SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
For the transition period from to
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Commission File Number 1-13154
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
AMERICAN MEDICAL SECURITY
RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
AMERICAN MEDICAL SECURITY GROUP, INC.
3100 AMS Boulevard
Green Bay, WI 54313
American Medical Security Retirement Savings Plan
Annual Report on Form 11-K
For the Fiscal Year Ended December 31, 2002
TABLE OF CONTENTS
Page
Financial Statements and Supplemental Schedule
Years ended December 31, 2002 and 2001
Report of Independent Auditors..................................................................3
Financial Statements
Statements of Net Assets Available for Benefits.................................................4
Statements of Changes in Net Assets Available for Benefits......................................5
Notes to Financial Statements...................................................................6
Supplemental Schedule
Schedule H, Line 4i--Schedule of Assets (Held at End of Year)..................................10
Signatures..............................................................................................11
Exhibit Index.........................................................................................EX-1
2
Report of Independent Auditors
The Administrative Committee
American Medical Security
Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of American Medical Security Retirement Savings Plan (the Plan) as of December
31, 2002 and 2001, and the related statements of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2002, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
Ernst & Young LLP
April 4, 2003
3
AMERICAN MEDICAL SECURITY RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
DECEMBER 31
2002 2001
-------------------------------------
ASSETS
Investments, at fair value (Note 3):
Mutual funds $40,565,278 $43,573,330
Common stock of American Medical Security Group, Inc.
612,651 571,113
Participant loans receivable 1,050,515 1,041,658
Profit sharing receivable from American Medical Security
Group, Inc. 1,269,383 -
-------------------------------------
Net assets available for benefits $43,497,827 $45,186,101
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SEE ACCOMPANYING NOTES
4
AMERICAN MEDICAL SECURITY RETIREMENT SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
2002 2001
--------------------------------------
Investment loss:
Net realized and unrealized depreciation in fair value of
investments (Note 3) $ (6,847,272) $ (3,996,410)
Interest and dividends 318,617 141,386
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(6,528,655) (3,855,024)
Less investment expense 79,623 148,206
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(6,608,278) (4,003,230)
Contributions:
Employers' 3,740,059 1,906,549
Employees' 4,783,013 5,045,519
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8,523,072 6,952,068
Other 10,855 5,864
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Total additions 1,925,649 2,954,702
Benefits paid 3,613,923 4,042,214
--------------------------------------
Net decrease (1,688,274) (1,087,512)
Net assets available for benefits at beginning of year 45,186,101 46,273,613
--------------------------------------
Net assets available for benefits at end of year $ 43,497,827 $ 45,186,101
======================================
SEE ACCOMPANYING NOTES
5
American Medical Security Retirement Savings Plan
Notes to Financial Statements
December 31, 2002
1. DESCRIPTION OF THE PLAN
The following description of the American Medical Security Retirement Savings
Plan (the Plan) provides only general information. Participants should refer to
the Plan document for a complete description of the Plan's provisions.
GENERAL
The Plan is a contributory defined contribution plan covering all full-time and
part-time employees of American Medical Security Group, Inc. (AMSG) and its
subsidiaries, American Medical Security, Inc. and Nurse Healthline, Inc.
(collectively the Company or Employer). The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
PARTICIPATION AND VESTING
Employees are eligible to become contributing participants in the Plan and
receive matching contributions on the first day of the following month after
reaching the age of 18 and after 30 days of eligible service. Employees with 30
days of service that are employed on the last day of the Plan year are entitled
to receive profit-sharing contributions for the Plan year.
Participants are immediately vested in their contributions plus actual earnings
thereon. New participants do not vest in Company contributions until three years
of service, at which time they become fully vested.
The nonvested portion of the Company's profit sharing and matching contributions
are forfeited when a participant terminates employment. Profit sharing
forfeitures are allocated to the remaining Plan participants, while matching
contribution forfeitures are used to reduce future matching contributions.
During 2002 and 2001, the Company utilized forfeited amounts of $65,000 and
$133,000, respectively, to offset the required matching contribution.
6
American Medical Security Retirement Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
CONTRIBUTIONS, WITHDRAWALS AND LOANS
Plan participants are permitted to make contributions on a before-tax basis each
payroll period of 2% to 18% of base compensation, subject to the maximum amount
allowed by the Internal Revenue Code (IRC). Participants can change their
before-tax contribution percentage any time during the Plan year. Participants
direct current contributions and accumulated contributions and earnings between
funds offered through the Plan.
In 2002, the Company matched 70% of the first 6% of compensation that a
participant contributed to the Plan. Additional amounts may be contributed at
the option of the Company. Prior to January 1, 2002, the Company matched 60% of
the first 6% of compensation contributed by a participant.
The Company makes a yearly profit sharing contribution in an amount to be
determined each year. For the year ended December 31, 2002, the Company made a
profit sharing contribution of $1,269,000, or 2% of eligible wages. No profit
sharing contribution was made in 2001.
Distributions due to retirement, death, permanent disability and termination of
employment are provided for as defined within the Plan.
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of the lesser of one-half of their vested account balance or $50,000.
The loan is secured by the balance in the participant's account and bears
interest at a rate commensurate with prevailing rates as determined by the Plan
administrator. Principal and interest are repaid through payroll deductions.
