A.M. Best Affirms Ratings of Universal American Financial Corporation; Downgrades Issuer Credit Ratings and Revises Outlook.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings (FSR) of B++ (Very Good) and downgraded the issuer credit ratings (ICR) to "bbb" from "bbb+" for the majority of Universal American Financial Corporation's (Universal American) (NASDAQ: UHCO) (Rye Brook, New York) insurance subsidiaries. A.M. Best has also downgraded the ICR to "bb" from "bb+" of Universal American. The outlook has been revised to negative from stable for the majority of the companies. (See list below for a complete list of the ratings.)

Concurrently, A.M. Best has affirmed the FSR of B+ (Very Good) and the ICR of "bbb-" of Union Bankers Insurance Company (Union Bankers) (McKinney, TX) and Selectcare of Texas, LLC (Selectcare) (Houston, TX). The outlook for these ratings is stable.

The downgrade of the ICR reflects the uncertainties and risks associated with Universal American's expansion strategy, recent weakened overall operating results and the possible need for additional capital in the near term. The organization has also reported depressed statutory results for a number of years. While Universal American's new Prescription Drug Benefit (PDP) plan has been very profitable in 2006, A.M. Best believes the current PDP profit margins are not sustainable.

The organization's Medicare supplement business produced noticeably higher than expected loss ratios for more than one year. Additionally, increased lapsation in the Medicare supplement business has been experienced, primarily driven by pricing competition from both traditional Medical supplement and Medicare Advantage writers, which has caused some deferred acquisition cost challenges for the parent holding company.

A.M. Best has been monitoring Universal American's evolving business strategy and growing presence in the U.S. senior insurance marketplace. The group has established multiple distribution channels and strategic partnerships with other companies in the senior market. Universal American's current debt-to-capital ratio remains within the range for its ratings, and the company maintains an appropriate fixed coverage ratio to service its outstanding debt.

While the company has been able to fund its growth through various means historically, given the group's senior market expansion plans, A.M. Best believes additional capital could be needed near term. Additionally, with Universal American's focus turning more towards Medicare Advantage and PDP, the company is now competing more directly with bigger companies, with much greater financial resources. Moreover, it is also becoming more reliant upon government reimbursement rates, which are currently very good, but could be lowered in the future. Should A.M. Best become uncomfortable with Universal American's overall statutory or parent company capitalization levels, or if it's the company does not meet its projections during 2006, a downgrade of the current B++ (Very Good) FSR ratings will occur.

The FSRs of B++ (Very Good) have been affirmed and the ICRs have been downgraded to "bbb" from "bbb+" for the following subsidiaries of Universal American Financial Corporation:

--Constitution Life Insurance Company

--Pennsylvania Life Insurance Company

--American Progressive Life & Health Insurance Company of New York 

--American Pioneer Life Insurance Company

--Penncorp Life Insurance Company

--The Pyramid Life Insurance Company

The FSR of B+ (Very Good) and the ICR of "bbb-" have been affirmed with a stable outlook for Universal American Financial Corp.'s subsidiaries, Union Bankers Insurance Company and Selectcare of Texas, LLC.

The ICR has been downgraded to "bb" from "bb+" for Universal American Financial Corp.

The following indicative ratings have been downgraded for the $140 million shelf registration:

Universal American Financial Corp.--

--"bb+" to "bb" on senior debt

--"bb" to "bb-" on subordinated debt 

--"bb-" to "b+" on preferred stock 

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.