Aveta Reports Fiscal 2007 Net Income of $65.6 Million; Revenues Up 27% from Fiscal 2006

Press Release: Aug 7, 2008 (12:47 pm)

NEW YORK - Aveta Inc., a leader in Medicare Advantage, today reported audited full-year revenues for 2007 grew to $1.972 billion, up 26.6% from $1.558 billion in 2006. Earnings before interest expense, income taxes, depreciation and amortization (EBITDA) totaled $213.7 million in 2007, compared to EBITDA of $74.0 million in 2006 reflecting a 189% increase. Net income for 2007 of $65.6 million compared to a net loss of $155.1 million in 2006. The loss in 2006 included a pre-tax charge for an impairment of goodwill and intangible assets of $145.1 million.

Premium revenues from the Company’s core managed care businesses totaled $1.923 billion in 2007, up 26.6% from 2006. Growth in premium revenues largely reflected the full year results of PMC in 2007 versus only a partial year of results in 2006 starting on the date of acquisition in August 2006. Additionally, premium revenues included higher risk adjusted payments and increased reimbursement from CMS.

Medical costs totaled $1.581 billion in 2007, representing a medical loss ratio of 82.2%, compared to a medical loss ratio of 86.0% in 2006. Aveta’s improved medical loss ratio is the result of lower medical trends in Puerto Rico and continued strong medical management in California. Trends in Puerto Rico were significantly mitigated in 2007 due to Aveta’s integration efforts which included the creation of a medical management infrastructure in Puerto that is similar to California operations. This infrastructure better enables the Company to coordinate care through its physician networks and reduce overall medical costs.

Administrative expenses were $179.9 million in 2007, representing an administrative expense ratio of 9.1%, as compared to an administrative expense ratio of 12.2% in 2006.

“We are pleased with continued strong performance of our California operations and of the considerable progress we have made in Puerto Rico,” said Dr. Rick Shinto, President and Chief Executive Officer of Aveta. “Through the creation of our medical management network, medical services organization and independent physician networks in Puerto Rico, we can offer enhanced benefits and improved quality of care to our seniors while controlling our medical costs. We believe we are a leader in promoting better medical care in Puerto Rico with enhanced outcomes for our beneficiaries and look forward to improving on our services in the future.”

Commenting further on Aveta’s 2007 results of operations, Warren Cole, Chief Financial Officer, cited that Aveta’s independent auditors, KPMG, issued an unqualified opinion on the Company’s 2007 financial statements. He also noted that Aveta’s financial performance has continued to improve in 2008, citing the recent announcement by Moody’s Investor Service that it has upgraded the senior debt ratings of Aveta’s operating companies in Puerto Rico and California and the Company’s recent agreement with its lenders to amend its loan agreement, ensuring a strong financial foundation for the Company’s continued growth.

About Aveta

Aveta Inc. is one of the largest health insurance organizations in the United States, caring for over 200,000 Medicare beneficiaries and 185,000 commercial members. Aveta specializes in building provider networks and management service organizations that emphasize integration and coordination of healthcare. Aveta is headquartered in Ft. Lee, New Jersey and has operations in Puerto Rico, California and Illinois.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any security nor shall any offer, solicitation or sale be deemed to be made by the Company in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Special note regarding forward looking statements:

The matters disclosed in the foregoing release include, and oral statements made from time to time by representatives of the Company may include, forward-looking statements that represent the Company’s current expectations of the future. Any such statements are subject to risks and uncertainties that could cause actual outcomes to differ materially from these expectations. These forward-looking statements include statements relating to the Company’s anticipated financial performance and business prospects. These forward-looking statements are necessarily estimates reflecting the best judgment of senior management and involve a number of risks and uncertainties, some of which may be beyond our control, that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, without limitation, the Company’s ability to implement its revised business plan and improve the operating performance of its business, membership enrollment and disenrollment patterns; changes in utilization; changes in medical and prescription drug cost trends; the Company's ability to accurately estimate and calculate Part D risk corridor adjustments; CMS retroactive risk adjustments to Medicare rates; marketing expenses related to limited open enrollment; increasing competition and potential confusion in the marketplace regarding other MA, MA-PD, PDP, and PFFS plan offerings; the Company's ability to accurately estimate incurred but not reported medical claims; contractual disputes with providers; increases in costs or liabilities associated with litigation; legislative and regulatory actions or changes; costs associated with information and data systems conversions and compliance with regulatory mandates; recent management changes; and changes in tax estimates, assets, or liabilities and valuation allowances related thereto. These forward-looking statements speak only as of the date stated and the Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized.

For more information, please contact:
Peter Poulos
Hill & Knowlton (New York)
Tel: (212) 885 -0588
Email: peter.poulos@hillandknowlton.com

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