UNIVERSAL AMERICAN FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. REINSURANCE:

In the normal course of business, the Company reinsures portions of certain policies that they underwrite to limit disproportionate risks. The Company is party to several reinsurance agreements on its life and accident & health insurance risks. The Company's senior market accident & health insurance products are reinsured under coinsurance treaties with unaffiliated insurers, while the life insurance risks are reinsured under either coinsurance or yearly-renewable term treaties with unaffiliated insurers. Under coinsurance treaties, the reinsurer receives an agreed upon percentage of all premiums and reimburses the Company that same percentage of any losses. In addition, the Company receives certain allowances from the reinsurers to cover commissions, expenses and premium taxes. Under yearly-renewable term treaties, the reinsuring company receives premiums at an agreed upon rate and holds the required reserves for its share of the risk on a yearly-renewable term basis. The Company is also party to certain reinsurance agreements whereby the Company limits its loss in excess of certain thresholds. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk to minimize its exposure to significant losses from reinsurer insolvencies. A contingent liability exists with respect to reinsurance that may become a liability of the Company in the event that the reinsurers should be unable to meet the obligations that they assumed.

The Company has several quota share reinsurance agreements in place with Hanover Life Reassurance Company ("HLR"), Cologne Life Reinsurance Company ("CLR") and Transamerica Occidental Life ("TA"), (collectively, the "Reinsurers"), which Reinsurers are rated A or better by A.M. Best. These agreements cover various accident & health insurance products written or acquired by the Company and contain ceding percentages ranging between 50% and 100%. The Reinsurers receive their pro-rata premium and pay their pro-rated benefits. In addition, the Company receives allowances from the Reinsurers to reimburse the commission, administration and premium tax expenses associated with the business reinsured. At December 31, 2000 and 1999 amounts due from these Reinsurers were as follows: 

                                             2000         1999  
Reinsurer                                    (In thousands)
CLR...................................... $  89,469   $  87,886
HLR......................................    54,838      44,269
TA.......................................    21,191      23,064 
   Total ................................ $ 165,498   $ 155,219
In conjunction with the 1999 Acquisition, Peninsular entered into a coinsurance agreement with Occidental Life Insurance Company of North Carolina ("Occidental"), a former affiliate, to cede 100% of its direct business (primarily life and annuity business). Currently, Occidental is rated B+ by A.M. Best. It is the intent of the parties to this agreement to replace the coinsurance agreement with a full assumption agreement which will effectively transfer the business to Occidental. As of December 31, 2000, approximately 52% of the business had been transferred. The reinsurance recoverable from Occidental totaled $8.8 million and $19.2 million at December 31, 2000 and 1999, respectively.

A summary of reinsurance activity for the three years ended December 31, 2000 is presented below: 

                                    As of December 31,
                            2000          1999          1998     
                                     (In thousands)
Life insurance
  in force
Gross amount            $  3,651,778  $  4,445,889  $  2,038,438
Ceded to other
  companies                 (916,669)   (1,571,284)     (735,791)
Assumed from
  other companies             51,175        50,699        47,084 
Net Amount              $  2,786,284  $  2,925,304  $  1,349,731 
Percentage of
  assumed to net                  2%            2%            4% 

                                  Year Ended December 31,
                            2000           1999         1998     
                                     (In thousands)
Direct
   Life insurance       $     41,371  $     25,704  $     15,242
   Accident & health         409,952       226,849       115,802 
     Total gross
     premiums                451,323       252,553       131,044 

Ceded to other
   companies
   Life insurance            (10,210)       (9,290)       (7,238)
   Accident & health        (224,415)     (129,537)      (82,308)
      Total ceded
      premiums              (234,625)     (138,827)      (89,546)

Assumed from
   other companies
   Life insurance              2,538         1,177           998
   Accident & health             517           574             - 
      Total assumed
      premium                  3,055         1,751           998 

Net amount
   Life insurance             33,699        17,591         9,002
   Accident & health         186,054        97,886        33,494 
      Total net
      premium           $    219,753  $    115,477  $     42,496 

Percentage of
   assumed to net  
   Life insurance                 8%            7%           11% 
   Accident & health              0%            1%            0% 
      Total assumed
      to total net                1%            2%            2%
Total claims recovered for 2000 and 1999 totaled $175.7 million and $104.9 million, respectively.