UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant |x|
Filed by a Party other than the Registrant | |
Check appropriate box:
| | Preliminary Proxy Statement
| | Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
| | Definitive Proxy Statement
|X| Definitive Additional Materials
| | Soliciting Material under Rule 14a-12
AMERICAN MEDICAL SECURITY GROUP, INC.
----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
|x| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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| | Fee paid previously with preliminary materials:
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(3) Filing Party:
(4) Date Filed:
Filed by: American Medical Security Group, Inc.
Pursuant to Rule 14a-6(b)
under the Securities Exchange Act of 1934
Subject Company: American Medical Security Group, Inc.
Commission File No. 1-13154
On November 3, 2004, American Medical Security Group, Inc. issued the following
press release announcing the company's financial results for the quarter ended
September 30, 2004:
EXHIBIT 99
[AMERICAN MEDICAL SECURITY GROUP, INC. LOGO]
P.O. Box 19032
Green Bay, WI 54307-9032
FORE MORE INFORMATION CONTACT:
Cliff Bowers
Vice President
Corporate Communications
(920) 661-2766
-----------------------
NEWS RELEASE
for Immediate Release
-----------------------
AMERICAN MEDICAL SECURITY GROUP
REPORTS THIRD QUARTER 2004 FINANCIAL RESULTS
|X| 3Q 2004 GAAP NET INCOME OF $0.36 PER DILUTED SHARE
AND ADJUSTED NET INCOME OF $0.54
|X| MEDICAL MEMBERSHIP UP SLIGHTLY
|X| INDIVIDUAL IN-FORCE MEMBERSHIP CONTINUES TO GROW
|X| COMBINED RATIO CONTINUES TO IMPROVE YEAR-ON-YEAR
GREEN BAY, Wis. - November 3, 2004 - American Medical Security Group,
Inc. (NYSE: AMZ) (AMS), today reported net income for the third quarter of 2004
of $5.3 million or $0.36 per diluted share, including a charge of $2.6 million
or $0.18 per diluted share for transaction costs related to the company's
proposed merger with PacifiCare Health Systems, Inc. (NYSE: PHS).
Adjusted net income(1) for the third quarter of 2004, which excludes
transaction costs related to the proposed merger, was $7.9 million or $0.54 per
diluted share. That compares to adjusted net income of $7.0 million or $0.49 per
diluted share for the third quarter of 2003, excluding realized investment gains
and income from discontinued operations.
On September 15, 2004, PacifiCare and AMS jointly announced the signing
of a definitive merger agreement whereby PacifiCare will acquire all of the
outstanding shares of common stock of the company through a cash merger in which
AMS will become a wholly owned subsidiary of PacifiCare. The AMS shareholder
meeting to approve the merger agreement is scheduled for December 2, 2004. It is
anticipated that the acquisition will be completed after shareholder approval
and state and federal regulatory and other customary approvals are received.
More
Ad One
GAAP net income and net income per share for the quarter and first nine
months reconcile to adjusted net income and adjusted net income per share as
follows:
INCOME RECONCILIATION
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------------------
INCOME: (in millions)
GAAP Net Income $ 5.3 $ 8.8 $24.0 $22.0
Adjustments:
Income from Discontinued
Operations - (0.9) - (0.7)
PBM Settlement, Net of Tax - - (3.4) -
Transaction Costs 2.6 - 2.6 -
Realized Investment Gains,
Net of Tax - (0.9) - (1.2)
-------------------------------------------------
Adjusted Net Income $ 7.9 $ 7.0 $23.3 $20.1
=================================================
INCOME PER SHARE, DILUTED:
GAAP Net Income $ 0.36 $ 0.61 $ 1.64 $1.58
Adjustments:
Income from Discontinued
Operations - (0.06) - (0.05)
PBM Settlement, Net of Tax - - (0.23) -
Transaction Costs 0.18 - 0.18 -
Realized Investment Gains,
Net of Tax - (0.06) - (0.08)
------------------------------------------------
Adjusted Net Income $ 0.54 $ 0.49 $ 1.59 $1.44
================================================
(Per share amounts may not total due to rounding)
"In-force membership in our individual business has increased for four
consecutive quarters, while the environment for our group business remains very
competitive," said Samuel V. Miller, Chairman, President and Chief Executive
Officer of AMS. "We continue to maximize the opportunity in both business areas
with new product designs and refinements to our distribution systems."
