Citi Raises Price Target On Universal American (UAM)

Citi Investment Research has a Buy rating and is raising its price target on Universal American UAM to $22 from $19. In the research report, Citi writes, "After CVS pays $13 / share for the PDP segment, the market is valuing the remaining Universal business at around $7.45 per share. As Universal noted in its press release, the remaining business will have cash and statutory capital of $640 million at the end of 2010, or $8 per share. Universal will need less than $400 million of statutory capital to support its remaining revenue, by our calculation, suggesting there's more than $200 million ($2.50 per share) in capital that can be deployed to shareholders, on top of the ongoing earnings stream of the business, which we estimate at around $0.75 per share. Our price target rises from $19 to $22." Shares of UAM gained $5.84 on Friday to close at $20.45, a gain of nearly 40%.