 30, 2003.

         Dividend payments by our insurance companies to our holding company or
to intermediate subsidiaries are limited by, or subject to the approval of the
insurance regulatory authorities of each insurance company's state of domicile.
Such dividend requirements and approval processes vary significantly from state
to state. Currently, Pennsylvania Life is able to pay ordinary dividends of up
to $10.6 million to American Exchange (its direct parent) without the prior
approval from Pennsylvania Department of Insurance in 2003. During the six
months ended June 30, 2003, Penncorp Life (Canada) paid $ 2.7 million in
dividends to Universal American. It is anticipated that Penncorp Life (Canada)
will be able to pay additional ordinary dividends of up to $3.3 million to
Universal American in 2003. We do not expect that our other insurance
subsidiaries will be able to pay ordinary dividends in 2003.

                                       35
<PAGE>

         Liquidity for our insurance company subsidiaries is measured by their
ability to pay scheduled contractual benefits, pay operating expenses, and fund
investment commitments. Sources of liquidity include scheduled and unscheduled
principal and interest payments on investments, premium payments and deposits
and the sale of liquid investments. We believe that these sources of cash for
our insurance company subsidiaries exceed scheduled uses of cash.

         Liquidity is also affected by unscheduled benefit payments including
death benefits, benefits under accident and health insurance policies and
interest-sensitive policy surrenders and withdrawals. The amount of surrenders
and withdrawals is affected by a variety of factors such as credited interest
rates for similar products, general economic conditions and events in the
industry that affect policyholders' confidence. Although the contractual terms
of substantially all of our in force life insurance policies and annuities give
the holders the right to surrender the policies and annuities, we impose
penalties for early surrenders. As of June 30, 2003 we held reserves that
exceeded the underlying cash surrender values of our net retained in force life
insurance and annuities by $26.0 million. Our insurance subsidiaries, in our
view, have not experienced any material changes in surrender and withdrawal
activity in recent years.

         Changes in interest rates may affect the incidence of policy surrenders
and withdrawals. In addition to the potential impact on liquidity, unanticipated
surrenders and withdrawals in a changed interest rate environment could
adversely affect earnings if we were required to sell investments at reduced
values in order to meet liquidity demands. We manage our asset and liability
portfolios in order to minimize the adverse earnings impact of changing market
rates. We seek to invest in assets that have duration and interest rate
characteristics similar to the liabilities that they support.

         The net yields on our cash and invested assets decreased from 6.8% in
2002 to 5.4% in 2003. A portion of these securities are held to support the
liabilities for policyholder account balances, which liabilities are subject to
periodic adjustments to their credited interest rates. The credited interest
rates of the interest-sensitive policyholder account balances are determined by
us based upon factors such as portfolio rates of return and prevailing market
rates and typically follow the pattern of yields on the assets supporting these
liabilities.

         As of June 30, 2003, our insurance company subsidiaries held cash and
cash equivalents totaling $81.6 million, as well as fixed maturity securities
that could readily be converted to cash with carrying values (and fair values)
of $1,077.5 million. The fair values of these holdings totaled more than
$1,159.1 million as of June 30, 2003.

         Investments

         Our investment policy is to balance the portfolio duration to achieve
investment returns consistent with the preservation of capital and maintenance
of liquidity adequate to meet payment of policy benefits and claims. We invest
in assets permitted under the insurance laws of the various states in which we
operate. Such laws generally prescribe the nature, quality of and limitations on
various types of investments that may be made. However, we do not currently have
investments in partnerships, special purpose entities, real estate, commodity
contracts, or other derivative securities. We currently engage the services of
three investment advisors under the direction of the management of our insurance
company subsidiaries and in accordance with guidelines adopted by the Investment
Committees of their respective boards of directors. Conning Asset Management
Company manages the portfolio of all of our United States subsidiaries, except
for the portfolio of Pyramid Life, which is managed by Hyperion Capital. MFC
Global Investment Management manages our Canadian portfolio. We invest primarily
in fixed maturity securities of the U.S. Government and its agencies and in
corporate fixed maturity securities with investment grade ratings of "Baa3"
(Moody's Investor Service), "BBB-" (Standard & Poor's Corporation) or higher.
Our current policy is not to invest in derivative programs or other hybrid
securities, except for GNMA's, FNMA's and investment grade corporate
collateralized mortgage obligations.

                                       36
<PAGE>

         As of June 30, 2003, 99.1% of our fixed maturity investments had
investment grade ratings from Moody's Investors Service or Standard & Poor's
Corporation. There were no non-income producing fixed maturities as of June 30,
2003. We wrote down the value of certain fixed maturity securities by $0.2
million during the six months ended June 30, 2003, and by $9.1 million during
the six months ended June 30, 2002 (primarily as a result of the impairment of
our World Com holdings). In each case, these write-downs represent our estimate
of other than temporary declines in value and were included in net realized
gains (losses) on investments in our consolidated statements of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

         Refer to Consolidated Financial Statements Note 2 - Recent Accounting
Pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         In general, market risk relates to changes in the value of financial
instruments that arise from adverse movements in interest rates, equity prices
and foreign exchange rates. We are exposed principally to changes in interest
rates that affect the market prices of our fixed income securities as well as
the cost of our debt. Additionally we are exposed to changes in the Canadian
dollar that affects the translation of the financial position and the results of
operations of our Canadian subsidiary.