AMS has introduced Health Savings Account (HSA) products and other
high- deductible, consumer-driven plans for both market segments. In the past
two quarters, the company has also more than doubled the number of its MedOne
specialists, sales representatives specializing in facilitating MedOne sales
through the company's independent agents.
REVENUES
Total revenues for the third quarter of 2004 were $183.4 million
compared to $184.0 million for the second quarter of 2004 and $185.3 million for
the third quarter of 2003. For the first three quarters of 2004, total revenues
were $553.0 million compared to $558.2 million for the same period of 2003.
Ad Two
AMS said that the trend toward lower-cost, higher-deductible health
plans in both its group and individual business is reducing growth in premium
per member per month. However, AMS anticipates that these plans will attract
customers who will have lower over-all utilization.
MEMBERSHIP
The company's medical membership was up slightly to 315,358 at the end
of the third quarter of 2004, compared to 315,076 at the end of the second
quarter and 314,259 at the end of the third quarter of 2003. The membership
trend reflects growing individual business offset by declining group membership.
Total health membership, which includes medical and dental membership,
was down slightly on a sequential basis due to a decline in dental membership.
Total health membership was 530,022 at the end of the third quarter of 2004.
That compares to 533,834 at the end of the second quarter of 2004, and 540,993
at the end of the third quarter of 2003.
Health segment operating ratios for the quarter and nine months on a
GAAP and adjusted basis are as follows:
HEALTH SEGMENT RATIOS
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------------------
HEALTH LOSS RATIO:
GAAP 67.7% 68.2% 66.5% 67.9%
PBM Settlement - - 1.0 -
-------------------------------------------------
Adjusted Ratio(1) 67.7% 68.2% 67.5% 67.9%
HEALTH EXPENSE RATIO:
GAAP 27.2% 27.0% 27.5% 27.6%
HEALTH COMBINED RATIO:
GAAP 94.9% 95.3% 93.9% 95.5%
PBM Settlement - - 1.0 -
-------------------------------------------------
Adjusted Ratio 94.9% 95.3% 95.0% 95.5%
Ad Three
CASH FLOW & BALANCE SHEET
Net cash provided by operations in the third quarter of 2004 was $4.7
million. Cash flow in the period was reduced by payments of litigation
settlements and by merger-related costs. Cash from operations was $9.1 million
for the third quarter of 2003. For the first nine months of 2004, cash from
operations was $11.5 million, including $5.9 million received from a settlement
with the company's former pharmacy benefit manager (PBM) in the first quarter.
For the first nine months of 2003, cash from operations was $7.5 million.
At September 30, 2004, AMS had a book value per share of $17.78. That
compares to $15.71 at the end of the third quarter of 2003, and $17.16 at the
end of the second quarter of 2004.
EARNINGS GUIDANCE
The company anticipates that net income per diluted share will be
approximately $0.56 for the fourth quarter of 2004. That would bring full-year
2004 net income per diluted share to approximately $2.20. Excluding the
merger-related costs and the gain from the PBM settlement, the company
anticipates adjusted net income per diluted share would be approximately $2.15
for full-year 2004.
NOTES
(1) The company uses the non-GAAP measurements "adjusted net income" and
"adjusted ratio" in this release. AMS management believes that these
measurements, which exclude, where applicable, the impact of merger-related
transaction costs, net realized investment gains, the one-time PBM settlement,
and income from discontinued operations, provide a meaningful presentation of
the underlying earnings of the company's continuing operations.
# # # # #
AMS WILL HOST A CONFERENCE CALL TO DISCUSS ITS FINANCIAL RESULTS ON
THURSDAY, NOVEMBER 4, 2004, AT 9:00 A.M. (CENTRAL TIME). INTERESTED PARTIES MAY
LISTEN TO THE CONFERENCE CALL LIVE VIA THE INVESTOR SECTION OF THE COMPANY'S
WEBSITE AT WWW.EAMS.COM. LISTEN-ONLY ACCESS TO THE LIVE CONFERENCE CALL IS ALSO
AVAILABLE BY DIALING 785-832-2422. FOLLOWING THE LIVE CALL, A REPLAY WILL BE
AVAILABLE UNTIL MIDNIGHT, SATURDAY, NOVEMBER 6, 2004, BY DIALING 402-530-0413.
