SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
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AMERICAN MEDICAL SECURITY GROUP, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[American Medical Security Group, Inc. Logo]
-------------------------- [For more information contact: Cliff Bowers,
NEWS RELEASE Vice President, Corporate Communications,
for Immediate Release (920) 661-2766, Gary Guengerich, Executive
-------------------------- Vice President & CFO, (920) 661-2486]
American Medical Security Group Reports
Fourth Quarter & Full-Year 2001 Financial Results
o Net income of $0.30 per share in 4th quarter; exceeds expectations
o Full-year income per share of $0.70, before nonrecurring item
o Company increases guidance for 2002
o Health segment loss ratio improves for fifth consecutive quarter
o Cash flow positive in quarter, full year
GREEN BAY, Wis. -- February 4, 2002 -- American Medical Security Group,
Inc. (NYSE:AMZ)(AMS), today reported net income of $4.3 million or $0.30 per
share for the fourth quarter of 2001. That compares to net income of $0.1
million or $0.01 per share in the fourth quarter of 2000, and $3.5 million or
$0.25 per share in the third quarter of 2001.
For the full-year 2001, the company reported income of $10.0 million or
$0.70 per share excluding a $0.41 nonrecurring litigation charge in the first
quarter. That compares to net income of $2.7 million or $0.18 per share for the
year 2000. AMS' income and income per share have improved in each of the last
five quarters.
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Ad One
"AMS began to realize its strong potential in 2001," said Samuel V.
Miller, AMS Chairman & Chief Executive Officer. "Our positive results,
particularly in the last half of the year, reflect the culmination of aggressive
rate action over several quarters, a redefinition of our markets and strong
expense control."
According to Miller, these actions have particularly benefited AMS'
smallgroup business which is now experiencing a significant turnaround following
two years of depressed performance.
"We've made great strides in improving our profitability. Now, in light
of the positive reception for our new products, the addition of an industry
veteran as Chief Marketing Officer, and an improving competitive climate, we
hope to begin growing membership and revenues again in the second half of the
year, while maintaining our margins," Miller said.
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MEMBERSHIP & REVENUE
During 2000 and 2001, AMS addressed rising health claim costs by
increasing premiums and exiting certain unprofitable markets. As anticipated,
these actions led to a decline in membership and revenues but improved the
company's loss ratio and profitability.
Total health segment membership was 557,716 at the end of 2001 compared
to 687,863 at the end of 2000.
For the fourth quarter of 2001, total revenues were $208 million,
compared to $240 million in the same period of 2000. Total revenues were $877
million for full-year 2001, versus $990 million for the prior year. The decline
in revenues for both the fourth quarter and full-year 2001 reflect declining
membership and a higher proportion of individual MedOne business, partially
offset by increased premiums.
MedOne membership increased slightly in the fourth quarter of 2001, and
also continued to grow as a percentage of the company's overall business. MedOne
membership for the fourth quarter of 2001 represented 45% of AMS' total
membership, compared to 43% for the third quarter of 2001 and 34% for the fourth
quarter of 2000.
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Ad Two
In January 2002, Tim O'Keefe was named AMS Senior Vice President & Chief
Marketing Officer. He has more than 12 years of executive management experience
with a number of companies in the health insurance field. A key focus for
O'Keefe will be the successful rollout of the company's new small group,
individual, dental and short-term medical products. Agent reaction to the new
products in states where they have been introduced has been very positive, and
quote requests are up significantly.
HEALTH SEGMENT LOSS RATIO
The company's health segment loss ratio has declined for the fifth
consecutive quarter. In the fourth quarter of 2001, the health loss ratio was
68.9% compared to 71.3% in the third quarter of 2001 and 76.4% for the fourth
quarter of 2000. For the full-year 2001, the health segment loss ratio was 72.6%
compared to 77.2% for 2000. The improvement results from AMS' premium increases
surpassing increases in claim costs, and, to a lesser degree, a change in the
company's product mix.
"The improvement in our loss ratio has surpassed our expectations in the
past two quarters," said Gary D. Guengerich, Executive Vice President & Chief
Financial Officer. "We believe this positive trend will moderate but continue
into 2002."
