BW Online | November 12, 2001 | Insuring the Elderly

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NOVEMBER 12, 2001

INSIDE WALL STREET

Insuring the Elderly

Gene Marcial

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Specialty insurer Universal American Financial (UHCO ) zeroes in on a target most rivals shy away from: old folks. That's just dandy for Universal, whose products---supplemental Medicare and long-term-care coverage, among others--appeal mainly to people 65 and up. If present trends continue, the percentage of the population over 65 will nearly double in 30 years. That points to rapid growth for Universal's revenues and earnings--despite insurers' current mountain of claims from the September 11 attacks. That debacle had no great impact on Universal's sales or earnings, notes Jason Zucker, an analyst at Banc of America Securities, who has a strong-buy rating on the stock, now trading at 6.35.

In addition, Universal provides administrative services to other insurers for their senior policyholders. GE Capital, Conseco, Mutual of Omaha, and AEGON outsource this business to Universal.

One other little point: Universal, with total assets of $1.1 billion in 2000, is an attractive acquisition target as it gains ground in the senior market, says Zucker. Management recognizes, he says, that as a small player in a consolidating industry, Universal can't stay independent for long. Also, its largest shareholder, Capital Z Partners, with a 44% stake, might "welcome an exit strategy" through a buyout, says Zucker. Other insurers have been bought at 2.5 times book value. He puts Universal's book value at $4.14 a share. Zucker figures Universal will earn 52 cents a share in 2001 and 59 cents in 2002.

By Gene G. Marcial

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