THIS PRESS RELEASE, ACCOMPANYING FINANCIAL INFORMATION AND OTHER STATISTICAL
INFORMATION CONTAINED IN THE CONFERENCE CALL WILL APPEAR IN THE INVESTOR SECTION
OF THE COMPANY'S WEBSITE AT WWW.EAMS.COM.
CAUTIONARY STATEMENT: Some of the statements contained in this press release are
"forward-looking" statements within the meaning of the 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, the
timing (including any possible delays) and receipt of regulatory approvals
(including any conditions, limitations or restrictions placed on these
approvals), and the risk that one or more governmental agencies may deny
approval of the merger; any delays in securing the approval of our shareholders
of the merger, and the risk that our shareholders do not approve the merger;
unexpected increases in health care costs; the company's ability to predict
future health care costs and adequately price its products; the company's
ability to expand its distribution network, generate new sales, sell new
products and retain existing members; the company's ability to control expenses;
legislative and regulatory matters, including delays in regulatory approvals,
changes in government regulation, regulatory action resulting from market
conduct activity; general business conditions, including competitive practices
and demand for the company's existing and new products; adverse outcomes of
legal proceedings; publicity about the company; development of and changes in
claims or litigation reserves; general economic conditions that impact the
performance of the company's investment portfolio or decisions of consumers to
purchase our products; and other factors that may be referred to in American
Medical Security Group, Inc.'s reports filed with the Securities and 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.
PacifiCare Health Systems and American Medical Security Group and their
respective officers and directors may be deemed to be participants in the
solicitation of proxies from shareholders of American Medical Security Group,
Inc. with respect to the transactions contemplated by the merger agreement
between PacifiCare and American Medical Security Group. Information regarding
the companies' officers and directors is included in their respective Definitive
Proxy Statements for their 2004 Annual Meetings of Stockholders filed with the
Securities and Exchange Commission in April 2004. These documents are available
free of charge at the Securities and Exchange Commission web site at
www.sec.gov, from PacifiCare at pacificare.com and from AMS at eAMS.com.
Investors and security holders may obtain more detailed information about who
may be deemed participants in the solicitation of proxies by reading the AMS
proxy statement when it becomes available.
Furthermore, investors and security holders of American Medical Security Group
are urged to read American Medical Security Group's definitive proxy statement
regarding the proposed merger filed with the Securities & Exchange Commission on
November 1, 2004. It contains important information about the merger and the
transactions contemplated by the Merger Agreement. Investors and securities
holders of American Medical Security Group may obtain a free copy of American
Medical Security Group's proxy statement and other documents filed with the
Securities and Exchange Commission at the Commission's web site at www.sec.gov.
American Medical Security Group's proxy statement and these other documents may
also be obtained for free from American Medical Security Group at eAMS.com in
the "Investors" section.
AMERICAN MEDICAL SECURITY GROUP, INC. LOGO
FINANCIAL SUPPLEMENT
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
INCOME DATA
====================================================================================================================================
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
------------------------------------------------------------------------------------------------------------------------------------
REVENUES
Premiums $ 179,055 $ 178,776 $ 176,735 $ 177,852 $ 712,418 $ 177,722 $ 176,528 $ 175,789
