Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | ||
Jun. 30, 2014 | Jul. 24, 2014 | Jul. 24, 2014 | |
Non-Voting | Voting | ||
Entity Registrant Name | 'UNIVERSAL AMERICAN CORP. | ' | ' |
Entity Central Index Key | '0001514128 | ' | ' |
Document Type | '10-Q | ' | ' |
Document Period End Date | 30-Jun-14 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Filer Category | 'Accelerated Filer | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 3,300,000 | 80,462,237 |
Document Fiscal Year Focus | '2014 | ' | ' |
Document Fiscal Period Focus | 'Q2 | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Investments: | ' | ' |
Fixed maturities available for sale, at fair value (amortized cost: 2014, $833,427; 2013, $913,453) | $868,086 | $933,398 |
Other invested assets | 27,590 | 22,575 |
Total investments | 895,676 | 955,973 |
Cash and cash equivalents | 57,740 | 69,574 |
Accrued investment income | 6,597 | 7,056 |
Deferred policy acquisition costs | 85,607 | 90,136 |
Reinsurance recoverables - life | 510,658 | 520,243 |
Reinsurance recoverables - health | 139,013 | 142,749 |
Due and unpaid premiums | 121,197 | 59,383 |
Present value of future profits and other amortizing intangible assets | 17,829 | 20,331 |
Goodwill and other indefinite lived intangible assets | 77,459 | 77,526 |
Deferred income tax asset | ' | 2,762 |
Income taxes receivable | 44,709 | 45,392 |
Other assets | 128,542 | 110,541 |
Total assets | 2,085,027 | 2,101,666 |
LIABILITIES | ' | ' |
Reserves and other policy liabilities - life | 525,035 | 532,077 |
Reserves for future policy benefits - health | 459,303 | 462,832 |
Policy and contract claims - health | 160,890 | 166,545 |
Premiums received in advance | 8,750 | 8,632 |
Series A mandatorily redeemable preferred shares | 40,000 | 40,000 |
Loan payable | 103,447 | 103,447 |
Amounts due to reinsurers | 8,191 | 7,690 |
Deferred income taxes payable | 2,143 | ' |
Other liabilities | 147,300 | 115,544 |
Total liabilities | 1,455,059 | 1,436,767 |
STOCKHOLDERS' EQUITY | ' | ' |
Preferred stock (Authorized: 40 million shares) | ' | ' |
Additional paid-in capital | 665,223 | 693,329 |
Accumulated other comprehensive income | 15,350 | 7,329 |
Retained deficit | -51,443 | -36,647 |
Total stockholders' equity | 629,968 | 664,899 |
Total liabilities and stockholders' equity | 2,085,027 | 2,101,666 |
Common stock - voting | ' | ' |
STOCKHOLDERS' EQUITY | ' | ' |
Common stock | 805 | 855 |
Common stock - non-voting | ' | ' |
STOCKHOLDERS' EQUITY | ' | ' |
Common stock | $33 | $33 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data in Millions, unless otherwise specified | ||
Fixed maturities available for sale, amortized cost (in dollars) | $833,427 | $913,453 |
Preferred stock, Authorized shares | 40 | 40 |
Common stock - voting | ' | ' |
Common stock, Authorized shares | 400 | 400 |
Common stock, issued shares | 80.5 | 85.5 |
Common stock, outstanding shares | 80.5 | 85.5 |
Common stock - non-voting | ' | ' |
Common stock, Authorized shares | 60 | 60 |
Common stock, issued shares | 3.3 | 3.3 |
Common stock, outstanding shares | 3.3 | 3.3 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Revenues: | ' | ' | ' | ' |
Net premium and policyholder fees earned | $488,538 | $484,284 | $970,192 | $1,005,519 |
Net investment income | 7,810 | 9,511 | 15,832 | 19,396 |
Fee and other income | 22,573 | 30,100 | 44,516 | 59,768 |
Net realized gains on investments | 455 | 10,081 | 1,502 | 12,557 |
Total revenues | 519,376 | 533,976 | 1,032,042 | 1,097,240 |
Benefits, claims and expenses: | ' | ' | ' | ' |
Claims and other benefits | 415,699 | 426,135 | 812,470 | 849,101 |
Change in deferred policy acquisition costs | 1,508 | 2,195 | 4,529 | 6,041 |
Amortization of intangible assets | 1,253 | 2,171 | 2,568 | 4,459 |
Commissions | 7,220 | 8,843 | 14,500 | 18,327 |
Reinsurance commissions and expense allowances | 1,457 | 1,678 | 3,399 | 3,032 |
Interest expense | 1,560 | 1,668 | 3,102 | 3,256 |
Asset impairment charge | ' | 91,742 | ' | 91,742 |
Affordable Care Act fee | 6,233 | ' | 11,661 | ' |
Other operating costs and expenses | 86,220 | 84,735 | 175,260 | 175,541 |
Total benefits, claims and expenses | 521,150 | 619,167 | 1,027,489 | 1,151,499 |
Income (loss) before equity in losses of unconsolidated subsidiaries | -1,774 | -85,191 | 4,553 | -54,259 |
Equity in losses of unconsolidated subsidiaries | -7,285 | -8,915 | -15,607 | -17,203 |
Loss before income taxes | -9,059 | -94,106 | -11,054 | -71,462 |
Provision for (benefit from) income taxes | 749 | -2,290 | 3,804 | 6,396 |
Net loss | ($9,808) | ($91,816) | ($14,858) | ($77,858) |
Loss per common share: | ' | ' | ' | ' |
Basic (in dollars per share) | ($0.12) | ($1.05) | ($0.17) | ($0.89) |
Diluted (in dollars per share) | ($0.12) | ($1.05) | ($0.17) | ($0.89) |
Weighted average shares outstanding: | ' | ' | ' | ' |
Basic weighted average shares outstanding (in shares) | 84,503 | 87,436 | 86,011 | 87,343 |
Diluted weighted average shares outstanding (in shares) | 84,503 | 87,436 | 86,011 | 87,343 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Comprehensive loss: | ' | ' | ' | ' |
Net loss | ($9,808) | ($91,816) | ($14,858) | ($77,858) |
Other comprehensive income (loss), net of income taxes: | ' | ' | ' | ' |
Unrealized gain (loss) on investments | 5,489 | -13,827 | 11,061 | -13,551 |
Less: reclassification adjustment for gains included in net income | -295 | -6,553 | -976 | -8,162 |
Change in net unrealized gain (loss) on securities available for sale | 5,194 | -20,380 | 10,085 | -21,713 |
Change in long-term claim reserve adjustment | -914 | 2,255 | -2,064 | 2,010 |
Total other comprehensive income (loss), net of income taxes | 4,280 | -18,125 | 8,021 | -19,703 |
Comprehensive loss | ($5,528) | ($109,941) | ($6,837) | ($97,561) |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) | Total | Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Retained Earnings (Deficit) |
In Thousands, unless otherwise specified | Voting | Non-Voting | ||||
Balance at Dec. 31, 2012 | $1,012,497 | $850 | $33 | $827,298 | $29,089 | $155,227 |
Increase (Decrease) in Stockholders' Equity | ' | ' | ' | ' | ' | ' |
Net loss | -77,858 | ' | ' | ' | ' | -77,858 |
Other comprehensive income (loss) | -19,703 | ' | ' | ' | -19,703 | ' |
Net issuance of common stock | 4,209 | 5 | ' | 4,204 | ' | ' |
Stock-based compensation | 1,919 | ' | ' | 1,919 | ' | ' |
Dividends to stockholders | 468 | ' | ' | ' | ' | 468 |
Balance at Jun. 30, 2013 | 921,532 | 855 | 33 | 833,421 | 9,386 | 77,837 |
Balance at Dec. 31, 2013 | 664,899 | 855 | 33 | 693,329 | 7,329 | -36,647 |
Increase (Decrease) in Stockholders' Equity | ' | ' | ' | ' | ' | ' |
Net loss | -14,858 | ' | ' | ' | ' | -14,858 |
Other comprehensive income (loss) | 8,021 | ' | ' | ' | 8,021 | ' |
Net issuance of common stock | 5,496 | 10 | ' | 5,486 | ' | ' |
Stock-based compensation | 2,276 | ' | ' | 2,276 | ' | ' |
Dividends to stockholders | 314 | ' | ' | 252 | ' | 62 |
Share retirement | -36,180 | -60 | ' | -36,120 | ' | ' |
Balance at Jun. 30, 2014 | $629,968 | $805 | $33 | $665,223 | $15,350 | ($51,443) |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Operating activities: | ' | ' |
Net loss | ($14,858) | ($77,858) |
Adjustments to reconcile net loss to cash used for operating activities, net of balances acquired: | ' | ' |
Deferred income taxes | 586 | -562 |
Net realized gains on investments | -1,502 | -12,557 |
Amortization of intangible assets | 2,568 | 4,459 |
Amortization of debt issuance costs | 876 | 679 |
Asset impairment charge | ' | 91,742 |
Net amortization of bond premium | 2,411 | 3,671 |
Depreciation expense | 4,034 | 5,328 |
Changes in operating assets and liabilities: | ' | ' |
Affordable Care Act fee | 11,661 | ' |
Deferred policy acquisition costs | 4,529 | 6,041 |
Reserves and other policy liabilities - life | -7,042 | -9,569 |
Reserves for future policy benefits - health | -6,703 | -719 |
Policy and contract claims - health | -5,655 | 2,373 |
Reinsurance balances | 13,822 | 10,035 |
Due and unpaid/advance premium, net | -61,696 | -110,242 |
Income taxes receivable | 683 | -10,451 |
Other, net | 14,967 | -4,432 |
Cash used for operating activities | -41,319 | -102,062 |
Investing activities: | ' | ' |
Proceeds from sale, maturity, call, paydown or redemption of fixed maturity investments | 133,430 | 270,052 |
Cost of fixed maturity investments acquired | -54,312 | -154,337 |
Change in short-term investments | ' | 16,993 |
Purchase of fixed assets | -3,032 | -3,499 |
Other investing activities | -8,495 | -6,040 |
Cash provided by investing activities | 67,591 | 123,169 |
Financing activities: | ' | ' |
Net proceeds from issuance of common and preferred stock, net of tax effect | -655 | 429 |
Share retirement | -36,180 | ' |
Dividends paid to stockholders | -1,271 | -1,420 |
Principal payment on loan payable | ' | -7,134 |
Cash used for financing activities | -38,106 | -8,125 |
Net (decrease) increase in cash and cash equivalents | -11,834 | 12,982 |
Cash and cash equivalents at beginning of period | 69,574 | 59,779 |
Cash and cash equivalents at end of period | $57,740 | $72,761 |
ORGANIZATION_AND_COMPANY_BACKG
ORGANIZATION AND COMPANY BACKGROUND | 6 Months Ended |
Jun. 30, 2014 | |
ORGANIZATION AND COMPANY BACKGROUND | ' |
ORGANIZATION AND COMPANY BACKGROUND | ' |
1. ORGANIZATION AND COMPANY BACKGROUND | |
Except as otherwise indicated, references to the "Company," "Universal American," "we," "our," and "us" are to Universal American Corp., a Delaware corporation, and its subsidiaries. | |
Universal American is a specialty health and life insurance holding company with an emphasis on providing a broad array of health insurance and managed care products and services to people covered by Medicare and Medicaid. Collectively, our health plans and insurance company subsidiaries are licensed in all fifty states and in the District of Columbia and authorized to sell Medicare Advantage products, life, accident and health insurance and annuities and to provide comprehensive medical services through Medicaid. | |
Through our Medicare Advantage subsidiaries, we sell Medicare Coordinated Care Plan products, which we call HMOs, Medicare Coordinated Care products built around contracted networks of providers, which we call PPOs and Medicare Advantage private fee-for-service products, known as PFFS Plans. | |
Our APS Healthcare subsidiaries provide specialty health services focused on behavioral health benefits, disease and condition management, and quality review and improvement services to government agencies, such as state Medicaid programs, commercial health plans, employers and unions. These services are provided on either an at-risk basis or an administrative services only basis. Behavioral health benefits are administered through APS Healthcare's provider network that consists of health care providers and facilities with which APS Healthcare directly or indirectly contracts to provide the necessary treatment. APS Healthcare operates in the United States and Puerto Rico. | |
Through our subsidiary, Collaborative Health Systems, LLC, also known as CHS, we formed Accountable Care Organizations, or ACOs, under the Medicare Shared Savings Program ("Shared Savings Program") with physicians and other healthcare professionals. As of June 30, 2014 we had thirty ACOs previously approved for participation in the program by the Centers for Medicare & Medicaid Services, known as CMS. In June 2014, we ceased our participation in three ACOs based on a variety of factors, including the level of engagement by the physicians in the ACO and the likelihood of the ACO achieving shared savings. We may further reduce our participation in ACO's as we continue to evaluate their performance. In addition, earlier in 2014 we merged two ACOs to take advantage of operating synergies. Based on data provided by CMS, these thirty ACOs currently include approximately 4,500 participating providers with approximately 340,000 assigned Medicare fee-for-service beneficiaries covering portions of twelve states, both within and outside our current Medicare Advantage footprint, including southeast Texas and upstate New York. CHS provides these ACOs with care coordination, analytics and reporting, technology and other administrative capabilities to enable participating providers to deliver better care and lower healthcare costs for their Medicare fee-for-service beneficiaries. The Company provides funding to CHS to support the operating activities of CHS and the ACOs. | |
On December 1, 2013, we completed our acquisition of the assets of the Total Care Medicaid managed care plan, known as Total Care. Total Care is a Medicaid health plan in Upstate New York, currently serving approximately 40,600 members in Syracuse and surrounding areas. For further discussion of this transaction, see Note 10—Other Disclosures. | |
