709878--3/16/2007--UNIVERSAL_AMERICAN_FINANCIAL

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{regulation, government, change}

{loss, insurance, financial}

{capital, credit, financial}

{acquisition, growth, future}

{tax, income, asset}

{cost, contract, operation}

{system, service, information}

{debt, indebtedness, cash}

{personnel, key, retain}

{cost, regulation, environmental}

{operation, natural, condition}

{property, intellectual, protect}

{interest, director, officer}

{provision, law, control}

{control, financial, internal}

{product, market, service}

{stock, price, share}

{cost, operation, labor}

We have a significant amount of debt outstanding that contains restrictive covenants, and we may be unable to service and repay our debt obligations if our subsidiaries cannot pay sufficient dividends or make other cash payments to us. Capital constraints could restrict our ability to support our premium growth. If we are required to maintain higher statutory capital levels for our existing operations or if we are subject to additional capital reserve requirements as we pursue new business opportunities, our ability to obtain funds from our subsidiaries may be restricted and our cash flows and liquidity may be adversely affected. Downgrades in our debt ratings, should they occur, may adversely affect our business, financial condition and results of operations. If we fail to properly maintain the integrity of our data and information systems, our business could be materially adversely affected. Any failure by us to manage our growing operations or to successfully integrate acquisitions and other significant transactions could harm our financial results, business and prospects. If we fail to effectively implement our operational and strategic initiatives, including our Medicare initiatives, our business could be materially adversely affected. Any failure to manage sales and administrative costs could hamper profitability. Most of our assets are invested in fixed income securities and are subject to market fluctuations. We are subject to extensive government regulation; compliance with laws and regulations is complex and expensive, and any violation of the laws and regulations applicable to us could reduce our revenues and profitability and otherwise adversely affect our operating results. We are required to comply with laws governing the transmission, security and privacy of health information that require significant compliance costs, and any failure to comply with these laws could result in material criminal and civil penalties. Changes in governmental regulation or legislative reform could increase our costs of doing business and adversely affect our profitability. Our reliance upon third party administrators may disrupt or adversely affect our operations. Reductions in funding for Medicare programs could materially reduce our profitability. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 made changes to the Medicare program that will materially impact our operations and could reduce our profitability and increase competition for existing and prospective members. We may be unable to continue to provide the Medicare Part D benefit profitably. Restrictions on our ability to market would adversely affect our revenue. We may be responsible for the actions of our independent and career agents. Legal and regulatory investigations and actions are increasingly common in the insurance and managed care business and may result in financial losses and harm our reputation. The occurrence of natural or man-made disasters could adversely affect our financial condition and results of operation. Our business may suffer if we are not able to hire and retain sufficient qualified personnel or if we lose our key personnel. If our government contracts are not renewed or are terminated, our business could be substantially impaired. Because our Medicare Advantage premiums, which generate most of our Medicare Advantage revenues, are fixed by contract, we are unable to increase our Medicare Advantage premiums during the contract term if our corresponding medical benefits expense exceeds our estimates. We derive a substantial portion of our Medicare Advantage health plan revenues and profits from Medicare Advantage health plan operations in Texas, and legislative actions, economic conditions or other factors that adversely affect those operations could materially reduce our revenues and profits. CMS s risk adjustment payment system and budget neutrality factors make our revenue and profitability difficult to predict and could result in material retroactive adjustments to our results of operations. If we are unable to develop and maintain satisfactory relationships with the providers of care to our members, our profitability could be adversely affected and we may be precluded from operating in some markets. Corporate practice of medicine and fee-splitting laws may govern our business operations, and violation of such laws could result in penalties and adversely affect our arrangements with contractors and our profitability. We may not have adequate intellectual property rights in our brand names for our health plans, and we may be unable to adequately enforce such rights. We are subject to significant competition, and if we do not design and price our products properly and competitively, our membership and profitability could decline. Increased litigation and negative publicity could increase our cost of doing business. Our net income may decline if our insurance premium rates are not adequate. We hold reserves for expected claims, which are estimated, and these estimates involve an extensive degree of judgment; if actual claims exceed reserve estimates, our results could be materially adversely affected. Our reserves for future insurance policy benefits and claims may prove to be inadequate, requiring us to increase liabilities and resulting in reduced net income and shareholders equity. The availability of reinsurance on acceptable terms and the financial stability of our reinsurers could impact our ability to manage risk and increase the volume of insurance that we sell. We may experience future lapsation in our Medicare Supplement business. We may experience higher than expected loss ratios in our Medicare Supplement business. We may not be able to compete successfully if we cannot recruit and retain insurance agents. We may be required to refund or reduce premiums if our premium rates are determined to be too high. We have stopped selling new long term care insurance and the premiums that we charge for the policies that remain in force may not be adequate to cover the claims expenses that we incur. We contract with CMS to provide Medicare Part D Prescription Drug benefits. There are significant risks associated with our participation in the Medicare Part D program. Our inability to collect receivables owed to us by other Part D prescription drug plans may disrupt or adversely affect our prescription drug plans. Financial accounting for the Medicare Part D benefits is complex. We rely on the accuracy of information provided by CMS regarding the eligibility of a person to participate in our Part D plans, and any inaccuracies in those lists could cause CMS to recoup premium payments from us with respect to members who turn out not to be ours, which could reduce our revenue and profitability. Our strategic alliance with our pharmacy benefits manager, PharmaCare Management Services, Inc., could be terminated after 2007. A reduction in the number of members in our health plans could adversely affect our results of operations. We have and may continue to incur significant expenses in connection with the implementation and expansion of our new Medicare Advantage plans, which could adversely affect our operating results. Our stock price and trading volume may be volatile. If we are unable to maintain effective internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the price of our common stock. State insurance laws and anti-takeover provisions in our organizational documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

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709878--3/16/2007--UNIVERSAL_AMERICAN_FINANCIAL_CORP