         Interest Rate Sensitivity

         Fixed Maturity Investments

         Our profitability could be affected if we were required to liquidate
fixed income securities during periods of rising and/or volatile interest rates.
However, 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
insurance liabilities generally arise over relatively long periods of time,
which typically permits ample time to prepare for their settlement. To date, we
have not used various financial risk management tools on our investment
securities, such as interest rate swaps, forwards, futures and options to modify
our exposure to changes in interest rates. However, we may consider using such
risk management tools in the future.

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

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

         The sensitivity analysis of interest rate risk assumes an instantaneous
shift in a parallel fashion across the yield curve, with scenarios of interest
rates increasing and decreasing 100 and 200 basis points from their levels as of
June 30, 2003, and with all other variables held constant. A 100 basis point
increase in market interest rates would result in a pre-tax decrease in the
market value of our fixed income investments of $69.4 million and a 200 basis
point increase in market interest rates would result in $130.6 million decrease.
Similarly, a 100 basis point decrease in market interest rates would result in a
pre-tax increase in the market value of our fixed income investments of $63.6
million and a 200 basis point decrease in market interest rates would result in
a $137.3 million increase.

                                       37
<PAGE>

         Debt

         We pay interest on our term loan and a portion of our trust preferred
securities based on the London Interbank Offering Rate for one, two or three
months ("LIBOR"). Due to the variable interest rate for this loan, the Company
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 $15.0 million of the trust preferred securities for a five
year period through the contractual terms of the security at inception and an
additional $15.0 million through the use of an interest rate swap.

         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 scenarios
increases or decreases in LIBOR of 100 and 200 basis points from their levels as
of June 30, 2003, and with all other variables held constant. The following
table summarizes the annualized impact of changes in LIBOR, based on the
weighted average balance outstanding and the weighted average interest rates for
the six months ended June 30, 2003.

                                     Effect of Change in LIBOR on Pre-tax Income

<TABLE>
<CAPTION>
                             Weighted    Weighted
                             Average      Average     200 Basis   100 Basis   100 Basis   200 Basis
                             Interest     Balance       Point       Point       Point       Point
Description                    Rate     Outstanding   Decrease    Decrease    Increase    Increase
<S>                          <C>        <C>           <C>         <C>         <C>         <C>
Floating rate debt             4.6%       $54.6         $1.1         $0.5      ($0.5)      ($1.1)
Floating rate trust            5.4%       $ 8.5         $0.2         $0.1      ($0.1)      ($0.2)
                                                        ----         ----      ------      ------
    preferred

TOTAL                                                   $1.3         $0.6      ($0.6)      ($1.3)
</TABLE>

         We anticipate that the weighted average balance outstanding of our
floating rate debt will decrease to $35.4 million for the year ending December
31, 2004, as a result of repayments. Further, we anticipate that the weighted
average balance of our floating rate trust preferred will increase to $25.0
million in 2004, as a result of the impact of the previous issuances being
outstanding for the full year.

         Currency Exchange Rate Sensitivity

         Portions of our operations are transacted using the Canadian dollar as
the functional currency. As of and for the three months ended June 30, 2003,
approximately 13% of our assets, 13% of our revenues, excluding realized gains,
and 22% of our operating income before taxes were derived from our Canadian
operations. As of and for the three months ended June 30, 2002, approximately
13% of our assets, 17% of our revenues, excluding realized gains, and 19% of our
operating income before taxes were derived from our Canadian operations.
Accordingly, our earnings and shareholder's equity are affected by fluctuations
in the value of the U.S. dollar as compared to the Canadian dollar. Although
this risk is somewhat mitigated by the fact that both the assets and liabilities
for our foreign operations are denominated in Canadian dollars, we are still
subject to translation losses.

         We periodically conduct various analyses to gauge the financial impact
of changes in the foreign currency exchange rate on our financial condition. The
ranges selected in these analyses reflect our assessment of what is reasonably
possible over the succeeding twelve-month period.

                                       38
<PAGE>

         As of June 30, 2003, a 10% strengthening of the U.S. dollar relative to
the Canadian dollar would result in a decrease in our operating income before
taxes of approximately $0.5 million and a decrease in shareholders' equity of
approximately $4.8 million. A 10% weakening of the U.S. dollar relative to the
Canadian dollar would result in an increase in our operating income before taxes
of approximately $0.7 million and an increase in shareholders' equity of
approximately $5.8 million. Our sensitivity analysis of the effects of changes
in foreign currency exchange rates does not factor in any potential change in
sales levels, local prices or any other variables.