We discontinued marketing and selling Traditional insurance products, consisting of Medicare supplement products, fixed benefit accident and sickness insurance and senior life insurance after June 1, 2012. However, we continue to manage the block as the policies remain in force over the renewal period. | |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2014 | |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | ' |
2. BASIS OF PRESENTATION | |
We have prepared the accompanying Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or U.S. GAAP, for interim reporting in accordance with Article 10 of the Securities and Exchange Commission's Regulation S-X. Accordingly, they do not include all of the disclosures normally required by U.S. GAAP or those normally made in an Annual Report on Form 10-K. For our insurance and HMO subsidiaries, U.S. GAAP differs from statutory accounting practices prescribed or permitted by regulatory authorities. We have eliminated all material intercompany transactions and balances. The interim financial information in this report is unaudited, but in the opinion of management, includes all adjustments, including normal, recurring adjustments necessary to present fairly the financial position and results of operations for the periods reported. The results of operations for the three and six months ended June 30, 2014 and 2013 are not necessarily indicative of the results to be expected for the full year. | |
Unconsolidated Subsidiaries: The ACOs we established with various healthcare providers were generally formed as Limited Liability Companies. We own a majority interest in our ACOs but do not consolidate them because we share the power to direct the activities of the ACOs that most significantly impact their performance. Our share of the income of an ACO is generally 50% and our share of losses of an ACO is generally 100%. In the event of losses, we will share in 100% of subsequent profits until our losses are recovered. Any remaining profits are generally shared at 50%. | |
The ACOs are considered variable interest entities, known as VIEs, under U.S. GAAP as these entities do not have sufficient equity to finance their own operations without additional financial support. We assess our contractual, ownership or other interests in a VIE to determine if our interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. We perform an ongoing qualitative assessment of our variable interests in VIEs to determine whether we have a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. The power to direct the activities of the ACOs that most significantly impact their performance is shared between us and the healthcare providers that we have joined with to establish the ACOs pursuant to the structure of the Management Committee of each of the ACOs. Accordingly, we have determined that we are not the primary beneficiary of the ACOs, and therefore we cannot consolidate them. We account for our participation in the ACOs using the equity method. Gains and losses from our participation in the ACOs are reported as equity in earnings (losses) of unconsolidated subsidiaries in the consolidated statements of operations. Our net investment in the ACOs is reported in other assets in the consolidated balance sheets. | |
Use of Estimates: The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported by us in our Consolidated Financial Statements and the accompanying Notes. Critical accounting policies require significant subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are based on information available at the time the estimates are made, as well as anticipated future events. Actual results could differ materially from these estimates. We periodically evaluate our estimates, and as additional information becomes available or actual amounts become determinable, we may revise the recorded estimates and reflect the revisions in our operating results. In our judgment, the accounts involving estimates and assumptions that are most critical to the preparation of our financial statements are policy related liabilities and expense recognition, deferred policy acquisition costs, goodwill and other intangible assets, investment valuation, revenue recognition, and income taxes. There have been no changes in our critical accounting policies during the current quarter. | |
Reclassifications: Beginning in 2014, in connection with the reporting of minimum medical loss ratios under the Affordable Care Act, we are reporting the costs of quality improvement initiatives in claims and other benefits in the consolidated statements of operations. Historically, these costs were reported in other operating costs and expenses. To maintain consistency with the new reporting classification, for the three and six months ended June 30, 2013 we have reclassified quality improvement initiative costs of $6.9 million and $12.9 million, respectively, from other operating costs and expenses to claims and other benefits in our consolidated statements of operations. | |
Significant Accounting Policies: For a description of existing significant accounting policies, see Note 3—Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 and Note 3—Recently Issued and Pending Accounting Pronouncements. | |
RECENTLY_ISSUED_AND_PENDING_AC
RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS | 6 Months Ended |
Jun. 30, 2014 | |
RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS | ' |
RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS | ' |
3. RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS | |
Revenue from Contracts with Customers: In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, to clarify the principles for revenue recognition. Insurance contracts are excluded from the scope of the guidance, however, our non-insurance contract revenues, including fee income, will be subject to the new guidance. | |
The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The following steps are to be applied to achieve this core principle: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation | |
ASU 2014-09 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. We are currently in the process of evaluating this new guidance. | |
Other Expenses, Fees Paid to the Federal Government by Health Insurers: In July 2011, ASU 2011-06, Other Expenses, Fees Paid to the Federal Government by Health Insurers was issued by the FASB to address questions about how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the Acts). The Acts impose an annual fee on health insurers (the "ACA fee") for each calendar year beginning on or after January 1, 2014. A health insurer's portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. The annual fee for the health insurance industry will be allocated to individual health insurers based on the ratio of the amount of an entity's direct premiums written during the preceding calendar year to the amount of health insurance for any U.S. health risk that is written during the preceding calendar year. The ASU provides that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the corresponding period with a corresponding deferred cost that is to be amortized to expense on a straight-line basis over the applicable calendar year. The ASU also notes that the fee would not meet the definition of an acquisition cost under ASC 944. The amendments are effective for calendar years beginning after December 31, 2013, when the fee initially becomes effective. | |
In January 2014, we had estimated that the fee to be paid in 2014, based on 2013 direct written premiums, would be approximately $21.7 million. As required under generally accepted accounting principles, we accrued this amount in other liabilities in our consolidated balance sheets in January 2014, with an offsetting deferred cost asset recorded in other assets. The asset is being amortized ratably over 2014 and is reported on a separate line in our consolidated statements of operations. However, in the second quarter of 2014, we received further data indicating that our ACA fee would be approximately $23.4 million. As such, in the second quarter of 2014, we adjusted our liability accrual and related asset amortization to reflect this adjustment. For the three and six month periods ended June 30, 2014, we amortized $6.2 million and $11.7 million, respectively. | |
INVESTMENTS
INVESTMENTS | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
INVESTMENTS. | ' | |||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||
4. INVESTMENTS | ||||||||||||||||||||
The amortized cost and fair value of fixed maturity investments are as follows: | ||||||||||||||||||||
June 30, 2014 | ||||||||||||||||||||
Classification | Amortized Cost | Gross | Gross | Gross | Fair Value | |||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
Gains | Losses | OTTI(1) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 42,376 | $ | 134 | $ | (29 | ) | $ | — | $ | 42,481 | |||||||||
Government sponsored agencies | 9,092 | 110 | (77 | ) | — | 9,125 | ||||||||||||||
Other political subdivisions | 59,810 | 1,691 | (55 | ) | — | 61,446 | ||||||||||||||
Corporate debt securities | 355,286 | 22,824 | (186 | ) | — | 377,924 | ||||||||||||||
Foreign debt securities | 74,713 | 3,868 | (4 | ) | — | 78,577 | ||||||||||||||
Residential mortgage-backed securities | 176,969 | 6,773 | (1,484 | ) | — | 182,258 | ||||||||||||||
Commercial mortgage-backed securities | 77,591 | 2,269 | (5 | ) | (51 | ) | 79,804 | |||||||||||||
Other asset-backed securities | 37,590 | 662 | (1 | ) | (1,780 | ) | 36,471 | |||||||||||||
| | | | | | | | | | | | | | | | | ||||
$ | 833,427 | $ | 38,331 | $ | (1,841 | ) | $ | (1,831 | ) | $ | 868,086 | |||||||||
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December 31, 2013 | ||||||||||||||||||||
Classification | Amortized Cost | Gross | Gross | Gross | Fair Value | |||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
Gains | Losses | OTTI(1) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 53,687 | $ | 131 | $ | (67 | ) | $ | — | $ | 53,751 | |||||||||
Government sponsored agencies | 10,400 | 251 | (170 | ) | — | 10,481 | ||||||||||||||
Other political subdivisions | 65,104 | 919 | (512 | ) | — | 65,511 | ||||||||||||||
Corporate debt securities | 382,496 | 16,811 | (1,707 | ) | — | 397,600 | ||||||||||||||
Foreign debt securities | 92,044 | 3,141 | (769 | ) | — | 94,416 | ||||||||||||||
Residential mortgage-backed securities | 182,853 | 4,506 | (4,143 | ) | — | 183,216 | ||||||||||||||
Commercial mortgage-backed securities | 76,503 | 2,606 | (17 | ) | (37 | ) | 79,055 | |||||||||||||
Other asset-backed securities | 50,366 | 694 | (25 | ) | (1,667 | ) | 49,368 | |||||||||||||
| | | | | | | | | | | | | | | | | ||||
$ | 913,453 | $ | 29,059 | $ | (7,410 | ) | $ | (1,704 | ) | $ | 933,398 | |||||||||
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-1 | ||||||||||||||||||||
Other-than-temporary impairments. | ||||||||||||||||||||
At June 30, 2014, gross unrealized losses on mortgage-backed and asset- backed securities totaled $3.3 million, consisting primarily of unrealized losses of $1.5 million on residential mortgage-backed securities and $1.8 million related to one subprime residential mortgage-backed security. The fair value of the subprime security is depressed due to the deterioration of collectability of the underlying mortgages. The fair values of the other securities are depressed primarily due to changes in interest rates. We have evaluated these holdings, with input from our investment managers, and do not believe further other-than-temporary impairment to be warranted. | ||||||||||||||||||||
The amortized cost and fair value of fixed maturity investments at June 30, 2014 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. | ||||||||||||||||||||
Amortized | Fair | |||||||||||||||||||
Cost | Value | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Due in 1 year or less | $ | 40,021 | $ | 40,331 | ||||||||||||||||
Due after 1 year through 5 years | 246,477 | 259,506 | ||||||||||||||||||
Due after 5 years through 10 years | 179,834 | 189,928 | ||||||||||||||||||
Due after 10 years | 74,945 | 79,788 | ||||||||||||||||||
Mortgage and asset-backed securities | 292,150 | 298,533 | ||||||||||||||||||
| | | | | | | | |||||||||||||
$ | 833,427 | $ | 868,086 | |||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
The fair value and unrealized loss as of June 30, 2014 and 2013 for fixed maturities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below: | ||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||
June 30, 2014 | Fair | Gross | Fair | Gross | Fair | Gross | ||||||||||||||
Value | Unrealized | Value | Unrealized | Value | Unrealized | |||||||||||||||
Losses and | Losses and | Losses and | ||||||||||||||||||
