A.M. Best Affirms Ratings of Universal American Financial Corporation; Outlook for Most Ratings Remains Negative.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings (FSR) of B++ (Good) and B+ (Good) and the issuer credit ratings (ICR) of "bbb" and "bbb-" of Universal American Financial Corporation's (Universal American) (Rye Brook, NY) [NASDAQ: UHCO] primary insurance subsidiaries. A.M. Best has also affirmed the ICR of "bb" and all debt ratings on the shelf registration of Universal American. The outlook for most ratings remains negative. (See link below for a detailed list of the companies and ratings.)

These rating affirmations reflect Universal American's improved operating results, increased presence in the senior health insurance market and current adequate level of capitalization maintained.

In May 2007, Universal American signed a definitive agreement to acquire MemberHealth, Inc.(MemberHealth), a privately held pharmacy benefits manager and sponsor of CCRx, a national Medicare Part D Plan. Universal American plans to acquire MemberHealth for $630 million plus potential performance-based consideration. The pending acquisition is the largest transaction to date for Universal American. The cost of the acquisition will be financed by cash and Universal American stock and is expected to close in late third quarter 2007 pending regulatory approval.

Given Universal American's significant organic premium growth, combined with the pending MemberHealth acquisition and sizeable projected future revenue expansion, A.M. Best will be closely monitoring the capitalization of the organization to make sure it maintains appropriate statutory and GAAP capitalization levels for its current ratings. A.M. Best also notes the large increase in goodwill associated with the purchase of MemberHealth and Universal American's heavy reliance on private fee for service (PFFS) and Prescription Part D (PDP) products. Furthermore, with exposure of $150 million of subprime mortgages, at July 31, 2007, Universal American has a relatively large exposure to these types of investments, particularly for a health insurer.

Also of concern is the increasing likelihood that 2009 PFFS reimbursement rates will be reduced noticeably, which would have a negative impact on future earnings of the organization.

Additionally, Universal American is experiencing continuing lapsation and deferred acquisition cost (DAC) challenges in managing its Medicare supplement business. A. M. Best does, however, note this last issue is of less concern than a year ago.

A.M. Best also has assigned an FSR of B++ and ICR of "bbb" to Marquette National Life Insurance Company (Marquette National) (Texas), a Universal American subsidiary. The outlook for both ratings is negative. The company recently began writing meaningful amounts of Medicare supplement and PFFS business.

For a complete list of Universal American Financial Corporation's FSRs, ICRs and debt ratings, please visit www.ambest.com/press/082103universalamerican.pdf.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.