Universal American Corp., a publicly traded health care company headquartered in White Plains that provides benefit plans to people covered by Medicare and Medicaid, has agreed to sell its Traditional Insurance business to Nassau Reinsurance Group Holdings L.P. in Manhattan in an all-cash deal initially valued at approximately $43 million.
The companies in an Oct. 8 announcement of their definitive agreement said the sale is expected to close in early 2016 pending state and federal regulatory approvals. At closing, Nassau will fund an additional $20 million in equity capital to support the transaction and strengthen the business moving forward. Universal American said it will also be entitled to potential earn-out payments of $13 million to $24 million through June 30, 2018.
With the sale agreement, Universal American announced a special cash dividend of 75 cents per share payable to shareholders Oct. 26. The company also announced it will repay the outstanding balance on a $44.9 million term loan and will terminate its credit facility.
Universal American”™s Traditional Insurance business includes its Medicare supplement, long-term care, disability, life and other ancillary insurance products, all of which have been in run-off since 2012 as the company began exiting those lines of business.
Nassau, a private insurance and reinsurance business founded in April with a $750 million equity capital commitment from Golden Gate Capital, will acquire all of Universal American”™s Constitution Life Insurance Co. and The Pyramid Life Insurance Co. as well as the traditional insurance business written by American Progressive Life & Health Insurance Co. of New York.
Universal American”™s approximately 30-employee traditional insurance business will become a privately held, wholly owned subsidiary of Nassau that will continue to operate from an office in Lake Mary, Florida.
The transaction is estimated to generate an after-tax loss of approximately $150 million for Universal American, including the write-off of approximately $53 million in intangible assets, the company said.
“While this transaction will generate a loss,” Universal American Chairman and CEO Richard A. Barasch said, “it allows us to exit the long-term care business as well as other, non-strategic business lines, and will free up additional capital that can be harvested for the benefit of our shareholders.” With the sale, the company can better focus its efforts on growing its Medicare Advantage business in southeast Texas and upstate New York, he added.