OTTI | OTTI | OTTI | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 8,202 | $ | (10 | ) | $ | 983 | $ | (19 | ) | $ | 9,185 | $ | (29 | ) | |||||
Government sponsored agencies | — | — | 2,000 | (77 | ) | 2,000 | (77 | ) | ||||||||||||
Other political subdivisions | 4,499 | (1 | ) | 7,132 | (54 | ) | 11,631 | (55 | ) | |||||||||||
Corporate debt securities | 12,760 | (51 | ) | 12,095 | (135 | ) | 24,855 | (186 | ) | |||||||||||
Foreign debt securities | — | — | 3,203 | (4 | ) | 3,203 | (4 | ) | ||||||||||||
Residential mortgage-backed securities | — | — | 39,914 | (1,484 | ) | 39,914 | (1,484 | ) | ||||||||||||
Commercial mortgage-backed securities | 5,264 | (5 | ) | 988 | (51 | ) | 6,252 | (56 | ) | |||||||||||
Other asset-backed securities | — | — | 5,220 | (1,781 | ) | 5,220 | (1,781 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total fixed maturities | $ | 30,725 | $ | (67 | ) | $ | 71,535 | $ | (3,605 | ) | $ | 102,260 | $ | (3,672 | ) | |||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total number of securities in an unrealized loss position | 56 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||
December 31, 2013 | Fair | Gross | Fair | Gross | Fair | Gross | ||||||||||||||
Value | Unrealized | Value | Unrealized | Value | Unrealized | |||||||||||||||
Losses and | Losses and | Losses and | ||||||||||||||||||
OTTI | OTTI | OTTI | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 17,951 | $ | (67 | ) | $ | — | $ | — | $ | 17,951 | $ | (67 | ) | ||||||
Government sponsored agencies | — | — | 1,911 | (170 | ) | 1,911 | (170 | ) | ||||||||||||
Other political subdivisions | 26,733 | (335 | ) | 6,264 | (177 | ) | 32,997 | (512 | ) | |||||||||||
Corporate debt securities | 74,902 | (1,518 | ) | 5,559 | (189 | ) | 80,461 | (1,707 | ) | |||||||||||
Foreign debt securities | 17,561 | (705 | ) | 3,091 | (64 | ) | 20,652 | (769 | ) | |||||||||||
Residential mortgage-backed securities | 82,898 | (3,337 | ) | 10,348 | (806 | ) | 93,246 | (4,143 | ) | |||||||||||
Commercial mortgage-backed securities | 6,195 | (17 | ) | 1,079 | (37 | ) | 7,274 | (54 | ) | |||||||||||
Other asset-backed securities | 9,530 | (25 | ) | 5,333 | (1,667 | ) | 14,863 | (1,692 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total fixed maturities | $ | 235,770 | $ | (6,004 | ) | $ | 33,585 | $ | (3,110 | ) | $ | 269,355 | $ | (9,114 | ) | |||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total number of securities in an unrealized loss position | 144 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
The decrease in gross unrealized losses at June 30, 2014 compared to December 31, 2013, and the resulting decrease in the number of securities in an unrealized loss position, is due to an overall flattening of the yield curve during 2014, resulting in a decline in interest-related unrealized losses. | ||||||||||||||||||||
Interest Rate Swaps | ||||||||||||||||||||
We terminated all outstanding interest rate swaps during 2013 and had no outstanding interest rate swaps at June 30, 2014. | ||||||||||||||||||||
Realized Gains and Losses | ||||||||||||||||||||
Gross realized gains and gross realized losses on investments included in net realized gains on investments in the consolidated statements of operations are as follows: | ||||||||||||||||||||
For the | For the | |||||||||||||||||||
three months | six months | |||||||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Realized Gains: | ||||||||||||||||||||
Fixed maturities | $ | 457 | $ | 3,188 | $ | 1,941 | $ | 5,025 | ||||||||||||
Interest rate swap | — | 8,837 | — | 9,927 | ||||||||||||||||
Other | — | 33 | — | 40 | ||||||||||||||||
| | | | | | | | | | | | | | |||||||
457 | 12,058 | 1,941 | 14,992 | |||||||||||||||||
| | | | | | | | | | | | | | |||||||
Realized Losses: | ||||||||||||||||||||
Fixed maturities | (2 | ) | (1,977 | ) | (439 | ) | (2,435 | ) | ||||||||||||
| | | | | | | | | | | | | | |||||||
Net realized gains on investments | $ | 455 | $ | 10,081 | $ | 1,502 | $ | 12,557 | ||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
5. FAIR VALUE MEASUREMENTS | ||||||||||||||
We carry fixed maturity investments and equity securities at fair value in our Consolidated Financial Statements. These fair value disclosures consist of information regarding the valuation of these financial instruments followed by the fair value measurement disclosure requirements of Accounting Standards Codification 820-10, Fair Value Measurements and Disclosures Topic, known as ASC 820-10. ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs in the valuation techniques used to measure fair value into three broad Levels, numbered 1, 2, and 3. For further discussion, see Note 7—Fair Value Measurements included in our Annual Report on Form 10-K for the year ended December 31, 2013. | ||||||||||||||
The following table presents our recurring fair value measurements by ASC-820-10 hierarchy levels (in thousands): | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
June 30, 2014 | ||||||||||||||
Assets: | ||||||||||||||
Fixed maturities, available for sale | $ | 868,086 | $ | — | $ | 865,884 | $ | 2,202 | ||||||
Equity securities | 14,054 | — | 14,054 | — | ||||||||||
| | | | | | | | | | | | | | |
Total assets | $ | 882,140 | $ | — | $ | 879,938 | $ | 2,202 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
December 31, 2013 | ||||||||||||||
Assets: | ||||||||||||||
Fixed maturities, available for sale | $ | 933,398 | $ | — | $ | 931,106 | $ | 2,292 | ||||||
Equity securities | 13,253 | — | 13,253 | — | ||||||||||
| | | | | | | | | | | | | | |
Total assets | $ | 946,651 | $ | — | $ | 944,359 | $ | 2,292 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
The following table provides a summary of changes in the recurring fair value measurement of our Level 3 financial instruments: | ||||||||||||||
Fixed | ||||||||||||||
Maturities | ||||||||||||||
(in thousands) | ||||||||||||||
Fair value as of December 31, 2013 | $ | 2,292 | ||||||||||||
Paydowns | (47 | ) | ||||||||||||
Unrealized losses included in AOCI(1)(2) | (1 | ) | ||||||||||||
| | | | | ||||||||||
Fair value as of March 31, 2014 | 2,244 | |||||||||||||
Paydowns | (42 | ) | ||||||||||||
Fair value as of June 30, 2014 | $ | 2,202 | ||||||||||||
| | | | | ||||||||||
| | | | | ||||||||||
-1 | ||||||||||||||
AOCI: Accumulated other comprehensive income. | ||||||||||||||
-2 | ||||||||||||||
Unrealized gains and losses represent changes in values of Level 3 financial instruments only for the periods in which the instruments are classified as Level 3. | ||||||||||||||
ACCUMULATED_OTHER_COMPREHENSIV
ACCUMULATED OTHER COMPREHENSIVE INCOME | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ' | |||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ' | |||||||||||||
6. ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||
The components of accumulated other comprehensive income are as follows (in thousands): | ||||||||||||||
Net Unrealized | Gross | Long-Term | Accumulated | |||||||||||
Gains (Losses) | Unrealized | Claim Reserve | Other | |||||||||||
on Investments | OTTI | Adjustment | Comprehensive | |||||||||||
Available for Sale | Income | |||||||||||||
Three months ended June 30, 2014 | ||||||||||||||
Balance as of April 1, 2014 | $ | 18,823 | $ | (1,130 | ) | $ | (6,623 | ) | $ | 11,070 | ||||
Other comprehensive income before reclassifications | 5,549 | (60 | ) | (914 | ) | 4,575 | ||||||||
Amounts reclassified from other comprehensive income | (295 | ) | — | — | (295 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive income | 5,254 | (60 | ) | (914 | ) | 4,280 | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2014 | $ | 24,077 | $ | (1,190 | ) | $ | (7,537 | ) | $ | 15,350 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Three months ended June 30, 2013 | ||||||||||||||
Balance as of April 1, 2013 | $ | 37,746 | $ | (2,155 | ) | $ | (8,080 | ) | $ | 27,511 | ||||
Other comprehensive loss before reclassifications | (14,470 | ) | 643 | 2,255 | (11,572 | ) | ||||||||
Amounts reclassified from other comprehensive loss | (6,553 | ) | — | — | (6,553 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive loss | (21,023 | ) | 643 | 2,255 | (18,125 | ) | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2013 | $ | 16,723 | $ | (1,512 | ) | $ | (5,825 | ) | $ | 9,386 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, 2014 | ||||||||||||||
Balance as of January 1, 2014 | $ | 13,909 | $ | (1,107 | ) | $ | (5,473 | ) | $ | 7,329 | ||||
Other comprehensive income before reclassifications | 11,144 | (83 | ) | (2,064 | ) | 8,997 | ||||||||
Amounts reclassified from other comprehensive income | (976 | ) | — | — | (976 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive income | 10,168 | (83 | ) | (2,064 | ) | 8,021 | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2014 | $ | 24,077 | $ | (1,190 | ) | $ | (7,537 | ) | $ | 15,350 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, 2013 | ||||||||||||||
Balance as of January 1, 2013 | $ | 39,934 | $ | (3,010 | ) | $ | (7,835 | ) | $ | 29,089 | ||||
Other comprehensive loss before reclassifications | (15,049 | ) | 1,498 | 2,010 | (11,541 | ) | ||||||||
Amounts reclassified from other comprehensive loss | (8,162 | ) | — | — | (8,162 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive loss | (23,211 | ) | 1,498 | 2,010 | (19,703 | ) | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2013 | $ | 16,723 | $ | (1,512 | ) | $ | (5,825 | ) | $ | 9,386 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Table amounts are presented net of tax at a rate of 35%. | ||||||||||||||
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
STOCK-BASED COMPENSATION | ' | |||||||
7. STOCK-BASED COMPENSATION | ||||||||
In April 2011, we established the Universal American Corp. 2011 Omnibus Equity Award Plan (the "2011 Equity Plan"). The 2011 Equity Plan is the sole active plan for providing equity compensation to eligible employees, directors and other third parties. We issue shares upon the exercise of options granted under the plan. Detailed information for activity in our stock-based incentive plan can be found in Note 19—Stock-Based Compensation in our Annual Report on Form 10-K for the year ended December 31, 2013. | ||||||||
Compensation expense, included in other operating costs and expenses, and the related tax benefit were as follows: | ||||||||
Three Months | ||||||||
Ended June 30, | ||||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Stock options | $ | 1,145 | $ | 1,269 | ||||
Restricted stock awards | 1,266 | 998 | ||||||
| | | | | | | | |
Total stock-based compensation expense | 2,411 | 2,267 | ||||||
Tax benefit recognized(1) | 711 | 393 | ||||||
| | | | | | | | |
Stock-based compensation expense, net of tax | $ | 1,700 | $ | 1,874 | ||||
| | | | | | | | |
| | | | | | | | |
Six Months | ||||||||
Ended June 30, | ||||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Stock options | $ | 2,276 | $ | 1,919 | ||||
Restricted stock awards | 2,675 | 1,798 | ||||||
| | | | | | | | |
Total stock-based compensation expense | 4,951 | 3,717 | ||||||
Tax benefit recognized(1) | 1,462 | 483 | ||||||
| | | | | | | | |
Stock-based compensation expense, net of tax | $ | 3,489 | $ | 3,234 | ||||
| | | | | | | | |
| | | | | | | | |
-1 | ||||||||
Tax benefit recognized includes the estimated effect of non-deductible compensation costs. | ||||||||
Stock Option Awards | ||||||||
We recognize compensation cost for share-based payments to employees, directors and other third parties based on the grant date fair value of the award, which we amortize over the grantees' service period in accordance with the provisions of Compensation—Stock Compensation Topic, ASC 718-10. We use the Black-Scholes valuation model to value stock options. | ||||||||
We estimated the fair value for options granted during the period at the date of grant using a Black-Scholes option pricing model with the following range of assumptions: | ||||||||
For options | ||||||||
granted in | ||||||||
2014 | ||||||||
Weighted-average grant date fair value | $2.11 - $2.42 | |||||||
Risk free interest rates | 1.11% - 1.31% | |||||||
Dividend yields | 0.00% | |||||||
Expected volatility | 38.19% - 39.49% | |||||||
Expected lives of options (in years) | 3.75 | |||||||
We did not capitalize any cost of stock-based compensation. Future expense may vary based upon factors such as the number of awards granted by us and the then-current fair value of such awards. | ||||||||
A summary of option activity for the six months ended June 30, 2014 is set forth below: | ||||||||
Options | Options | Weighted | ||||||
(in thousands) | Average Exercise | |||||||
Price | ||||||||
Outstanding at January 1, 2014 | 5,692 | $ | 7.37 | |||||
Granted | 1,456 | 7.03 | ||||||
Exercised | (106 | ) | 6.78 | |||||
Forfeited or expired | (777 | ) | 7.28 | |||||
| | | | | | | | |