Investment income 3,402 3,345 3,211 3,573 13,531 3,538 3,454 3,506
Realized investment gain (loss) 375 91 1,416 28 1,910 65 (117) 28
Fees & other 4,040 3,845 3,899 4,073 15,857 4,249 4,155 4,076
--------- --------- --------- --------- --------- --------- ---------- ---------
Total revenues 186,872 186,057 185,261 185,526 743,716 185,574 184,020 183,399
EXPENSES
Benefits 120,598 119,315 119,218 119,366 478,497 118,505 117,392 117,598
General and administrative 29,284 29,244 26,908 27,989 113,425 28,187 28,349 27,233
Commissions and selling 24,042 24,294 24,292 24,455 97,083 24,749 24,173 24,264
Interest expense 339 324 309 283 1,255 221 221 255
Depreciation 1,777 1,664 1,673 1,660 6,774 1,591 1,470 1,395
Amortization 238 239 238 188 903 163 163 163
--------- --------- --------- --------- --------- --------- ---------- ---------
Total expenses 176,278 175,080 172,638 173,941 697,937 173,416 171,768 170,908
--------- --------- --------- --------- --------- --------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 10,594 10,977 12,623 11,585 45,779 12,158 12,252 12,491
Income taxes 3,997 4,151 4,735 4,318 17,201 4,515 4,506 4,593
--------- --------- --------- --------- --------- --------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS 6,597 6,826 7,888 7,267 28,578 7,643 7,746 7,898
PBM settlement, net of tax - - - - - 3,356 - -
Acquisition transaction costs - - - - - - - (2,647)
Income (loss) from discontinued
operations (134) (57) 923 - 732 - - -
---------- ---------- --------- --------- --------- --------- ---------- ---------
NET INCOME $ 6,463 $ 6,769 $ 8,811 $ 7,267 $ 29,310 $ 10,999 $ 7,746 $ 5,251
========== ========== ========= ========= ========= ========= ========== =========
PER SHARE DATA
Adjusted net income - diluted (1) $ 0.47 $ 0.48 $ 0.49 $ 0.50 $ 1.94 $ 0.52 $ 0.53 $ 0.54
Income from continuing operations
- diluted $ 0.49 $ 0.49 $ 0.55 $ 0.50 $ 2.03 $ 0.52 $ 0.53 $ 0.54
Income (loss) from discontinued
operations - diluted $ (0.01) $ - $ 0.06 $ - $ 0.05 $ - $ - $ -
Net income - basic $ 0.50 $ 0.51 $ 0.66 $ 0.54 $ 2.21 $ 0.81 $ 0.57 $ 0.38
Net income - diluted $ 0.48 $ 0.48 $ 0.61 $ 0.50 $ 2.08 $ 0.75 $ 0.53 $ 0.36
Weighted average common shares
- basic 12,981 13,160 13,392 13,542 13,270 13,627 13,690 13,763
Weighted average common shares
- diluted 13,575 14,015 14,340 14,464 14,100 14,585 14,666 14,692
MARGIN ANALYSIS
Income before income taxes 5.7% 5.9% 6.8% 6.2% 6.2% 6.6% 6.7% 6.8%
Net income 3.5% 3.6% 4.8% 3.9% 3.9% 5.9% 4.2% 2.9%
(1) - See page 8 for reconciliation of GAAP net income to adjusted net income.
INCOME DATA
=============================================================
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
YTD
09/30/03 09/30/04
------------------------
REVENUES
Premiums $ 534,566 $ 530,039
Investment income 9,958 10,498
Realized investment gain (loss) 1,882 (24)
Fees & other 11,784 12,480
---------- -----------
Total revenues 558,190 552,993
EXPENSES
Benefits 359,131 353,495
General and administrative 85,436 83,769
Commissions and selling 72,628 73,186
Interest expense 972 697
Depreciation 5,114 4,456
Amortization 715 489
---------- -----------
Total expenses 523,996 516,092
---------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 34,194 36,901
Income taxes 12,883 13,614
---------- -----------
INCOME FROM CONTINUING OPERATIONS 21,311 23,287
PBM settlement, net of tax - 3,356
Acquisition transaction costs - (2,647)
Income (loss) from discontinued
operations 732 -
---------- -----------
NET INCOME $ 22,043 $ 23,996
========== ===========
PER SHARE DATA
Adjusted net income - diluted (1) $ 1.44 $ 1.59
Income from continuing operations
- diluted $ 1.52 $ 1.59
Income (loss) from discontinued
operations - diluted $ 0.05 $ -
Net income - basic $ 1.67 $ 1.75
Net income - diluted $ 1.58 $ 1.64
Weighted average common shares
- basic 13,179 13,694
Weighted average common shares
- diluted 13,978 14,648
MARGIN ANALYSIS
Income before income taxes 6.1% 6.7%
Net income 3.9% 4.3%
(1) - See page 8 for reconciliation of GAAP net income to adjusted net income.