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HEALTH SEGMENT EXPENSE RATIO
The company's health expense ratio for the fourth quarter of 2001 was
28.0% versus 27.0% in the third quarter of 2001 and 24.7% in the fourth quarter
of 2000. The increases primarily reflect lower premiums and a product mix change
driven by growth in the MedOne business. The MedOne business has higher selling
and administrative expenses but lower claim costs than the small group product.
COMBINED RATIO
The total health segment loss ratio plus the expense ratio, or the
combined ratio, improved to 96.9% in the fourth quarter of 2001, compared to
98.3% in the third quarter of 2001, and 101.1% in the fourth quarter of 2000.
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CASH FLOW & BALANCE SHEET
Cash flow provided by operations was $17.1 million in the fourth quarter
of 2001 and $17.6 million for the full year, a reflection of the increasing
profitability of the company. The company expects cash flow for 2002 to
significantly exceed that of 2001.
AMS had a book value per share of $16.30 and a tangible book value per
share of $8.85 at the end of the fourth quarter of 2001. That compares to $15.77
and $8.24 at the end of the fourth quarter of 2000.
EARNINGS GUIDANCE
"We are increasing our earnings guidance for 2002 based on our
significantly improved financial performance in the past two quarters,"
Guengerich said. "While there may be material upside potential beyond these
estimates, our guidance is based on rapidly emerging positive trends, tempered
by the inherent variables in our business."
The company currently projects that its earnings per share will be
approximately $0.30 for the first quarter of 2002 and between $1.15 and $1.25
for full-year 2002. The full-year amount includes approximately $0.17 per share
resulting from the nonamortization of goodwill from the adoption of FASB
Statement No. 142, "Goodwill and Other Intangible Assets."
OTHER NEWS
On January 29, 2002, Blue Cross and Blue Shield United of Wisconsin, a
wholly owned subsidiary of Cobalt Corporation, and a holder of 45% of the
outstanding shares of AMS, filed with the company notice of its intent to
nominate four persons for election to the AMS Board of Directors at the 2002
annual meeting of AMS shareholders.
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Cobalt had previously made a 13D filing in which it stated it was
considering submitting such nominations and was also looking at alternative
methods of disposing of its shares of AMS. The company has been engaged in
discussions with Cobalt concerning how to address Cobalt's need to dispose of
its shares in a manner that is favorable to all of the company's shareholders.
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Ad Four
American Medical Security Group, through its operating subsidiaries,
markets health care benefits and insurance products to small businesses,
families and individuals. Insurance products of American Medical Security Group
are underwritten by United Wisconsin Life Insurance Company. The company serves
customers nationwide through partnerships with professional, independent agents
and quality health care providers. It provides medical and dental coverage for
557,716 members.
# # # # #
The full-year 2001 income reported in the text of this document excludes
the effect of the first quarter 2001 litigation charge. Including the charge,
full-year 2001 GAAP net income is $4.2 million or $0.29 per share. The company's
balance sheet and statement of income which reconcile the 2001 pro forma income
to GAAP net income follow.
AMS will host a conference call to discuss its financial results and
strategic plans on Tuesday, February 5, 10:00 a.m. (Central Time). Interested
parties may listen to the conference call live via the Investor Section of the
company's website at AMSchoices.com. The call will be archived at the same site
beginning a few hours after the live webcast. Listen-only access to the live
conference call is also available by dialing 719-457-2620. (Confirmation number
449192).
The directors and executive officers of American Medical Security Group,
Inc. ("AMS") and certain other persons may be deemed to be participants in
solicitation by AMS of proxies from its shareholders in connection with AMS'
2002 Annual Meeting of Shareholders. Information concerning such participants
was filed by AMS with the Securities and Exchange Commission (the "SEC") on
January 22, 2002.