Outstanding at June 30, 2014 | 6,265 | $ | 7.31 | |||||
| | | | | | | | |
| | | | | | | | |
The total intrinsic value of stock options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised was less than $0.1 million during each of the six month periods ended June 30, 2014 and 2013. | ||||||||
We received proceeds of $0.7 million and less than $0.5 million from the exercise of stock options during each of the six month periods ended June 30, 2014 and 2013. | ||||||||
As of June 30, 2014, the total compensation cost related to non-vested option awards not yet recognized was $9.6 million, which we expect to recognize over a weighted average period of 3.2 years. | ||||||||
Restricted Stock Awards | ||||||||
In accordance with our 2011 Equity Plan, we may grant restricted stock to employees, directors and other third parties. These awards generally vest ratably over a four-year period; however during the six months ended June 30, 2014 and 2013 we paid a portion of the annual bonuses in the form of restricted stock. The 2014 award and 2013 award vest under certain circumstances on the one-year and two-year anniversary of the grant, respectively. We generally value restricted stock awards at an amount equal to the market price of our common stock on the date of grant. We recognize compensation expense for restricted stock awards on a straight line basis over the vesting period. | ||||||||
A summary of non-vested restricted stock award activity for the six months ended June 30, 2014 is set forth below: | ||||||||
Non-Vested Restricted Stock | Shares | Weighted Average | ||||||
(in thousands) | Grant-Date | |||||||
Fair Value | ||||||||
Non-vested at January 1, 2014 | 1,333 | $ | 9.54 | |||||
Granted | 1,408 | 6.87 | ||||||
Vested | (336 | ) | 10.08 | |||||
Forfeited | (333 | ) | 8.16 | |||||
| | | | | | | | |
Non-vested at June 30, 2014 | 2,072 | $ | 7.86 | |||||
| | | | | | | | |
| | | | | | | | |
The total fair value of shares of restricted stock vested during the three months ended June 30, 2014 was $2.4 million. | ||||||||
Tax Benefits of Stock-Based Compensation | ||||||||
ASC 718-10 requires us to report the benefits of tax deductions in excess of recognized compensation cost of equity awards as a financing cash flow. We recognized ($0.7) million and $0.4 million of financing cash flows for these excess tax deductions for the six month periods ended June 30, 2014 and 2013, respectively. | ||||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2014 | |
COMMITMENTS AND CONTINGENCIES. | ' |
COMMITMENTS AND CONTINGENCIES | ' |
8. COMMITMENTS AND CONTINGENCIES | |
Legal Proceedings | |
In addition to the matters discussed below, we are also subject to a variety of legal proceedings, arbitrations, investigations, audits, claims and litigation, including claims under the False Claims Act and claims for benefits under insurance policies and claims by members, providers, customers, employees, regulators and other third parties. In some cases, plaintiffs seek punitive damages. It is not possible to accurately predict the outcome or estimate the resulting penalty, fine or other remedy that may result from any current or future legal proceeding, investigation, audit, claim or litigation. Nevertheless, the range of outcomes and losses could be significant and could have a material adverse effect on our consolidated financial position, results of operations, or cash flows. | |
On September 17, 2013, APS Healthcare, Inc. received a subpoena from the Department of Health and Human Services, Office of Inspector General ("HHS-OIG"), requesting documents relating to APS Healthcare's former Medicaid contracts with the State of Missouri that were in existence from 2006 to 2010. | |
On October 22, 2013, we filed a lawsuit in the United States District Court for the District of Delaware against funds affiliated with the private equity firm GTCR ("GTCR"), David Katz, a former managing director of GTCR, and former senior management of APS Healthcare (Gregory Scott, Jerome Vaccaro and John McDonough, all such defendants, collectively, the "Defendants"). The lawsuit, which alleges securities fraud, multiple material breaches of contract and common law fraud, seeks substantial damages, including punitive damages. The lawsuit arises out of our acquisition of APS Healthcare from GTCR in March 2012. The Defendants filed a motion to dismiss the complaint. In a decision issued on July 24, 2014, the court denied the motion with respect to the breach of contract claim. The court granted the motion with respect to the securities fraud claims and portions of the common law fraud claims on the ground that they did not provide enough detail about each defendant's specific role in the fraud. The decision permits us to file an amended complaint with those details and we intend to do so. | |
Government Regulations | |
Laws and regulations governing Medicare, Medicaid and other state and federal healthcare and insurance programs are complex and subject to significant interpretation. As part of the recent healthcare reform legislation, CMS and other regulatory agencies have been exercising increased oversight and regulatory authority over our Medicare and other businesses. Compliance with such laws and regulations is subject to CMS audit, other governmental review and investigation and significant and complex interpretation. According to CMS, we are a high-risk Medicare Advantage sponsor. As a result, CMS continues to audit our Medicare Advantage plans with regularity to ensure we are in compliance with applicable laws, rules, regulations and CMS instructions. There can be no assurance that we will be found to be in compliance with all such laws, rules and regulations in connection with these audits, reviews and investigations, and at times we have been found to be out of compliance. Failure to be in compliance can subject us to significant regulatory action including significant fines, penalties, cancellation of contracts with governmental agencies or operating restrictions on our business, including, without limitation, suspension of our ability to market to and enroll new members in our Medicare plans, termination of our contracts with CMS, exclusion from Medicare and other state and federal healthcare programs and inability to expand into new markets or add new products within existing markets. | |
Certain of our businesses provide products and services to various government agencies. As a government contractor, we are subject to the terms of the contracts we have with those agencies and applicable laws governing government contracts. We may also be subject to false claim act litigation (also known as qui tam litigation) brought by individuals who seek to sue on behalf of the government, alleging that the government contractor submitted false claims to the government. In 2011, we settled a false claim act investigation involving the sales and marketing practices of our former Wisconsin Medicare Advantage HMO plans. In addition, in 2011 and prior to our acquisition of APS Healthcare in 2012, Innovative Resources Group, LLC ("IRG"), a subsidiary of APS Healthcare, settled a false claim act matter arising out of its Medicaid contract with the State of Georgia. IRG has also been named as a defendant in a false claims act litigation involving its Medicaid contract with the State of Nevada that terminated in 2010, is the subject of an investigation by the Department of Health and Human Services, Office of Inspector General relating to its Medicaid contracts with the State of Missouri that were in existence from 2006 to 2010 and is the subject of an investigation by the Tennessee Attorney General's office related to IRG's operation of a disease management, health management and wellness program for Tennessee state employees that was in existence in 2011 and 2012. It is possible that IRG, other APS Healthcare subsidiaries or other Universal American companies could be party to additional false claims act investigations and litigation in the future and that the existing or future litigation or investigations could have a material adverse effect on our business and results of operations. | |
BUSINESS_SEGMENT_INFORMATION
BUSINESS SEGMENT INFORMATION | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
BUSINESS SEGMENT INFORMATION | ' | |||||||||||||
BUSINESS SEGMENT INFORMATION | ' | |||||||||||||
9. BUSINESS SEGMENT INFORMATION | ||||||||||||||
As of June 30, 2014, our business segments are based on product and consist of | ||||||||||||||
• | ||||||||||||||
Senior Managed Care—Medicare Advantage and, | ||||||||||||||
• | ||||||||||||||
Traditional Insurance. | ||||||||||||||
Our remaining segment, Corporate & Other, reflects the activities of our holding company, along with start-up and operating costs associated with our ACO business, the operations of APS Healthcare, the operations of Total Care, acquired on December 1, 2013, and other ancillary operations. | ||||||||||||||
We report intersegment revenues and expenses on a gross basis in each of the operating segments but eliminate them in the consolidated results. These intersegment revenues and expenses affect the amounts reported on the individual financial statement line items, but we eliminate them in consolidation and they do not change income before taxes. The most significant items eliminated are intersegment revenue and expense relating to commissions earned by agency subsidiaries in our Corporate & Other segment from insurance subsidiaries in our Traditional segment and in 2013 for services provided by APS Healthcare to our Senior Managed Care—Medicare Advantage segment. | ||||||||||||||
Financial data by segment, with a reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes in accordance with U.S. GAAP is as follows: | ||||||||||||||
Three months ended June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Revenues | Income(loss) | Revenues | Income(loss) | |||||||||||
before | before | |||||||||||||
Income Taxes | Income Taxes | |||||||||||||
(in thousands) | ||||||||||||||
Senior Managed Care—Medicare Advantage | $ | 362,386 | $ | 12,799 | $ | 394,909 | $ | 46 | ||||||
Traditional Insurance | 51,869 | 3,425 | 58,586 | 5,057 | ||||||||||
Corporate & Other | 105,431 | (25,738 | ) | 74,755 | (109,290 | ) | ||||||||
Intersegment revenues | (765 | ) | — | (4,355 | ) | — | ||||||||
Adjustments to segment amounts: | ||||||||||||||
Net realized gains on investments(1) | 455 | 455 | 10,081 | 10,081 | ||||||||||
| | | | | | | | | | | | | | |
Total | $ | 519,376 | $ | (9,059 | ) | $ | 533,976 | $ | (94,106 | ) | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Revenues | Income(loss) | Revenues | Income(loss) | |||||||||||
before | before | |||||||||||||
Income Taxes | Income Taxes | |||||||||||||
(in thousands) | ||||||||||||||
Senior Managed Care—Medicare Advantage | $ | 722,161 | $ | 37,678 | $ | 824,937 | $ | 38,640 | ||||||
Traditional Insurance | 105,870 | 3,320 | 120,261 | 7,403 | ||||||||||
Corporate & Other | 204,061 | (53,554 | ) | 147,360 | (130,062 | ) | ||||||||
Intersegment revenues | (1,552 | ) | — | (7,875 | ) | — | ||||||||
Adjustments to segment amounts: | ||||||||||||||
Net realized gains on investments(1) | 1,502 | 1,502 | 12,557 | 12,557 | ||||||||||
| | | | | | | | | | | | | | |
Total | $ | 1,032,042 | $ | (11,054 | ) | $ | 1,097,240 | $ | (71,462 | ) | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
We evaluate the results of operations of our segments based on income (loss) before realized gains and losses and income taxes. We believe that realized gains and losses are not indicative of overall operating trends. | ||||||||||||||
OTHER_DISCLOSURES
OTHER DISCLOSURES | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
OTHER DISCLOSURES | ' | ||||||||||||||||||
OTHER DISCLOSURES | ' | ||||||||||||||||||
10. OTHER DISCLOSURES | |||||||||||||||||||
Income Taxes: For interim financial reporting, except in circumstances as described in the following paragraph we estimate our annual effective tax rate based on projected taxable income for the full year and record a quarterly tax provision based on that estimated annual effective tax rate. | |||||||||||||||||||
In situations where uncertainty surrounding possible future events or transactions precludes our ability to make a reliable estimate of pre-tax income for the full year, projected pre-tax income for the full year is close to break-even, or permanent differences are significant when compared to projected pre-tax income, our estimated annual effective tax rate may become volatile and could distort the income tax provision for an interim period. When this happens, we calculate our interim income tax provision using actual year-to-date financial results. | |||||||||||||||||||