2
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
FINANCIAL DATA
===========================================================================================================================
(IN THOUSANDS, EXCEPT MEMBERSHIP)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
REVENUE MIX
Health premiums $ 175,924 $ 175,703 $ 173,744 $ 174,871 $ 700,242 $ 174,810 $ 173,673 $ 173,003
Life premiums 3,131 3,073 2,991 2,981 12,176 2,912 2,855 2,786
Investment income 3,777 3,436 4,627 3,601 15,441 3,603 3,337 3,534
Service fees 4,040 3,845 3,899 4,073 15,857 4,249 4,155 4,076
--------- --------- --------- --------- --------- --------- --------- ---------
Total revenues $ 186,872 $ 186,057 $ 185,261 $ 185,526 $ 743,716 $ 185,574 $ 184,020 $ 183,399
========= ========= ========= ========= ========= ========= ========= =========
MEMBERSHIP ANALYSIS
Fully insured medical 278,091 275,323 270,401 273,252 273,252 269,697 270,538 272,140
Self funded medical 42,704 42,568 43,858 46,012 46,012 44,400 44,538 43,218
Dental 231,508 228,610 226,734 227,502 227,502 222,118 218,758 214,664
--------- -------- --------- --------- --------- --------- --------- ---------
Total Health 552,303 546,501 540,993 546,766 546,766 536,215 533,834 530,022
Life 144,207 141,930 137,395 136,423 136,423 132,437 130,418 127,075
FINANCIAL STATISTICS
Book value per share $ 14.68 $ 15.27 $ 15.71 $ 16.12 $ 16.12 $ 17.11 $ 17.16 $ 17.78
Cash flow from operations $ (3,575) $ 1,978 $ 9,092 $ 12,630 $ 20,125 $ 10,422 $ (3,646) $ 4,742
Return on equity, annualized 14.2% 13.9% 15.3% 13.6% 14.3% 13.6% 13.3% 13.2%
Debt to total capital 15.0% 14.1% 13.5% 12.2% 12.2% 11.5% 11.4% 11.0%
Common shares outstanding,
net of treasury 12,936 13,254 13,434 13,511 13,511 13,549 13,678 13,683
FINANCIAL DATA
===========================================================
(IN THOUSANDS, EXCEPT MEMBERSHIP)
YTD
9/30/03 9/30/04
----------------------
REVENUE MIX
Health premiums $ 525,371 $ 521,486
Life premiums 9,195 8,553
Investment income 11,840 10,474
Service fees 11,784 12,480
--------- ---------
Total revenues $ 558,190 $ 552,993
========= =========
MEMBERSHIP ANALYSIS
Fully insured medical 270,401 272,140
Self funded medical 43,858 43,218
Dental 226,734 214,664
--------- ---------
Total Health 540,993 530,022
Life 137,395 127,075
FINANCIAL STATISTICS
Book value per share $ 15.71 $ 17.78
Cash flow from operations $ 7,495 $11,518
Return on equity, annualized 14.4% 13.5%
Debt to total capital 13.5% 11.0%
Common shares outstanding,
net of treasury 13,434 13,683
3
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
BALANCE SHEETS
====================================================================================================================================
(IN THOUSANDS)
2003 2004
3/31 6/30 9/30 12/31 3/31 6/30 9/30
---------------------------------------------------------------------------------
ASSETS
Investments:
Fixed maturity securities available for sale,
at fair value $ 283,595 $ 286,044 $ 286,324 $ 302,277 $ 313,813 $ 296,890 $ 302,119
Fixed maturity securities held to maturity,
at amortized cost 3,175 3,168 3,483 3,377 3,170 3,163 3,164
Trading securities, at fair value 1,142 1,217 1,254 1,424 1,582 1,700 1,797
--------- --------- --------- --------- --------- --------- ---------
Total investments 287,912 290,429 291,061 307,078 318,565 301,753 307,080
Cash and cash equivalents 20,396 22,036 30,183 17,289 18,716 19,610 20,756
Other assets:
Property and equipment, net 34,112 35,118 34,445 37,446 37,441 38,485 39,922
Goodwill and other intangibles, net 35,468 35,229 34,283 34,095 33,932 33,769 33,606
Other assets 50,737 49,239 49,378 48,179 44,594 46,310 39,323
--------- --------- --------- --------- --------- --------- ---------
Total other assets 120,317 119,586 118,106 119,720 115,967 118,564 112,851
--------- --------- --------- --------- --------- --------- ---------
TOTAL ASSETS $ 428,625 $ 432,051 $ 439,350 $ 444,087 $ 453,248 $ 439,927 $ 440,687