SHAREHOLDERS OF AMS ARE ADVISED TO READ AMS' PROXY STATEMENT IN CONNECTION WITH
ITS SOLICITATION OF PROXIES FROM ITS SHAREHOLDERS WHEN IT BECOMES AVAILABLE,
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Shareholders of AMS and other
interested parties may obtain, free of charge, copies of AMS' proxy statement,
and any other documents filed by AMS with the SEC, at the SEC's Internet web
site at www.sec.gov. When available, definitive proxy statements and other
documents may also be obtained by contacting AMS: Cliff Bowers, American Medical
Security Group, Inc., P.O. Box 19032, Green Bay, WI 54307-9032. (920) 661-2766
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Ad Five
Cautionary Statement: Some of the statements contained in this press
release are "forward-looking" statements within the meaning of the safe harbor
provisions of the United States Private Securities Litigation Reform Act of
1995. Generally, forward-looking statements express expectations for or about
the future, rather than historical fact. Forward-looking statements are subject
to inherent risks and uncertainties that may cause actual results or events to
differ materially from those contemplated by such statements. Such risks and
uncertainties include, among others, unexpected increases in medical costs;
increased utilization of prescription drugs or medical services resulting from
bioterrorism concerns or otherwise; the Company's ability to predict rising
health care costs and adequately price its products; the Company's ability to
increase its agent distribution force, generate new sales, sell new products and
retain existing customers; changes in the Company's relationships with key
agents that sell its products; the Company's ability to control expenses during
a time of declining revenue and membership; legislative and regulatory matters,
including the effects of health care or other legislation or regulation, delays
in regulatory approvals, and regulatory action resulting from market conduct
activity; general business conditions, including competitive practices and
demand for the Company's existing and new products; development of and changes
in claims reserves; rating agency policies and practices; general economic
conditions, including the effect of changes in interest rates on the Company's
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investment portfolio; the outcome of commercial or other litigation; and
other factors that may be referred to in American Medical Security Group, Inc.'s
reports filed with the Securities & Exchange Commission from time to time.
Forward-looking statements made in this release express expectations only as of
the date they are made. The Company does not undertake any obligation to update
or revise such statements as a result of new information or future events.
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American Medical Security Group, Inc.
Condensed Consolidated Statements Of Income
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- -----------------------
2001 2000 2001 2000
(In thousands, except per share data)
Revenues:
Insurance premiums $ 198,158 $ 230,666 $ 838,672 $ 951,071
Investment income 4,244 4,618 17,443 19,007
Realized investment gain (loss) 60 (123) (779) (325)
Other revenue 5,207 4,945 21,285 20,112
---------------------- -----------------------
Total revenues 207,669 240,106 876,621 989,865
Expenses:
Medical and other benefits 135,188 174,397 601,942 724,613
Selling, general and administrative 61,945 63,085 248,742 251,767
Interest expense 570 915 2,877 3,584
Amortization of goodwill and intangibles 908 946 3,628 3,785
---------------------- -----------------------
Total expenses 198,611 239,343 857,189 983,749
Income before income taxes and
non-recurring item 9,058 763 19,432 6,116
Income tax expense 4,713 637 9,407 3,447
---------------------- -----------------------_
Income before non-recurring item 4,345 126 10,025 2,669
Non-recurring item, net of tax -- -- 5,850 --
Net income $ 4,345 $ 126 $ 4,175 $ 2,669
====================== =======================
Income before non-recurring item per share:
Basic $ 0.31 $ 0.01 $ 0.71 $ 0.18
Diluted $ 0.30 $ 0.01 $ 0.70 $ 0.18
Net income per share:
Basic $ 0.31 $ 0.01 $ 0.30 $ 0.18
Diluted $ 0.30 $ 0.01 $ 0.29 $ 0.18
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American Medical Security Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2001 2000
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(In thousands)
ASSETS
Investments:
Securities available for sale, at fair value:
Fixed maturities $ 269,753 $ 262,428
Equity securities-preferred 722 2,368
Fixed maturity securities held to maturity, at amortized cost 4,286 4,320
Trading securities, at fair value 517 260
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Total investments 275,278 269,376
Cash and cash equivalents 24,975 15,606
Other assets:
Property and equipment, net 33,381 32,451
Goodwill and other intangibles, net 103,934 107,562
Other assets 35,447 46,928
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Total other assets 172,762 186,941
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Total assets $ 473,015 $ 471,923
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Medical and other benefits payable $ 135,504 $ 145,310
Advance premiums 16,737 17,568
Payables and accrued expenses 28,032 25,902
Notes payable 40,058 41,258
Other liabilities 23,284 20,708
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Total liabilities 243,615 250,746
Shareholders' equity:
Common stock 16,654 16,654
Paid-in capital 187,927 187,956
Retained earnings 40,470 36,295
Accumulated other comprehensive gain (loss) 1,903 (3,948)
Treasury stock (17,554) (15,780)
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Total shareholders' equity 229,400 221,177
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Total liabilities and shareholders' equity $ 473,015 $ 471,923
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End of Filing
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