As the year progresses, we refine our estimate of full year pre-tax income as new information becomes available, including actual year-to-date financial results. This continual estimation process could result in a change to our estimated annual effective tax rate, or cause us to change between use of an estimated annual effective tax rate and actual year-to-date financial results in calculating our year-to-date income tax provision. When this occurs, we adjust the income tax provision during the quarter in which the change occurs so that the year-to-date income tax provision reflects the current estimates and methodology used. In both cases, the tax effect of realized gains and losses as well as non-recurring tax items are reported in the interim period in which they occur. Significant judgment is required in determining our annual estimated effective tax rate and in evaluating our tax positions. | |||||||||||||||||||
For the three and six months ended June 30, 2014, we determined our current year income tax provision using actual year-to-date financial results for our domestic and foreign tax jurisdictions, as compared to the estimated annual effective tax rate method utilized in 2013. | |||||||||||||||||||
Our effective tax rate was (8.3%) for the second quarter of 2014 compared to 2.4% for the second quarter of 2013. The variance in the effective tax rate compared with the 35% federal rate was driven primarily by permanent items. For the quarter ended June 30, 2014, the tax effect of permanent items exceeded the tax effect of our loss from operations, resulting in income tax expense. Permanent items include those items that were mandated as non-deductible under the Affordable Care Act (ACA fee of $6.2 million in 2014 and non-deductible executive compensation) as well as interest on the mandatorily redeemable preferred stock. We include state and foreign income taxes in our tax expense that also contributed to the variance in the effective tax rate. | |||||||||||||||||||
Our effective tax rate was (34.4%) for the six months ended June 30, 2014 compared to (8.9%) for same period of 2013. The variance in the effective tax rate compared with the 35% federal rate was driven primarily by permanent items. For the six months ended June 30, 2014, the tax effect of permanent items exceeded the tax effect of our loss from operations, resulting in income tax expense. Permanent items include those items that were mandated as non-deductible under the Affordable Care Act (ACA fee of $11.7 million in 2014 and non-deductible executive compensation) as well as interest on the mandatorily redeemable preferred stock. We include state and foreign income taxes in our tax expense that also contributed to the variance in the effective tax rate. | |||||||||||||||||||
Stock Repurchase Plan: On August 1, 2013, our Board of Directors authorized the repurchase of up to $40 million of our outstanding common stock. Purchases may occur from time to time in the open market, in privately negotiated transactions, or otherwise as market conditions permit. On May 13, 2014 we repurchased and retired six million shares of our common stock directly from funds associated with Capital Z Partners Management, LLC at a price of $6.03 per share for total consideration of $36.2 million. We used cash on hand to fund the repurchase of these shares. | |||||||||||||||||||
Acquisition of Total Care: On December 1, 2013, we completed our acquisition of the assets of the Total Care Medicaid managed care plan, known as Total Care. The purchase price for the acquisition was $6.2 million in cash, of which $3.3 million was paid at closing. An estimated $2.9 million of contingent consideration will be paid in the future based on membership and quality improvements of the health plan. At closing, the excess of the purchase price over the tangible assets acquired, totaling $5.8 million was allocated to amortizing intangible assets, including customer relationships, provider networks and trade names, with estimated lives of 8 years. The balance of $0.1 million was allocated to goodwill. | |||||||||||||||||||
During the first quarter of 2014, we made acquisition accounting adjustments to reflect a $0.1 million increase in our estimated fair value of the provider networks with a corresponding adjustment to eliminate goodwill. There have been no other adjustments to the fair value estimates made as of the acquisition date. | |||||||||||||||||||
Reinsurance: We evaluate the financial condition of our reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies. We are obligated to pay claims in the event that a reinsurer to whom we have ceded an insured claim fails to meet its obligations under the reinsurance agreement. We are also obligated to pay claims on the traditional business of Pennsylvania Life Insurance Company, the company that we sold to CVS Caremark in 2011, in the event that any of the third party reinsurers to whom Pennsylvania Life has ceded an insured claim fails to meet their obligations under the reinsurance agreement. We are not aware of any instances where any of our reinsurers have been unable to pay any policy claims on any reinsured business. | |||||||||||||||||||
As of June 30, 2014, all of our primary reinsurers, as well as the primary first party reinsurers of Pennsylvania Life's traditional business, were rated "A-" (Excellent) or better by A.M. Best with the exception of one reinsurer. For that reinsurer, which is not rated, a trust containing assets at 106% of reserves was established at the inception of the reinsurance agreement. The trust agreement requires that on an ongoing basis the trust assets be maintained at a minimum level of 100% of reserves. The reserves amounted to approximately $130.6 million as of June 30, 2014. | |||||||||||||||||||
Restructuring Charges: A summary of our restructuring liability balance as of June 30, 2014 follows: | |||||||||||||||||||
Segment | January 1, | Charge to | Cash | Non-cash | June 30, | ||||||||||||||
Balance | Earnings | Paid | Balance | ||||||||||||||||
(in thousands) | |||||||||||||||||||
2014 | |||||||||||||||||||
Workforce reduction | Corporate & Other | $ | 6,246 | $ | 484 | $ | (3,502 | ) | $ | — | $ | 3,228 | |||||||
Facility consolidation | Traditional | 222 | — | — | (58 | ) | 164 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | $ | 6,468 | $ | 484 | $ | (3,502 | ) | $ | (58 | ) | $ | 3,392 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
For further discussion of our restructuring initiatives, see Note 22—Other Operational Disclosures—Restructuring Charges in our Annual Report on Form 10-K for the year ended December 31, 2013. | |||||||||||||||||||
Principal and Interest Payments on Term Loan: During the six months ended June 30, 2014, we were not required to make any principal payments as all scheduled 2014 principal payments, totaling $14.3 million, were prepaid on November 4, 2013, in connection with the amendment of our credit facility. During the three and six month periods ended June 30, 2014, we made interest payments totaling $0.7 million and $1.4 million, respectively. | |||||||||||||||||||
During the three and six month periods ended June 30, 2013, we made principal and interest payments totaling $3.6 million and $7.1 million, respectively, and interest payments totaling $0.8 million and $1.3 million, respectively. | |||||||||||||||||||
Unconsolidated Subsidiaries: We account for our participation in the ACOs using the equity method. Gains and losses from our participation in the ACOs are reported as equity in losses of unconsolidated subsidiaries in the consolidated statements of operations. Our net investment in the ACOs is reported in other assets in the consolidated balance sheets. We recognized equity in losses of our unconsolidated ACOs of $7.3 million and $15.6 million for the three and six months ended June 30, 2014, respectively, and losses of $8.9 million and $17.2 million for the three and six months ended June 30, 2013, respectively. For additional information on the ACOs, see Note 1—Organization and Company Background and Note 2—Basis of Presentation. | |||||||||||||||||||
Earnings Per Common Share Computation: The calculation of the diluted loss per common share presented in the consolidated statements of operations excludes common stock equivalents from stock options and unvested restricted stock that are potentially dilutive because to include them would be antidilutive when reporting a net loss. Total shares excluded were 0.5 million and 0.4 million, respectively, for the three and six month periods ended June 30, 2014 and 0.1 million for both the three and six month periods ended June 30, 2013. | |||||||||||||||||||
SUBSEQUENT_EVENT
SUBSEQUENT EVENT | 6 Months Ended |
Jun. 30, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENT | ' |
11. SUBSEQUENT EVENT | |
Sale of Today's Options of Oklahoma: On July 22, 2014, we entered into an agreement to sell the outstanding common stock of Today's Options of Oklahoma, Inc., known as TOOK, to Momentum Health, LLC, the parent company of Global Health, an Oklahoma-based health maintenance organization. TOOK operates an HMO Medicare Advantage plan in Oklahoma with approximately 5,800 lives. We expect to receive approximately $14.5 million of gross proceeds in the transaction, consisting of a base amount of $9.4 million, plus approximately $4.5 million of excess statutory capital and surplus above 250% risk based capital, plus approximately $0.6 million relating to certain balances receivable from CMS at the closing date. The transaction, which is expected to close in the third quarter of 2014, is subject to customary closing conditions, including regulatory approvals. | |
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
BASIS OF PRESENTATION | ' |
Use of Estimates | ' |
Use of Estimates: The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported by us in our Consolidated Financial Statements and the accompanying Notes. Critical accounting policies require significant subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are based on information available at the time the estimates are made, as well as anticipated future events. Actual results could differ materially from these estimates. We periodically evaluate our estimates, and as additional information becomes available or actual amounts become determinable, we may revise the recorded estimates and reflect the revisions in our operating results. In our judgment, the accounts involving estimates and assumptions that are most critical to the preparation of our financial statements are policy related liabilities and expense recognition, deferred policy acquisition costs, goodwill and other intangible assets, investment valuation, revenue recognition, and income taxes. There have been no changes in our critical accounting policies during the current quarter. | |
Reclassifications | ' |
Reclassifications: Beginning in 2014, in connection with the reporting of minimum medical loss ratios under the Affordable Care Act, we are reporting the costs of quality improvement initiatives in claims and other benefits in the consolidated statements of operations. Historically, these costs were reported in other operating costs and expenses. To maintain consistency with the new reporting classification, for the three and six months ended June 30, 2013 we have reclassified quality improvement initiative costs of $6.9 million and $12.9 million, respectively, from other operating costs and expenses to claims and other benefits in our consolidated statements of operations. |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 6 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | ||||||||||||||||||||
INVESTMENTS. | ' | |||||||||||||||||||
Schedule of amortized cost and fair value of fixed maturity investments | ' | |||||||||||||||||||
June 30, 2014 | ||||||||||||||||||||
Classification | Amortized Cost | Gross | Gross | Gross | Fair Value | |||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
Gains | Losses | OTTI(1) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 42,376 | $ | 134 | $ | (29 | ) | $ | — | $ | 42,481 | |||||||||
Government sponsored agencies | 9,092 | 110 | (77 | ) | — | 9,125 | ||||||||||||||
Other political subdivisions | 59,810 | 1,691 | (55 | ) | — | 61,446 | ||||||||||||||
Corporate debt securities | 355,286 | 22,824 | (186 | ) | — | 377,924 | ||||||||||||||
Foreign debt securities | 74,713 | 3,868 | (4 | ) | — | 78,577 | ||||||||||||||
Residential mortgage-backed securities | 176,969 | 6,773 | (1,484 | ) | — | 182,258 | ||||||||||||||
Commercial mortgage-backed securities | 77,591 | 2,269 | (5 | ) | (51 | ) | 79,804 | |||||||||||||
Other asset-backed securities | 37,590 | 662 | (1 | ) | (1,780 | ) | 36,471 | |||||||||||||
| | | | | | | | | | | | | | | | | ||||
$ | 833,427 | $ | 38,331 | $ | (1,841 | ) | $ | (1,831 | ) | $ | 868,086 | |||||||||
| | | | | | | | | | | | | | | | | ||||