========= ========= ========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Medical and other benefits payable $ 131,650 $ 131,023 $ 127,023 $ 129,809 $ 123,426 $ 118,723 $ 106,274
Advance premiums 17,300 16,453 16,150 15,865 16,902 14,982 15,350
Payables and accrued expenses 23,466 21,039 24,020 24,099 22,539 20,281 23,846
Notes payable 33,558 33,258 32,958 30,158 30,158 30,158 30,158
Other liabilities 32,736 27,860 28,162 26,332 28,436 21,005 21,838
--------- --------- --------- --------- --------- --------- ---------
Total liabilities 238,710 229,633 228,313 226,263 221,461 205,149 197,466
Shareholders' equity:
Common stock 16,654 16,654 16,654 16,654 16,654 16,654 16,654
Paid-in capital 190,367 192,362 193,509 194,431 194,426 195,548 195,610
Retained earnings 9,321 16,090 24,901 32,168 43,167 50,913 56,164
Unrealized gain on investments 8,090 9,964 7,521 6,133 8,869 2,094 5,190
Treasury stock (34,517) (32,652) (31,548) (31,562) (31,329) (30,431) (30,397)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total shareholders' equity 189,915 202,418 211,037 217,824 231,787 234,778 243,221
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 428,625 $ 432,051 $ 439,350 $ 444,087 $ 453,248 $ 439,927 $ 440,687
========== ========== ========== ========== ========== ========== ==========
4
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
SEGMENT DATA - HEALTH
====================================================================================================================================
(IN THOUSANDS, EXCEPT FINANCIAL STATISTICS)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
OPERATING RESULTS
Revenues:
Premiums $ 175,924 $ 175,703 $ 173,744 $ 174,871 $ 700,242 $ 174,810 $ 173,673 $ 173,003
Investment income 1,715 1,683 1,596 1,675 6,669 1,568 1,496 1,417
Other revenue 3,965 3,772 3,828 4,008 15,573 4,193 4,104 4,030
--------- --------- --------- --------- --------- ---------- --------- ---------
Total revenues 181,604 181,158 179,168 180,554 722,484 180,571 179,273 178,450
Expenses:
Benefits 119,783 118,637 118,518 118,708 475,646 117,904 116,833 117,178
PBM settlement (pre-tax) - - - - - (5,339) - -
General and administrative 29,352 29,189 27,090 28,004 113,635 28,345 28,377 27,272
Commissions and selling 23,472 23,724 23,727 23,901 94,824 24,200 23,643 23,758
--------- --------- --------- --------- --------- ---------- --------- ---------
Total expenses 172,607 171,550 169,335 170,613 684,105 165,110 168,853 168,208
--------- --------- --------- --------- --------- ---------- --------- ---------
Income before income taxes $ 8,997 $ 9,608 $ 9,833 $ 9,941 $ 38,379 $ 15,461 $ 10,420 $ 10,242
========= ========= ========= ========= ========= ========== ========= =========
FINANCIAL STATISTICS
Loss ratio 68.1% 67.5% 68.2% 67.9% 67.9% 64.4% 67.3% 67.7%
Expense ratio:
General and administrative 14.4% 14.5% 13.4% 13.7% 14.0% 13.8% 14.0% 13.4%
Commissions and selling 13.3% 13.5% 13.7% 13.7% 13.5% 13.8% 13.6% 13.7%
--------- --------- --------- --------- --------- ---------- --------- ---------
Total expense ratio 27.8% 28.0% 27.0% 27.4% 27.5% 27.7% 27.6% 27.2%
--------- --------- --------- --------- --------- ---------- --------- ---------
Combined ratio 95.9% 95.5% 95.3% 95.3% 95.5% 92.1% 94.9% 94.9%
========= ========= ========= ========= ========= ========== ========= =========
Premiums per member per month:
Fully insured medical $ 181 $ 184 $ 184 $ 185 $ 183 $ 186 $ 185 $ 183
Self funded 53 53 55 53 54 55 55 57
Dental 23 23 24 24 23 24 24 25
Short-term disability 22 22 23 23 22 23 24 24
Benefits cost per member per month:
Fully insured medical $ 125 $ 124 $ 127 $ 128 $ 126 $ 119 $ 125 $ 126
Self funded 27 36 40 29 33 39 39 38
Dental 15 16 15 15 15 15 16 15
Short-term disability 12 8 3 4 7 6 4 5
SEGMENT DATA - HEALTH
=============================================================
(IN THOUSANDS, EXCEPT FINANCIAL STATISTICS)
YTD
9/30/03 9/30/04
OPERATING RESULTS ----------------------
Revenues:
Premiums $ 525,371 $ 521,486
Investment income 4,994 4,481
Other revenue 11,565 12,327