         The magnitude of changes reflected in the above analysis regarding
interest rates and foreign currency exchange rates should, in no manner, be
construed as a prediction of future economic events, but rather as a simple
illustration of the potential impact of such events on our financial results.

ITEM 4. CONTROLS AND PROCEDURES

         The Company's management evaluated, with the participation of the
Company's principal executive and principal financial officers, the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as of June 30, 2003. Based on their evaluation,
the Company's principal executive and principal financial officers concluded
that the Company's disclosure controls and procedures were effective as of June
30, 2003.

         There has been no change in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the Company's fiscal quarter ended June 30,
2003, that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         The Company has litigation in the ordinary course of business,
including claims for medical, disability and life insurance benefits, and in
some cases, seeking punitive damages. Management and counsel believe that after
reserves and liability insurance recoveries, none of these will have a material
adverse effect on the Company

         A lawsuit was commenced in 2002 against Universal American, American
Progressive and Richard A. Barasch by Marvin Barasch, a former Chairman of
American Progressive and Universal American. The five counts in the lawsuit
primarily arise out of Marvin Barasch's employment agreement with American
Progressive, but also include other personal claims against Richard Barasch. In
July 2003 all of the counts were dismissed, except for the allegation in Count 1
of age discrimination under New York State law. The plaintiff has filed a Notice
of Appeal as to two of the dismissed counts. The Company believes that the
remaining allegation of Count 1, as well as the allegations in the dismissed
counts now under appeal, are all totally without merit and that the likelihood
of material recovery by the plaintiff is remote.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

                                       39
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        a. The annual meeting of the stockholders of Universal American
           Financial Corp. was held on June 3, 2003.

        b. All director nominees were elected.

        c. Certain matters voted upon at the meeting and votes cast with respect
           to such matters are as follows:

ELECTION OF DIRECTORS:

<TABLE>
<CAPTION>
                           VOTES       VOTES
     DIRECTOR             RECEIVED    WITHHELD
<S>                      <C>          <C>
Richard A. Barasch       47,468,191   206,644
Bradley E. Cooper        47,579,259    95,576
Susan S. Fleming         47,579,259    95,576
Mark M. Harmeling        47,579,259    95,576
Bertram Harnett          47,273,632   401,203
Linda A. Lamel           47,579,259    95,576
Patrick J. McLaughlin    47,579,259    95,576
Robert Spass             47,579,259    95,576
Robert F. Wright         47,579,259    95,576
</TABLE>

ITEM 5. OTHER INFORMATION

        None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a.  Exhibits

                Exhibit 11    Computation of Per Share Earnings Data required
                              by Statement of Financial Accounting Standards No.
                              128, Earnings Per Share, is provided in Note 4 to
                              the Consolidated Financial Statements in this
                              report.

                Exhibit 31.1  Certification of Chief Executive Officer pursuant
                              to Section 302 of the Sarbanes-Oxley Act of 2002.

                Exhibit 31.2  Certification of Chief Financial Officer pursuant
                              to Section 302 of the Sarbanes-Oxley Act of 2002.

                Exhibit 32.1  Certification of Chief Executive Officer pursuant
                              to 18 U.S.C. Section 1350, as adopted pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002.

                Exhibit 32.2  Certification of Chief Financial Officer pursuant
                              to 18 U.S.C. Section 1350, as adopted pursuant to
                              Section 906 of the Sarbanes-Oxley Act of 2002.

                                       40
<PAGE>

        b.  Reports on Form 8-K

                During the quarterly period ended June 30, 2003, the following
                current reports were filed on Form 8-K:

                1.  Form 8-K filed on April 2, 2003 regarding the purchase of
                    the Pyramid Life Insurance Company and the placement of $10
                    million of trust preferred securities.

                2.  Form 8-K filed on May 29, 2003 regarding the placement of
                    $30 million of trust preferred securities.

                3.  Form 8-K filed on June 12, 2003 amending Item 7 (a) and (b)
                    of Form 8-K filed April 2, 2003.

                4.  Form 8-K filed on June 20, 2003 regarding the recapture of
                    certain reinsurance contracts.

                5.  Form 8-K filed on July 10, 2003 regarding the acquisition of
                    the marketing organization of Guarantee Reserve Life
                    Insurance Company ("GRL") and the reinsurance of GRL's
                    future Life insurance business.

                6.  Form 8-K filed on August 6, 2003 regarding the press release
                    announcing results of operations and financial condition for
                    the period ended June 30, 2003.

                7.  Form 8-K filed on August 6, 2003 regarding supplemental
                    financial information for the period ended June 30, 2003.

SIGNATURE

         Pursuant to the requirements 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 FINANCIAL CORP.

                                              By: /s/ Robert A. Waegelein
                                                  ------------------------------
                                                  Robert A. Waegelein
                                                  Executive Vice President
                                                  Chief Financial Officer

Date: December 23, 2003

                                       41