| | | | | | | | | | | | | | | | | ||||
December 31, 2013 | ||||||||||||||||||||
Classification | Amortized Cost | Gross | Gross | Gross | Fair Value | |||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
Gains | Losses | OTTI(1) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 53,687 | $ | 131 | $ | (67 | ) | $ | — | $ | 53,751 | |||||||||
Government sponsored agencies | 10,400 | 251 | (170 | ) | — | 10,481 | ||||||||||||||
Other political subdivisions | 65,104 | 919 | (512 | ) | — | 65,511 | ||||||||||||||
Corporate debt securities | 382,496 | 16,811 | (1,707 | ) | — | 397,600 | ||||||||||||||
Foreign debt securities | 92,044 | 3,141 | (769 | ) | — | 94,416 | ||||||||||||||
Residential mortgage-backed securities | 182,853 | 4,506 | (4,143 | ) | — | 183,216 | ||||||||||||||
Commercial mortgage-backed securities | 76,503 | 2,606 | (17 | ) | (37 | ) | 79,055 | |||||||||||||
Other asset-backed securities | 50,366 | 694 | (25 | ) | (1,667 | ) | 49,368 | |||||||||||||
| | | | | | | | | | | | | | | | | ||||
$ | 913,453 | $ | 29,059 | $ | (7,410 | ) | $ | (1,704 | ) | $ | 933,398 | |||||||||
| | | | | | | | | | | | | | | | | ||||
| | | | | | | | | | | | | | | | | ||||
-1 | ||||||||||||||||||||
Other-than-temporary impairments. | ||||||||||||||||||||
Schedule of amortized cost and fair value of fixed maturity investments by contractual maturity | ' | |||||||||||||||||||
Amortized | Fair | |||||||||||||||||||
Cost | Value | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Due in 1 year or less | $ | 40,021 | $ | 40,331 | ||||||||||||||||
Due after 1 year through 5 years | 246,477 | 259,506 | ||||||||||||||||||
Due after 5 years through 10 years | 179,834 | 189,928 | ||||||||||||||||||
Due after 10 years | 74,945 | 79,788 | ||||||||||||||||||
Mortgage and asset-backed securities | 292,150 | 298,533 | ||||||||||||||||||
| | | | | | | | |||||||||||||
$ | 833,427 | $ | 868,086 | |||||||||||||||||
| | | | | | | | |||||||||||||
| | | | | | | | |||||||||||||
Schedule of fair value and unrealized loss for fixed maturities in a continuous unrealized loss position | ' | |||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||
June 30, 2014 | Fair | Gross | Fair | Gross | Fair | Gross | ||||||||||||||
Value | Unrealized | Value | Unrealized | Value | Unrealized | |||||||||||||||
Losses and | Losses and | Losses and | ||||||||||||||||||
OTTI | OTTI | OTTI | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 8,202 | $ | (10 | ) | $ | 983 | $ | (19 | ) | $ | 9,185 | $ | (29 | ) | |||||
Government sponsored agencies | — | — | 2,000 | (77 | ) | 2,000 | (77 | ) | ||||||||||||
Other political subdivisions | 4,499 | (1 | ) | 7,132 | (54 | ) | 11,631 | (55 | ) | |||||||||||
Corporate debt securities | 12,760 | (51 | ) | 12,095 | (135 | ) | 24,855 | (186 | ) | |||||||||||
Foreign debt securities | — | — | 3,203 | (4 | ) | 3,203 | (4 | ) | ||||||||||||
Residential mortgage-backed securities | — | — | 39,914 | (1,484 | ) | 39,914 | (1,484 | ) | ||||||||||||
Commercial mortgage-backed securities | 5,264 | (5 | ) | 988 | (51 | ) | 6,252 | (56 | ) | |||||||||||
Other asset-backed securities | — | — | 5,220 | (1,781 | ) | 5,220 | (1,781 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total fixed maturities | $ | 30,725 | $ | (67 | ) | $ | 71,535 | $ | (3,605 | ) | $ | 102,260 | $ | (3,672 | ) | |||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total number of securities in an unrealized loss position | 56 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||
December 31, 2013 | Fair | Gross | Fair | Gross | Fair | Gross | ||||||||||||||
Value | Unrealized | Value | Unrealized | Value | Unrealized | |||||||||||||||
Losses and | Losses and | Losses and | ||||||||||||||||||
OTTI | OTTI | OTTI | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
U.S. Treasury securities and U.S. Government obligations | $ | 17,951 | $ | (67 | ) | $ | — | $ | — | $ | 17,951 | $ | (67 | ) | ||||||
Government sponsored agencies | — | — | 1,911 | (170 | ) | 1,911 | (170 | ) | ||||||||||||
Other political subdivisions | 26,733 | (335 | ) | 6,264 | (177 | ) | 32,997 | (512 | ) | |||||||||||
Corporate debt securities | 74,902 | (1,518 | ) | 5,559 | (189 | ) | 80,461 | (1,707 | ) | |||||||||||
Foreign debt securities | 17,561 | (705 | ) | 3,091 | (64 | ) | 20,652 | (769 | ) | |||||||||||
Residential mortgage-backed securities | 82,898 | (3,337 | ) | 10,348 | (806 | ) | 93,246 | (4,143 | ) | |||||||||||
Commercial mortgage-backed securities | 6,195 | (17 | ) | 1,079 | (37 | ) | 7,274 | (54 | ) | |||||||||||
Other asset-backed securities | 9,530 | (25 | ) | 5,333 | (1,667 | ) | 14,863 | (1,692 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total fixed maturities | $ | 235,770 | $ | (6,004 | ) | $ | 33,585 | $ | (3,110 | ) | $ | 269,355 | $ | (9,114 | ) | |||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total number of securities in an unrealized loss position | 144 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Schedule of gross realized gains and gross realized losses on investments included in net realized gains on investments in the consolidated statements of operations | ' | |||||||||||||||||||
For the | For the | |||||||||||||||||||
three months | six months | |||||||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Realized Gains: | ||||||||||||||||||||
Fixed maturities | $ | 457 | $ | 3,188 | $ | 1,941 | $ | 5,025 | ||||||||||||
Interest rate swap | — | 8,837 | — | 9,927 | ||||||||||||||||
Other | — | 33 | — | 40 | ||||||||||||||||
| | | | | | | | | | | | | | |||||||
457 | 12,058 | 1,941 | 14,992 | |||||||||||||||||
| | | | | | | | | | | | | | |||||||
Realized Losses: | ||||||||||||||||||||
Fixed maturities | (2 | ) | (1,977 | ) | (439 | ) | (2,435 | ) | ||||||||||||
| | | | | | | | | | | | | | |||||||
Net realized gains on investments | $ | 455 | $ | 10,081 | $ | 1,502 | $ | 12,557 | ||||||||||||
| | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | |||||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
Schedule of recurring fair value measurements by hierarchy levels | ' | |||||||||||||
The following table presents our recurring fair value measurements by ASC-820-10 hierarchy levels (in thousands): | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
June 30, 2014 | ||||||||||||||
Assets: | ||||||||||||||
Fixed maturities, available for sale | $ | 868,086 | $ | — | $ | 865,884 | $ | 2,202 | ||||||
Equity securities | 14,054 | — | 14,054 | — | ||||||||||
| | | | | | | | | | | | | | |
Total assets | $ | 882,140 | $ | — | $ | 879,938 | $ | 2,202 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
December 31, 2013 | ||||||||||||||
Assets: | ||||||||||||||
Fixed maturities, available for sale | $ | 933,398 | $ | — | $ | 931,106 | $ | 2,292 | ||||||
Equity securities | 13,253 | — | 13,253 | — | ||||||||||
| | | | | | | | | | | | | | |
Total assets | $ | 946,651 | $ | — | $ | 944,359 | $ | 2,292 | ||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Summary of changes in the recurring fair value measurement of Level 3 financial instruments | ' | |||||||||||||
Fixed | ||||||||||||||
Maturities | ||||||||||||||
(in thousands) | ||||||||||||||
Fair value as of December 31, 2013 | $ | 2,292 | ||||||||||||
Paydowns | (47 | ) | ||||||||||||
Unrealized losses included in AOCI(1)(2) | (1 | ) | ||||||||||||
| | | | | ||||||||||
Fair value as of March 31, 2014 | 2,244 | |||||||||||||
Paydowns | (42 | ) | ||||||||||||
Fair value as of June 30, 2014 | $ | 2,202 | ||||||||||||
| | | | | ||||||||||
| | | | | ||||||||||
-1 | ||||||||||||||
AOCI: Accumulated other comprehensive income. | ||||||||||||||
-2 | ||||||||||||||
Unrealized gains and losses represent changes in values of Level 3 financial instruments only for the periods in which the instruments are classified as Level 3. | ||||||||||||||
ACCUMULATED_OTHER_COMPREHENSIV1
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ' | |||||||||||||
Schedule of components of accumulated other comprehensive income | ' | |||||||||||||
The components of accumulated other comprehensive income are as follows (in thousands): | ||||||||||||||
Net Unrealized | Gross | Long-Term | Accumulated | |||||||||||
Gains (Losses) | Unrealized | Claim Reserve | Other | |||||||||||
on Investments | OTTI | Adjustment | Comprehensive | |||||||||||
Available for Sale | Income | |||||||||||||
Three months ended June 30, 2014 | ||||||||||||||
Balance as of April 1, 2014 | $ | 18,823 | $ | (1,130 | ) | $ | (6,623 | ) | $ | 11,070 | ||||
Other comprehensive income before reclassifications | 5,549 | (60 | ) | (914 | ) | 4,575 | ||||||||
Amounts reclassified from other comprehensive income | (295 | ) | — | — | (295 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive income | 5,254 | (60 | ) | (914 | ) | 4,280 | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2014 | $ | 24,077 | $ | (1,190 | ) | $ | (7,537 | ) | $ | 15,350 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Three months ended June 30, 2013 | ||||||||||||||
Balance as of April 1, 2013 | $ | 37,746 | $ | (2,155 | ) | $ | (8,080 | ) | $ | 27,511 | ||||
Other comprehensive loss before reclassifications | (14,470 | ) | 643 | 2,255 | (11,572 | ) | ||||||||
Amounts reclassified from other comprehensive loss | (6,553 | ) | — | — | (6,553 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive loss | (21,023 | ) | 643 | 2,255 | (18,125 | ) | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2013 | $ | 16,723 | $ | (1,512 | ) | $ | (5,825 | ) | $ | 9,386 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, 2014 | ||||||||||||||
Balance as of January 1, 2014 | $ | 13,909 | $ | (1,107 | ) | $ | (5,473 | ) | $ | 7,329 | ||||
Other comprehensive income before reclassifications | 11,144 | (83 | ) | (2,064 | ) | 8,997 | ||||||||
Amounts reclassified from other comprehensive income | (976 | ) | — | — | (976 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive income | 10,168 | (83 | ) | (2,064 | ) | 8,021 | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2014 | $ | 24,077 | $ | (1,190 | ) | $ | (7,537 | ) | $ | 15,350 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, 2013 | ||||||||||||||
Balance as of January 1, 2013 | $ | 39,934 | $ | (3,010 | ) | $ | (7,835 | ) | $ | 29,089 | ||||
Other comprehensive loss before reclassifications | (15,049 | ) | 1,498 | 2,010 | (11,541 | ) | ||||||||
Amounts reclassified from other comprehensive loss | (8,162 | ) | — | — | (8,162 | ) | ||||||||
| | | | | | | | | | | | | | |
Net current-period other comprehensive loss | (23,211 | ) | 1,498 | 2,010 | (19,703 | ) | ||||||||
| | | | | | | | | | | | | | |
Balance as of June 30, 2013 | $ | 16,723 | $ | (1,512 | ) | $ | (5,825 | ) | $ | 9,386 | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
Schedule of compensation expense included in other operating costs and expenses and the related tax benefit | ' | |||||||
Three Months | ||||||||
Ended June 30, | ||||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Stock options | $ | 1,145 | $ | 1,269 | ||||
Restricted stock awards | 1,266 | 998 | ||||||
| | | | | | | | |
Total stock-based compensation expense | 2,411 | 2,267 | ||||||
Tax benefit recognized(1) | 711 | 393 | ||||||
| | | | | | | | |
Stock-based compensation expense, net of tax | $ | 1,700 | $ | 1,874 | ||||
| | | | | | | | |
| | | | | | | | |
Six Months | ||||||||
Ended June 30, | ||||||||
2014 | 2013 | |||||||
(in thousands) | ||||||||
Stock options | $ | 2,276 | $ | 1,919 | ||||
Restricted stock awards | 2,675 | 1,798 | ||||||
| | | | | | | | |
Total stock-based compensation expense | 4,951 | 3,717 | ||||||
Tax benefit recognized(1) | 1,462 | 483 | ||||||
| | | | | | | | |
Stock-based compensation expense, net of tax | $ | 3,489 | $ | 3,234 | ||||
| | | | | | | | |
| | | | | | | | |
-1 | ||||||||
Tax benefit recognized includes the estimated effect of non-deductible compensation costs. | ||||||||
Schedule of assumptions used to estimate the fair value for the options at the date of grant using a Black-Scholes option pricing model | ' | |||||||
For options | ||||||||
granted in | ||||||||
2014 | ||||||||
Weighted-average grant date fair value | $2.11 - $2.42 | |||||||
Risk free interest rates | 1.11% - 1.31% | |||||||
Dividend yields | 0.00% | |||||||
Expected volatility | 38.19% - 39.49% | |||||||
Expected lives of options (in years) | 3.75 | |||||||
Summary of option activity | ' | |||||||
Options | Options | Weighted | ||||||
(in thousands) | Average Exercise | |||||||
Price | ||||||||
Outstanding at January 1, 2014 | 5,692 | $ | 7.37 | |||||
Granted | 1,456 | 7.03 | ||||||
Exercised | (106 | ) | 6.78 | |||||
Forfeited or expired | (777 | ) | 7.28 | |||||
| | | | | | | | |
Outstanding at June 30, 2014 | 6,265 | $ | 7.31 | |||||
| | | | | | | | |
| | | | | | | | |
Summary of non-vested restricted stock awards | ' | |||||||
Non-Vested Restricted Stock | Shares | Weighted Average | ||||||