TERMINATION OF THE PLAN
The Company has established the Plan with the intention and expectation that the
Employer will be able to make contributions indefinitely, but the Employer
neither is, nor shall, be under any obligation or liability whatsoever to
maintain the Plan for any given length of time. The Company retains the right to
modify or terminate the Plan at any time, but may not retroactively reduce the
share of any participant or cause the Plan's assets to revert to the Company
unless required by law. In the event of termination, the balance of each
participant's account would become fully vested, and all assets would be
distributed to the participants and beneficiaries.
7
American Medical Security Retirement Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
EXPENSES
Administrative expenses of the Plan are paid from Plan assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION AND ACCOUNTING METHOD
The Plan's financial statements are prepared on the accrual basis of accounting.
The Plan's investments are stated at fair value. The fair value of mutual fund
shares and AMSG common stock are based on the quoted market values on the last
business day of the Plan year. The fair value of the participation units in the
common trust fund is based on quoted redemption values. Participant loans are
stated at their unpaid principal balance, which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company to make estimates
that affect the amounts reported in the Plan's financial statements and
accompanying notes. Actual results could differ from these estimates.
3. INVESTMENTS
The following individual investments represent more than 5% of the Plan's net
assets available for benefits:
DECEMBER 31
2002 2001
----------------------------
Investments at fair value as determined by
quoted market price or redemption value:
MCM Stable Value Advisory Fund $6,335,953 $ 5,643,420
Scudder Growth & Income Fund 4,217,761 5,961,180
Warburg Pincus Emerging Growth Fund 3,274,196 5,047,100
Alleghany Montag & Caldwell Growth Fund 8,968,682 10,916,792
Mercury HW International Value 2,894,452 3,235,770
Neuberger Berman Genesis Trust 4,020,858 4,104,739
Gabelli Equity Fund 3,373,587 2,081,430
8
American Medical Security Retirement Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The Plan's investments, including gains and losses on investments bought, sold
and held during the year, appreciated (depreciated) in fair value as follows:
YEAR ENDED DECEMBER 31
2002 2001
-----------------------------
Mutual funds $(6,903,851) $(4,296,267)
Common stock of American Medical Security Group, 56,579 299,857
Inc. -----------------------------
$(6,847,272) $(3,996,410)
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4. INCOME TAX STATUS
The Company has not received a determination letter on their adoption of the
nonstandardized prototype plan. In accordance with Revenue Procedure 2002-6, the
Company has chosen to rely on the current opinion letter that has been issued to
the prototype. Once qualified, the Plan is required to operate in conformity
with the code to maintain its qualification. The Company believes the Plan is
being operated in compliance with the applicable requirements of the Code and,
therefore, believes that the plan is qualified and the related trust is tax
exempt. The Company has indicated that it will take the necessary steps, if any,
to maintain the Plan's qualified status.
5. TRANSACTIONS WITH PARTIES IN INTEREST
Investment fees incurred are paid by participants. In addition, certain services
are provided by the Plan sponsor at no cost to the Plan.
9
American Medical Security Retirement Savings Plan
Employer Identification Number 39-1431799
Plan Number 001
Schedule H, Line 4i-Schedule of Assets (Held at End of Year)
December 31, 2002
IDENTITY OF ISSUER, BORROWER/ UNITS/ CURRENT
DESCRIPTION OF INVESTMENT SHARES VALUE
--------------------------------------------------------------------------------
American Century - International Growth Investor 24,228 $ 154,574
Dreyfus GNMA Fund 93,525 1,416,907
Dreyfus S&P 500 Fund 32,314 827,248
Gabelli Equity Income Fund 259,108 3,373,587
Mercury HW International Value 174,470 2,894,452
Alleghany Montag & Caldwell Growth Fund 482,187 8,968,682
MCM Stable Value Advisory Fund 480,509 6,335,953
INVESCO Small Company Growth Fund 102,835 856,620
Janus Twenty Fund 15,674 454,692
Neuberger Berman Genesis Trust 142,888 4,020,858
Strong Corporate Bond 110,803 1,106,923
Scudder Growth & Income Fund 263,940 4,217,761
Warburg Pincus Emerging Growth Fund 173,697 3,274,196
Warburg Pincus Global Fixed Income 92,060 905,872
Dreyfus Emerging Markets 158,427 1,756,953
American Medical Security Group, Inc. common 78,045 612,651
stock*
Participant loans receivable (interest rates
range from 5.25% to 9.75%) 1,050,515
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$42,228,444
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*Represents a party in interest to the Plan.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee of the American Medical Security Retirement Savings
Plan has duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: June 26, 2003
AMERICAN MEDICAL SECURITY
RETIREMENT SAVINGS PLAN
/s/ John R. Lombardi
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John R. Lombardi
American Medical Security Retirement Savings Plan
Administrative Committee Member
11
EXHIBIT INDEX
TO
FORM 11-K ANNUAL REPORT
for fiscal year ended December 31, 2002
EXHIBIT DESCRIPTION INCORPORATED HEREIN FILED
NUMBER BY REFERENCE TO HEREWITH
23 Consent of Independent X
Auditors
99 Certification Pursuant to X
18 U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley
Act of 2002
EX-1