--------- ----------
Total revenues 541,930 538,294
Expenses:
Benefits 356,938 351,915
PBM settlement (pre-tax) - (5,339)
General and administrative 85,631 83,994
Commissions and selling 70,923 71,601
--------- ----------
Total expenses 513,492 502,171
--------- ----------
Income before income taxes $ 28,438 $ 36,123
========= ==========
FINANCIAL STATISTICS
Loss ratio 67.9% 66.5%
Expense ratio:
General and administrative 14.1% 13.7%
Commissions and selling 13.5% 13.7%
--------- ---------
Total expense ratio 27.6% 27.5%
--------- ---------
Combined ratio 95.5% 93.9%
========= =========
Premiums per member per month:
Fully insured medical $ 183 $ 185
Self funded 54 56
Dental 23 24
Short-term disability 22 24
Benefits cost per member per month:
Fully insured medical $ 125 $ 123
Self funded 34 39
Dental 15 16
Short-term disability 8 5
5
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
SEGMENT DATA - LIFE
====================================================================================================================================
(IN THOUSANDS, EXCEPT FINANCIAL STATISTICS)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
-------------------------------------------------------------------------------------------------
OPERATING RESULTS
Revenues:
Premiums $ 3,131 $ 3,073 $ 2,991 $ 2,981 $ 12,176 $ 2,912 $ 2,855 $ 2,786
Investment income 133 129 121 129 512 121 114 116
Other revenue 75 73 71 65 284 56 51 46
------- ------- ------- ------- -------- ------- ------- -------
Total revenues 3,339 3,275 3,183 3,175 12,972 3,089 3,020 2,948
Expenses:
Benefits 837 679 700 658 2,874 601 559 420
General and administrative 510 487 383 415 1,795 402 383 386
Commissions and selling 589 585 582 575 2,331 564 530 506
------- ------- ------- ------- -------- ------- ------- -------
Total expenses 1,936 1,751 1,665 1,648 7,000 1,567 1,472 1,312
------- ------- ------- ------- -------- ------- ------- -------
Income before income taxes $ 1,403 $ 1,524 $ 1,518 $ 1,527 $ 5,972 $ 1,522 $ 1,548 $ 1,636
======= ======= ======= ======= ======== ======= ======= =======
FINANCIAL STATISTICS
Loss ratio 26.7% 22.1% 23.4% 22.1% 23.6% 20.6% 19.6% 15.1%
Expense ratio:
General and administrative 13.9% 13.5% 10.4% 11.7% 12.4% 11.9% 11.6% 12.2%
Commissions and selling 18.8% 19.0% 19.5% 19.3% 19.1% 19.4% 18.6% 18.2%
------- ------- ------- ------- -------- ------- ------- -------
Total expense ratio 32.7% 32.5% 29.9% 31.0% 31.6% 31.3% 30.2% 30.4%
------- ------- ------- ------- -------- ------- ------- -------
Combined ratio 59.4% 54.6% 53.3% 53.1% 55.2% 51.9% 49.8% 45.4%
======= ======= ======= ======= ======== ======= ======= =======
SEGMENT DATA - LIFE
======================================================
(IN THOUSANDS, EXCEPT FINANCIAL STATISTICS)
YTD
9/30/03 9/30/04
OPERATING RESULTS -------------------
Revenues:
Premiums $ 9,195 $ 8,553
Investment income 383 351
Other revenue 219 153
------- -------
Total revenues 9,797 9,057
Expenses:
Benefits 2,216 1,580
General and administrative 1,380 1,171
Commissions and selling 1,756 1,600
------- -------
Total expenses 5,352 4,351
------- -------
Income before income taxes $ 4,445 $ 4,706
======= =======
FINANCIAL STATISTICS
Loss ratio 24.1% 18.5%
Expense ratio:
General and administrative 12.6% 11.9%
Commissions and selling 19.1% 18.7%
------- -------
Total expense ratio 31.7% 30.6%
------- -------
Combined ratio 55.8% 49.1%
======= =======
6
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
CORPORATE AND OTHER
====================================================================================================================================
(IN THOUSANDS)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
OPERATING RESULTS
Revenues:
Investment income $ 1,554 $ 1,533 $ 1,494 $ 1,769 $ 6,350 $ 1,849 $ 1,844 $ 1,973
Realized investment gain (loss) 375 91 1,416 28 1,910 65 (117) 28
-------- -------- -------- ------- ------- -------- -------- --------
Total revenues 1,929 1,624 2,910 1,797 8,260 1,914 1,727 2,001
Expenses:
