Shareholder lawyers are trying to organize several class-action suits against a Northeastern insurer that reported a higher-than-expected Medicare supplement loss ratio for the third quarter.[@@]
The company, Universal American Financial Corp., Rye Brook, N.Y., may be best known to National Underwriter readers for its long term care insurance administration service, but the company also sells Medigap insurance and other insurance products to older consumers.
When Universal American released its third-quarter earnings Oct. 28, it reported $15 million in net income for the quarter on $237 million in revenue, compared with $19 million in net income on $204 million in revenue for the third quarter of 2004.
Although revenue at the company’s Medigap unit was up, profits at the unit fell 33% because the unit’s loss ratio increased to 71.9%, from 69%. That increase caused the company’s share price to drop 33%, to $15, according to a notice issued by Milberg Weiss Bershad & Schulman L.L.P., New York, one of the law firms trying to organize a class action against Universal American.
Milberg Weiss and the other law firms are trying to organize an action in the U.S. District Court in New York that would represent investors who had bought Universal American securities between Feb. 16 and Oct. 28.
One suit that has already been filed is Robert Kemp vs. Universal American Financial Corp. et al.
The shareholder law firms are not yet putting a dollar figure on the potential class members’ losses, but the firms say Universal American misled investors about its medical loss ratio.
Universal American itself has issued a statement taking note of the filing of the Kemp complaint and of reports of other efforts to organize legal actions.
“Universal American has reviewed the allegations contained in the complaint and believes that they are without merit,” the company says in its statement. “Universal American intends to vigorously defend itself against the complaint.”
The actions that the other law firms are organizing seem to be similar to the one outlined in the Kemp complaint, Universal American says.