(in thousands) | Grant-Date | |||||||
Fair Value | ||||||||
Non-vested at January 1, 2014 | 1,333 | $ | 9.54 | |||||
Granted | 1,408 | 6.87 | ||||||
Vested | (336 | ) | 10.08 | |||||
Forfeited | (333 | ) | 8.16 | |||||
| | | | | | | | |
Non-vested at June 30, 2014 | 2,072 | $ | 7.86 | |||||
| | | | | | | | |
| | | | | | | | |
BUSINESS_SEGMENT_INFORMATION_T
BUSINESS SEGMENT INFORMATION (Tables) | 6 Months Ended | |||||||||||||
Jun. 30, 2014 | ||||||||||||||
BUSINESS SEGMENT INFORMATION | ' | |||||||||||||
Schedule of reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | |||||||||||||
Three months ended June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Revenues | Income(loss) | Revenues | Income(loss) | |||||||||||
before | before | |||||||||||||
Income Taxes | Income Taxes | |||||||||||||
(in thousands) | ||||||||||||||
Senior Managed Care—Medicare Advantage | $ | 362,386 | $ | 12,799 | $ | 394,909 | $ | 46 | ||||||
Traditional Insurance | 51,869 | 3,425 | 58,586 | 5,057 | ||||||||||
Corporate & Other | 105,431 | (25,738 | ) | 74,755 | (109,290 | ) | ||||||||
Intersegment revenues | (765 | ) | — | (4,355 | ) | — | ||||||||
Adjustments to segment amounts: | ||||||||||||||
Net realized gains on investments(1) | 455 | 455 | 10,081 | 10,081 | ||||||||||
| | | | | | | | | | | | | | |
Total | $ | 519,376 | $ | (9,059 | ) | $ | 533,976 | $ | (94,106 | ) | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Six months ended June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||
Revenues | Income(loss) | Revenues | Income(loss) | |||||||||||
before | before | |||||||||||||
Income Taxes | Income Taxes | |||||||||||||
(in thousands) | ||||||||||||||
Senior Managed Care—Medicare Advantage | $ | 722,161 | $ | 37,678 | $ | 824,937 | $ | 38,640 | ||||||
Traditional Insurance | 105,870 | 3,320 | 120,261 | 7,403 | ||||||||||
Corporate & Other | 204,061 | (53,554 | ) | 147,360 | (130,062 | ) | ||||||||
Intersegment revenues | (1,552 | ) | — | (7,875 | ) | — | ||||||||
Adjustments to segment amounts: | ||||||||||||||
Net realized gains on investments(1) | 1,502 | 1,502 | 12,557 | 12,557 | ||||||||||
| | | | | | | | | | | | | | |
Total | $ | 1,032,042 | $ | (11,054 | ) | $ | 1,097,240 | $ | (71,462 | ) | ||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
-1 | ||||||||||||||
We evaluate the results of operations of our segments based on income (loss) before realized gains and losses and income taxes. We believe that realized gains and losses are not indicative of overall operating trends. | ||||||||||||||
OTHER_DISCLOSURES_Tables
OTHER DISCLOSURES (Tables) | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
OTHER DISCLOSURES | ' | ||||||||||||||||||
Summary of restructuring liability | ' | ||||||||||||||||||
Segment | January 1, | Charge to | Cash | Non-cash | June 30, | ||||||||||||||
Balance | Earnings | Paid | Balance | ||||||||||||||||
(in thousands) | |||||||||||||||||||
2014 | |||||||||||||||||||
Workforce reduction | Corporate & Other | $ | 6,246 | $ | 484 | $ | (3,502 | ) | $ | — | $ | 3,228 | |||||||
Facility consolidation | Traditional | 222 | — | — | (58 | ) | 164 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total | $ | 6,468 | $ | 484 | $ | (3,502 | ) | $ | (58 | ) | $ | 3,392 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
ORGANIZATION_AND_COMPANY_BACKG1
ORGANIZATION AND COMPANY BACKGROUND (Details) | 6 Months Ended | |
Jun. 30, 2014 | Dec. 02, 2013 | |
item | Total Care | |
item | ||
ORGANIZATION AND COMPANY BACKGROUND | ' | ' |
Number of states in which the company's subsidiaries sell Medicare advantage products, life, accident and health insurance | 50 | ' |
Number of ACOs approved for participation in the program by the Centers for Medicare & Medicaid Services | 30 | ' |
Number of ACOs where participation has ceased | 3 | ' |
Number of ACOs merged to take advantage of operating synergies | 2 | ' |
Number of participating providers in ACOs | 4,500 | ' |
Estimated number of Medicare fee-for-service beneficiaries under ACO's | 340,000 | ' |
Number of states with ACO coverage | 12 | ' |
Organization and company background | ' | ' |
Number of members covered under Medicaid health plan | ' | 40,600 |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | |
In Millions, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
BASIS OF PRESENTATION | ' | ' | ' |
Share of the entity in income of ACOs (as a percent) | ' | 50.00% | ' |
Share of the entity in losses of ACOs (as a percent) | ' | 100.00% | ' |
Share of entity in subsequent profits in case of losses of ACOs (as a percent) | ' | 100.00% | ' |
Share of entity in profits remaining after recovery of losses of ACOs (as a percent) | ' | 50.00% | ' |
Costs of quality improvement initiatives | $6.90 | ' | $12.90 |
RECENTLY_ISSUED_AND_PENDING_AC1
RECENTLY ISSUED AND PENDING ACCOUNTING PRONOUNCEMENTS (Details) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended |
Jan. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Other Expenses, Fees Paid to the Federal Government by Health Insurers | ' | ' | ' |
Amount of amortization of deferred cost asset recognized in the income statement | ' | $6,233,000 | $11,661,000 |
ASU 2011-6 | ' | ' | ' |
Other Expenses, Fees Paid to the Federal Government by Health Insurers | ' | ' | ' |
Estimated annual fees to be paid to the federal government by health insurers | 21,700,000 | 23,400,000 | ' |
Amount of amortization of deferred cost asset recognized in the income statement | ' | $6,200,000 | $11,700,000 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Investments | ' | ' |
Amortized Cost | $833,427 | $913,453 |
Gross Unrealized Gains | 38,331 | 29,059 |
Gross Unrealized Losses | -1,841 | -7,410 |
Gross unrealized OTTI | -1,831 | -1,704 |
Fair Value | 868,086 | 933,398 |
Subprime residential mortgage loans | ' | ' |
Investments | ' | ' |
Gross Unrealized Losses | 1,800 | ' |
Number of subprime securities | 1 | ' |
U.S. Treasury securities and U.S. Government obligations | ' | ' |
Investments | ' | ' |
Amortized Cost | 42,376 | 53,687 |
Gross Unrealized Gains | 134 | 131 |
Gross Unrealized Losses | -29 | -67 |
Fair Value | 42,481 | 53,751 |
Government sponsored agencies | ' | ' |
Investments | ' | ' |
Amortized Cost | 9,092 | 10,400 |
Gross Unrealized Gains | 110 | 251 |
Gross Unrealized Losses | -77 | -170 |
Fair Value | 9,125 | 10,481 |
Other political subdivisions | ' | ' |
Investments | ' | ' |
Amortized Cost | 59,810 | 65,104 |
Gross Unrealized Gains | 1,691 | 919 |
Gross Unrealized Losses | -55 | -512 |
Fair Value | 61,446 | 65,511 |
Corporate debt securities | ' | ' |
Investments | ' | ' |
Amortized Cost | 355,286 | 382,496 |
Gross Unrealized Gains | 22,824 | 16,811 |
Gross Unrealized Losses | -186 | -1,707 |
Fair Value | 377,924 | 397,600 |
Foreign debt securities | ' | ' |
Investments | ' | ' |
Amortized Cost | 74,713 | 92,044 |
Gross Unrealized Gains | 3,868 | 3,141 |
Gross Unrealized Losses | -4 | -769 |
Fair Value | 78,577 | 94,416 |
Residential mortgage-backed securities | ' | ' |
Investments | ' | ' |
Amortized Cost | 176,969 | 182,853 |
Gross Unrealized Gains | 6,773 | 4,506 |
Gross Unrealized Losses | -1,484 | -4,143 |
Fair Value | 182,258 | 183,216 |
Commercial mortgage-backed securities | ' | ' |
Investments | ' | ' |
Amortized Cost | 77,591 | 76,503 |
Gross Unrealized Gains | 2,269 | 2,606 |
Gross Unrealized Losses | -5 | -17 |
Gross unrealized OTTI | -51 | -37 |
Fair Value | 79,804 | 79,055 |
Other asset-backed securities | ' | ' |
Investments | ' | ' |
Amortized Cost | 37,590 | 50,366 |
Gross Unrealized Gains | 662 | 694 |
Gross Unrealized Losses | -1 | -25 |
Gross unrealized OTTI | -1,780 | -1,667 |
Fair Value | 36,471 | 49,368 |
Mortgage-backed and asset-backed securities | ' | ' |
Investments | ' | ' |
Gross Unrealized Losses | $3,300 | ' |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Amortized Cost | ' | ' |
Due in 1 year or less | $40,021 | ' |
Due after 1 year through 5 years | 246,477 | ' |
Due after 5 years through 10 years | 179,834 | ' |
Due after 10 years | 74,945 | ' |
Mortgage and asset-backed securities | 292,150 | ' |
Total | 833,427 | ' |
Fair Value | ' | ' |
Due in 1 year or less | 40,331 | ' |
Due after 1 year through 5 years | 259,506 | ' |
Due after 5 years through 10 years | 189,928 | ' |
Due after 10 years | 79,788 | ' |
Mortgage and asset-backed securities | 298,533 | ' |
Fair Value | $868,086 | $933,398 |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | item | item |
Investments | ' | ' |
Less than 12 Months, Fair Value | $30,725 | $235,770 |
Less than 12 Months, Gross Unrealized Losses and OTTI | -67 | -6,004 |
12 Months or Longer, Fair Value | 71,535 | 33,585 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -3,605 | -3,110 |
Total, Fair Value | 102,260 | 269,355 |
Total, Gross Unrealized Losses and OTTI | -3,672 | -9,114 |
Total number of securities in an unrealized loss position | 56 | 144 |
U.S. Treasury securities and U.S. Government obligations | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | 8,202 | 17,951 |
Less than 12 Months, Gross Unrealized Losses and OTTI | -10 | -67 |
12 Months or Longer, Fair Value | 983 | ' |
12 Months or Longer, Gross Unrealized Losses and OTTI | -19 | ' |
Total, Fair Value | 9,185 | 17,951 |
Total, Gross Unrealized Losses and OTTI | -29 | -67 |
Government sponsored agencies | ' | ' |
Investments | ' | ' |
12 Months or Longer, Fair Value | 2,000 | 1,911 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -77 | -170 |
Total, Fair Value | 2,000 | 1,911 |
Total, Gross Unrealized Losses and OTTI | -77 | -170 |
Other political subdivisions | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | 4,499 | 26,733 |
Less than 12 Months, Gross Unrealized Losses and OTTI | -1 | -335 |
12 Months or Longer, Fair Value | 7,132 | 6,264 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -54 | -177 |
Total, Fair Value | 11,631 | 32,997 |
Total, Gross Unrealized Losses and OTTI | -55 | -512 |
Corporate debt securities | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | 12,760 | 74,902 |
Less than 12 Months, Gross Unrealized Losses and OTTI | -51 | -1,518 |
12 Months or Longer, Fair Value | 12,095 | 5,559 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -135 | -189 |
Total, Fair Value | 24,855 | 80,461 |
Total, Gross Unrealized Losses and OTTI | -186 | -1,707 |
Foreign debt securities | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | ' | 17,561 |
Less than 12 Months, Gross Unrealized Losses and OTTI | ' | -705 |
12 Months or Longer, Fair Value | 3,203 | 3,091 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -4 | -64 |
Total, Fair Value | 3,203 | 20,652 |
Total, Gross Unrealized Losses and OTTI | -4 | -769 |
Residential mortgage-backed securities | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | ' | 82,898 |
Less than 12 Months, Gross Unrealized Losses and OTTI | ' | -3,337 |
12 Months or Longer, Fair Value | 39,914 | 10,348 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -1,484 | -806 |
Total, Fair Value | 39,914 | 93,246 |
Total, Gross Unrealized Losses and OTTI | -1,484 | -4,143 |
Commercial mortgage-backed securities | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | 5,264 | 6,195 |
Less than 12 Months, Gross Unrealized Losses and OTTI | -5 | -17 |
12 Months or Longer, Fair Value | 988 | 1,079 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -51 | -37 |
Total, Fair Value | 6,252 | 7,274 |
Total, Gross Unrealized Losses and OTTI | -56 | -54 |
Other asset-backed securities | ' | ' |
Investments | ' | ' |
Less than 12 Months, Fair Value | ' | 9,530 |
Less than 12 Months, Gross Unrealized Losses and OTTI | ' | -25 |
12 Months or Longer, Fair Value | 5,220 | 5,333 |
12 Months or Longer, Gross Unrealized Losses and OTTI | -1,781 | -1,667 |
Total, Fair Value | 5,220 | 14,863 |
Total, Gross Unrealized Losses and OTTI | ($1,781) | ($1,692) |
INVESTMENTS_Details_4
INVESTMENTS (Details 4) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Gross realized gains and gross realized losses | ' | ' | ' | ' |
Realized Gains: | $457 | $12,058 | $1,941 | $14,992 |
Net realized gains on investments | 455 | 10,081 | 1,502 | 12,557 |
Fixed maturities | ' | ' | ' | ' |
Gross realized gains and gross realized losses | ' | ' | ' | ' |
Realized Gains: | 457 | 3,188 | 1,941 | 5,025 |
Realized Losses: | -2 | -1,977 | -439 | -2,435 |
Interest rate swap | ' | ' | ' | ' |
Gross realized gains and gross realized losses | ' | ' | ' | ' |
Outstanding interest rate swaps | 0 | ' | 0 | ' |
Realized Gains: | ' | 8,837 | ' | 9,927 |
Other | ' | ' | ' | ' |
Gross realized gains and gross realized losses | ' | ' | ' | ' |
Realized Gains: | ' | $33 | ' | $40 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Fixed maturities, available for sale | $868,086 | $933,398 |
Fair Value Measurements Recurring | Total | ' | ' |
Assets: | ' | ' |