Benefits (22) (1) - - (23) - - -
General and administrative 1,199 1,232 1,108 1,230 4,769 1,031 1,059 970
Commissions and selling (19) (15) (17) (21) (72) (15) - -
Acquisition transaction costs - - - - - - - 2,647
Interest expense 339 324 309 283 1,255 221 221 255
Amortization of intangibles 238 239 238 188 903 163 163 163
-------- ------- -------- ------ -------- -------- -------- --------
Total expenses 1,735 1,779 1,638 1,680 6,832 1,400 1,443 4,035
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes $ 194 $ (155) $ 1,272 $ 117 $ 1,428 $ 514 $ 284 $(2,034)
======== ======== ======== ======== ======== ======== ======== ========
CORPORATE AND OTHER
============================================================
(IN THOUSANDS)
YTD
9/30/03 9/30/04
OPERATING RESULTS --------------------
Revenues:
Investment income $ 4,581 $ 5,666
Realized investment gain (loss) 1,882 (24)
-------- --------
Total revenues 6,463 5,642
Expenses:
Benefits (23) -
General and administrative 3,539 3,060
Commissions and selling (51) (15)
Acquisition transaction costs - 2,647
Interest expense 972 697
Amortization of intangibles 715 489
-------- --------
Total expenses 5,152 6,878
-------- --------
Income (loss) before income taxes $ 1,311 $(1,236)
======== ========
7
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
===================================================================================================================================
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
2003 2004
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr 2nd Qtr 3rd Qtr
INCOME
GAAP Net income $ 6,463 $ 6,769 $ 8,811 $ 7,267 $ 29,310 $ 10,999 $ 7,746 $ 5,251
Less:
Income (loss) from discontinued
operations (134) (57) 923 - 732 - - -
-------- -------- ------- ------- -------- -------- -------- --------
Income from continuing operations 6,597 6,826 7,888 7,267 28,578 10,999 7,746 5,251
Less:
PBM settlement, net of tax - - - - - 3,356 - -
Acquisition transaction costs - - - - - - - (2,647)
Realized investment gains (loss),
net of tax 234 57 885 18 1,192 41 (74) 18
-------- -------- ------- ------- -------- -------- -------- --------
Adjusted net income $ 6,363 $ 6,769 $ 7,003 $ 7,249 $ 27,386 $ 7,602 $ 7,820 $ 7,880
======== ======== ======= ======= ======== ======== ======== ========
INCOME PER SHARE - DILUTED
GAAP Net income per share $ 0.48 $ 0.48 $ 0.61 $ 0.50 $ 2.08 $ 0.75 $ 0.53 $ 0.36
Less:
Income (loss) from discontinued
operations (0.01) - 0.06 - 0.05 - - -
-------- -------- ------- ------- -------- -------- -------- --------
Income from continuing operations 0.49 0.49 0.55 0.50 2.03 0.75 0.53 0.36
Less:
PBM settlement, net of tax - - - - - 0.23 - -
Acquisition transaction costs - - - - - - - (0.18)
Realized investment gain (loss),
net of tax 0.02 - 0.06 - 0.08 - (0.01) -
-------- -------- ------- ------- -------- -------- -------- --------
Adjusted net income per share $ 0.47 $ 0.48 $ 0.49 $ 0.50 $ 1.94 $ 0.52 $ 0.53 $ 0.54
======== ======== ======= ======= ======== ======== ======== ========
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
============================================================
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
YTD
9/30/03 9/30/04
---------------------
INCOME
GAAP Net income $ 22,043 $ 23,996
Less:
Income (loss) from discontinued
operations 732 -
-------- ---------
Income from continuing operations 21,311 23,996
Less:
PBM settlement, net of tax - 3,356
Acquisition transaction costs (2,647)
Realized investment gains (loss),
net of tax 1,176 (15)
-------- ---------
Adjusted net income $ 20,135 $ 23,302
======== =========
INCOME PER SHARE - DILUTED
GAAP Net income per share $ 1.58 $ 1.64
Less:
Income (loss) from discontinued
operations 0.05 -
-------- ---------
Income from continuing operations 1.52 1.64
Less:
PBM settlement, net of tax - 0.23
Acquisition transaction costs - (0.18)
Realized investment gain (loss),
net of tax 0.08 -
-------- ---------
Adjusted net income per share $ 1.44 $ 1.59
======== =========
8