Total assets | 882,140 | 946,651 |
Fair Value Measurements Recurring | Total | Fixed maturities | ' | ' |
Assets: | ' | ' |
Fixed maturities, available for sale | 868,086 | 933,398 |
Fair Value Measurements Recurring | Total | Equity securities | ' | ' |
Assets: | ' | ' |
Total assets | 14,054 | 13,253 |
Fair Value Measurements Recurring | Level 2 | ' | ' |
Assets: | ' | ' |
Total assets | 879,938 | 944,359 |
Fair Value Measurements Recurring | Level 2 | Fixed maturities | ' | ' |
Assets: | ' | ' |
Fixed maturities, available for sale | 865,884 | 931,106 |
Fair Value Measurements Recurring | Level 2 | Equity securities | ' | ' |
Assets: | ' | ' |
Total assets | 14,054 | 13,253 |
Fair Value Measurements Recurring | Level 3 | ' | ' |
Assets: | ' | ' |
Total assets | 2,202 | 2,292 |
Fair Value Measurements Recurring | Level 3 | Fixed maturities | ' | ' |
Assets: | ' | ' |
Fixed maturities, available for sale | $2,202 | $2,292 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Mar. 31, 2014 |
Changes in the recurring fair value measurement of Level 3 financial instruments: | ' | ' |
Fair value at the beginning of the period | $2,244 | $2,292 |
Paydowns | -42 | -47 |
Unrealized gains included in AOCI | ' | -1 |
Fair value at the end of the period | $2,202 | $2,244 |
ACCUMULATED_OTHER_COMPREHENSIV2
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Accumulated other comprehensive income | ' | ' | ' | ' |
Balance at the beginning of period | $11,070 | $27,511 | $7,329 | $29,089 |
Other comprehensive income (loss) before reclassifications | 4,575 | -11,572 | 8,997 | -11,541 |
Amounts reclassified from other comprehensive income | -295 | -6,553 | -976 | -8,162 |
Total other comprehensive income (loss), net of income taxes | 4,280 | -18,125 | 8,021 | -19,703 |
Balance at the end of period | 15,350 | 9,386 | 15,350 | 9,386 |
Federal rate (as a percent) | 35.00% | ' | 35.00% | ' |
Net Unrealized Gains (Losses) on Investments Available for Sale | ' | ' | ' | ' |
Accumulated other comprehensive income | ' | ' | ' | ' |
Balance at the beginning of period | 18,823 | 37,746 | 13,909 | 39,934 |
Other comprehensive income (loss) before reclassifications | 5,549 | -14,470 | 11,144 | -15,049 |
Amounts reclassified from other comprehensive income | -295 | -6,553 | -976 | -8,162 |
Total other comprehensive income (loss), net of income taxes | 5,254 | -21,023 | 10,168 | -23,211 |
Balance at the end of period | 24,077 | 16,723 | 24,077 | 16,723 |
Gross Unrealized OTTI | ' | ' | ' | ' |
Accumulated other comprehensive income | ' | ' | ' | ' |
Balance at the beginning of period | -1,130 | -2,155 | -1,107 | -3,010 |
Other comprehensive income (loss) before reclassifications | -60 | 643 | -83 | 1,498 |
Total other comprehensive income (loss), net of income taxes | -60 | 643 | -83 | 1,498 |
Balance at the end of period | -1,190 | -1,512 | -1,190 | -1,512 |
Long-Term Claim Reserve Adjustment | ' | ' | ' | ' |
Accumulated other comprehensive income | ' | ' | ' | ' |
Balance at the beginning of period | -6,623 | -8,080 | -5,473 | -7,835 |
Other comprehensive income (loss) before reclassifications | -914 | 2,255 | -2,064 | 2,010 |
Total other comprehensive income (loss), net of income taxes | -914 | 2,255 | -2,064 | 2,010 |
Balance at the end of period | ($7,537) | ($5,825) | ($7,537) | ($5,825) |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Share data in Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Total stock-based compensation expense | $2,411,000 | $2,267,000 | $4,951,000 | $3,717,000 |
Tax benefit recognized | 711,000 | 393,000 | 1,462,000 | 483,000 |
Stock-based compensation expense, net of tax | 1,700,000 | 1,874,000 | 3,489,000 | 3,234,000 |
Options, other disclosures | ' | ' | ' | ' |
Financing cash flows for excess tax deductions recognized | ' | ' | -700,000 | 400,000 |
Employees, directors and other third parties stock options | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Total stock-based compensation expense | 1,145,000 | 1,269,000 | 2,276,000 | 1,919,000 |
Assumptions used to estimate the fair value of options at the date of grant using a Black-Scholes option pricing model | ' | ' | ' | ' |
Risk free interest rates, minimum (as a percent) | ' | ' | 1.11% | ' |
Risk free interest rates, maximum (as a percent) | ' | ' | 1.31% | ' |
Dividend yields (as a percent) | ' | ' | 0.00% | ' |
Expected volatility, minimum (as a percent) | ' | ' | 38.19% | ' |
Expected volatility, maximum (as a percent) | ' | ' | 39.49% | ' |
Expected lives of options | ' | ' | '3 years 9 months | ' |
Options | ' | ' | ' | ' |
Outstanding at the beginning of the period (in shares) | ' | ' | 5,692 | ' |
Granted (in shares) | ' | ' | 1,456 | ' |
Exercised (in shares) | ' | ' | -106 | ' |
Forfeited or expired (in shares) | ' | ' | -777 | ' |
Outstanding at the end of the period (in shares) | 6,265 | ' | 6,265 | ' |
Weighted Average Exercise Price | ' | ' | ' | ' |
Outstanding at the beginning of the period (in dollars per share) | ' | ' | $7.37 | ' |
Granted (in dollars per share) | ' | ' | $7.03 | ' |
Exercised (in dollars per share) | ' | ' | $6.78 | ' |
Forfeited or expired (in dollars per share) | ' | ' | $7.28 | ' |
Outstanding at the end of the period (in dollars per share) | $7.31 | ' | $7.31 | ' |
Options, other disclosures | ' | ' | ' | ' |
Proceeds from the exercise of stock options | ' | ' | 700,000 | ' |
Compensation cost related to non-vested awards not yet recognized | 9,600,000 | ' | 9,600,000 | ' |
Weighted-average period over which compensation cost related to non-vested awards is expected to be recognized | ' | ' | '3 years 2 months 12 days | ' |
Employees, directors and other third parties stock options | Minimum | ' | ' | ' | ' |
Assumptions used to estimate the fair value of options at the date of grant using a Black-Scholes option pricing model | ' | ' | ' | ' |
Weighted-average grant date fair value (in dollars per share) | ' | ' | $2.11 | ' |
Employees, directors and other third parties stock options | Maximum | ' | ' | ' | ' |
Assumptions used to estimate the fair value of options at the date of grant using a Black-Scholes option pricing model | ' | ' | ' | ' |
Weighted-average grant date fair value (in dollars per share) | ' | ' | $2.42 | ' |
Options, other disclosures | ' | ' | ' | ' |
Total intrinsic value of options exercised | ' | ' | 100,000 | 100,000 |
Proceeds from the exercise of stock options | ' | ' | ' | 500,000 |
Restricted stock awards | ' | ' | ' | ' |
STOCK-BASED COMPENSATION | ' | ' | ' | ' |
Total stock-based compensation expense | 1,266,000 | 998,000 | 2,675,000 | 1,798,000 |
Restricted Stock Awards | ' | ' | ' | ' |
Vesting period | ' | ' | '4 years | '4 years |
Shares | ' | ' | ' | ' |
Non-vested at beginning of period (in shares) | ' | ' | 1,333 | ' |
Granted (in shares) | ' | ' | 1,408 | ' |
Vested (in shares) | ' | ' | -336 | ' |
Forfeited (in shares) | ' | ' | -333 | ' |
Non-vested at end of period (in shares) | 2,072 | ' | 2,072 | ' |
Weighted Average Grant-Date Fair Value | ' | ' | ' | ' |
Non-vested at beginning of period (in dollars per share) | ' | ' | $9.54 | ' |
Granted (in dollars per share) | ' | ' | $6.87 | ' |
Vested (in dollars per share) | ' | ' | $10.08 | ' |
Forfeited (in dollars per share) | ' | ' | $8.16 | ' |
Non-vested at end of period (in dollars per share) | $7.86 | ' | $7.86 | ' |
Non-vested shares, other disclosures | ' | ' | ' | ' |
Total fair value of shares vested | $2,400,000 | ' | ' | ' |
Restricted stock, 2 year vesting | ' | ' | ' | ' |
Restricted Stock Awards | ' | ' | ' | ' |
Vesting period | ' | ' | ' | '2 years |
Restricted stock, 1 year vesting | ' | ' | ' | ' |
Restricted Stock Awards | ' | ' | ' | ' |
Vesting period | ' | ' | '1 year | ' |
BUSINESS_SEGMENT_INFORMATION_D
BUSINESS SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | $519,376 | $533,976 | $1,032,042 | $1,097,240 |
Income (loss) before Income Taxes | -9,059 | -94,106 | -11,054 | -71,462 |
Operating segments | Senior Managed Care-Medicare Advantage | ' | ' | ' | ' |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | 362,386 | 394,909 | 722,161 | 824,937 |
Income (loss) before Income Taxes | 12,799 | 46 | 37,678 | 38,640 |
Operating segments | Traditional Insurance | ' | ' | ' | ' |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | 51,869 | 58,586 | 105,870 | 120,261 |
Income (loss) before Income Taxes | 3,425 | 5,057 | 3,320 | 7,403 |
Operating segments | Corporate & Other | ' | ' | ' | ' |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | 105,431 | 74,755 | 204,061 | 147,360 |
Income (loss) before Income Taxes | -25,738 | -109,290 | -53,554 | -130,062 |
Intersegment revenues | ' | ' | ' | ' |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | -765 | -4,355 | -1,552 | -7,875 |
Net realized gains on investments | ' | ' | ' | ' |
Reconciliation of segment revenues and segment income (loss) before income taxes to total revenue and income from continuing operations before income taxes | ' | ' | ' | ' |
Revenues | 455 | 10,081 | 1,502 | 12,557 |
Income (loss) before Income Taxes | $455 | $10,081 | $1,502 | $12,557 |
OTHER_DISCLOSURES_Details
OTHER DISCLOSURES (Details) (USD $) | 0 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | ||
Share data in Millions, except Per Share data, unless otherwise specified | Aug. 01, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | 13-May-14 |
Definitive agreement | ||||||
Income Taxes: | ' | ' | ' | ' | ' | ' |
Effective tax rate on income from continuing operations (as a percent) | ' | -8.30% | 2.40% | -34.40% | -8.90% | ' |
Federal rate (as a percent) | ' | 35.00% | ' | 35.00% | ' | ' |
Non-deductible health insurance industry fee | ' | $6,200,000 | ' | $11,700,000 | ' | ' |
Stock Repurchase Plan | ' | ' | ' | ' | ' | ' |
Authorized repurchase amount of outstanding common stock | 40,000,000 | ' | ' | ' | ' | ' |
Stock Repurchased and Retired During Period, Shares | ' | ' | ' | ' | ' | 6 |
Price per share for repurchase of common stock | ' | ' | ' | ' | ' | $6.03 |
Total consideration for repurchase of common stock | ' | ' | ' | $36,180,000 | ' | $36,200,000 |
OTHER_DISCLOSURES_Details_2
OTHER DISCLOSURES (Details 2) (USD $) | 6 Months Ended | 0 Months Ended | 3 Months Ended |
In Millions, unless otherwise specified | Jun. 30, 2014 | Dec. 02, 2013 | Mar. 31, 2014 |
item | Total Care | Total Care | |
Acquisition of total care | ' | ' | ' |
Cash paid on acquisition | ' | $6.20 | ' |
Purchase price for acquisition paid at closing | ' | 3.3 | ' |
Contingent consideration | ' | 2.9 | ' |
Amortizing intangible assets | ' | 5.8 | ' |
Estimated life | ' | '8 years | ' |
Purchase price allocated to goodwill | ' | 0.1 | ' |
Acquisition accounting adjustments | ' | ' | 0.1 |
Reinsurance | ' | ' | ' |
Number of reinsurers not rated | 1 | ' | ' |
Percentage of reserves of trust assets maintained for reinsurer, which is not rated | 106.00% | ' | ' |
Minimum percentage of reserves of trust assets maintained for reinsurer | 100.00% | ' | ' |
Asset maintained for reinsurer, which is not rated | $130.60 | ' | ' |
OTHER_DISCLOSURES_Details_3
OTHER DISCLOSURES (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 6 Months Ended | |||
Share data in Millions, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Nov. 04, 2013 | Jun. 30, 2014 | Jun. 30, 2014 |
Credit Facility | Corporate & Other | Traditional | |||||
Workforce reduction | Facility consolidation | ||||||
Restructuring liability | ' | ' | ' | ' | ' | ' | ' |
Balance at beginning of the period | ' | ' | $6,468,000 | ' | ' | $6,246,000 | $222,000 |
Charge to Earnings | ' | ' | 484,000 | ' | ' | 484,000 | ' |
Cash Paid | ' | ' | -3,502,000 | ' | ' | -3,502,000 | ' |
Non-cash | ' | ' | -58,000 | ' | ' | ' | -58,000 |
Balance at the end of the period | 3,392,000 | ' | 3,392,000 | ' | ' | 3,228,000 | 164,000 |
Principal and Interest Payments on Term Loan: | ' | ' | ' | ' | ' | ' | ' |
Principal payments | ' | ' | ' | ' | 14,300,000 | ' | ' |
Cash paid for interest | 700,000 | 7,100,000 | 1,400,000 | 1,300,000 | ' | ' | ' |
Principal payments on term loan | ' | 3,600,000 | ' | 800,000 | ' | ' | ' |
Unconsolidated Subsidiaries | ' | ' | ' | ' | ' | ' | ' |
Losses recognized from ACO arrangements | $7,285,000 | $8,915,000 | $15,607,000 | $17,203,000 | ' | ' | ' |
Earnings Per Common Share Computation | ' | ' | ' | ' | ' | ' | ' |
Antidilutive securities excluded from the computation of diluted EPS (in shares) | 0.5 | 0.1 | 0.4 | 0.1 | ' | ' | ' |
SUBSEQUENT_EVENT_Details
SUBSEQUENT EVENT (Details) (Subsequent event, TOOK, USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Jul. 22, 2014 |
item | |
Subsequent event | TOOK | ' |
Subsequent events | ' |
Number of lives | 5,800 |
Gross proceeds | $14.50 |
Base amount | 9.4 |
Excess statutory capital and surplus amount | 4.5 |
Percentage of risk based capital | 250.00% |
Receivable from CMS | $0.60 |