SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
From the transition period from to
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Commission File Number 0-14320
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UICI
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(Exact name of registrant as specified in its charter)
Delaware 75-2044750
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 McEwen, Suite 200, Dallas, Texas 75244
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (972) 392-6700
Not Applicable
--------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Common Stock, $.01 Par
Value--45,292,000 shares as of September 30, 1997.
<PAGE>
INDEX
UICI AND SUBSIDIARIES
Page
PART I. FINANCIAL INFORMATION
Consolidated condensed balance sheets-September 30, 1997
and December 31, 1996 3
Consolidated condensed statements of income-Three
months ended September 30, 1997 and 1996 and the nine
months ended September 30, 1997 and 1996 4
Consolidated condensed statements of cash flows-Nine
months ended September 30, 1997 and 1996 5
Notes to consolidated condensed financial
statements-September 30, 1997 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
--------------------------------
SIGNATURES 15
2
<PAGE>
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited) (Note)
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Securities available for sale--
Fixed maturities, at fair value
(cost: 1997--$797,195; 1996--$744,782) ... $ 811,065 $ 762,927
Equity securities, at fair value
(cost: 1997--$12,914; 1996--$15,966) ..... 15,572 15,106
Student loans .................................. 6,604 18,042
Mortgage and collateral loans .................. 28,701 15,282
Policy loans ................................... 22,357 22,689
Credit card loans .............................. 32,816 22,489
Real estate investments ........................ 30,739 30,822
Short-term investments ......................... 137,522 195,536
---------- ----------
Total investments .......................... 1,085,376 1,082,893
Cash ............................................. 9,854 15,420
Agents' receivables .............................. 16,737 6,740
Reinsurance receivables .......................... 71,101 68,438
Due premiums and other receivables ............... 40,205 25,149
Investment income due and accrued ................ 12,771 12,735
Deferred acquisition costs ....................... 85,044 59,955
Goodwill ......................................... 85,831 17,126
Property and equipment, net ...................... 36,398 26,061
Other ............................................ 7,222 6,471
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$1,450,539 $1,320,988
========== ==========
LIABILITIES
Policy liabilities:
Future policy and contract benefits ............ $ 498,499 $ 512,670
Claims ......................................... 227,397 201,276
Unearned premiums .............................. 90,807 79,378
Other policy liabilities ....................... 15,218 14,000
Federal income taxes ........................... 18,595 4,705
Other liabilities ................................ 49,394 32,214
Short-term debt .................................. 5,013 1,032
Long-term debt ................................... 25,227 29,911
---------- ----------
930,150 875,186
MINORITY INTERESTS ................................. 12,667 12,884
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share ........... 453 451
Additional paid-in capital ....................... 165,705 165,668
Net unrealized investment gains .................. 10,714 2,153
Retained earnings ................................ 330,850 264,646
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507,722 432,918
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$1,450,539 $1,320,988
========== ==========
</TABLE>
NOTE: The balance sheet as of December 31, 1996 has been derived from the
audited financial statements at that date.
See notes to consolidated condensed financial statements.
3
<PAGE>
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Health premiums ............................. $ 149,328 $ 119,306 $ 431,103 $ 366,540
Life premiums and other considerations ...... 12,282 10,987 35,226 35,253
Net investment income ....................... 20,666 18,004 61,861 51,886
Fees and other income ....................... 53,157 28,486 130,576 80,162
Gains (losses) on sale of investments ....... 1,916 (73) 3,018 670
--------- --------- --------- ---------
237,349 176,710 661,784 534,511
BENEFITS AND EXPENSES
Benefits, claims, and settlement expenses ... 102,830 76,930 295,098 246,386
Underwriting, acquisition, and other expenses 98,345 70,270 264,743 203,851
Interest expense ............................ 804 605 2,155 1,867
--------- --------- --------- ---------
201,979 147,805 561,996 452,104
INCOME BEFORE FEDERAL INCOME TAXES
AND MINORITY INTERESTS .................... 35,370 28,905 99,788 82,407
Federal income taxes .......................... 10,869 9,410 32,094 27,025
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTERESTS .......... 24,501 19,495 67,694 55,382
Minority interests ............................ 1,887 1,374 3,844 5,022
--------- --------- --------- ---------
NET INCOME ................................ $ 22,614 $ 18,121 $ 63,850 $ 50,360
========= ========= ========= =========
NET INCOME PER SHARE ...................... $0.50 $0.42 $1.41 $1.23
===== ===== ===== =====
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income .............................................. $ 63,850 $ 50,360
Adjustments to reconcile net income to
cash provided by operating activities:
Increase in policy liabilities ........................ 38,320 16,471
Increase in other liabilities ......................... 9,741 4,856
Increase in federal income taxes payable .............. 4,033 8,163
Increase in deferred acquisition costs ................ (10,995) (2,639)
Increase in accrued investment income
and reinsurance and other receivables ............... (13,039) (1,701)
Depreciation and amortization ......................... 4,906 4,903
Net income attributable to minority interests ......... 3,844 5,022
Gains on sale of investments .......................... (3,018) (670)
Other items, net ...................................... (1,843) (2,188)
-------- --------
Cash Provided by Operations ......................... 95,799 82,577
-------- --------
INVESTING ACTIVITIES
Decrease (increase) in investments ...................... 20,190 (108,639)
Increase in agents' receivables ......................... (4,163) (770)
Purchase of subsidiaries and assets, net of cash acquired
of $2,137 and $3,996 in 1997 and 1996, respectively ... (77,247) (13,847)
Minority interest purchased ............................. (15,062) --
Additions to property and equipment ..................... (6,258) (14,639)
-------- --------
Cash Used in Investing Activities ................... (82,540) (137,895)
-------- --------
FINANCING ACTIVITIES
Deposits from investment products ....................... 13,608 12,228
Withdrawals from investment products .................... (31,352) (29,162)
Proceeds from debt ...................................... 2,365 10,250
Repayments of debt ...................................... (3,068) (33,094)
Proceeds from payable to related party .................. -- 550
Repayment of payable to related party ................... -- (715)
Proceeds from issuance of common stock, net of expenses . -- 100,148
Proceeds from exercise of stock options and warrants .... 232 178
Purchase of treasury stock .............................. (194) (115)
Distributions to minority interests ..................... (416) (1,786)
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Cash (Used in) Provided by Financing Activities ..... (18,825) 58,482
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Net (Decrease) Increase in Cash ..................... (5,566) 3,164
Net Cash at Beginning of Period ..................... 15,420 5,913
-------- ---------
Cash at End of Period ............................... $ 9,854 $ 9,077
======== =========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
UICI AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
September 30, 1997
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements for UICI
and its subsidiaries (the Company) have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine-month period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1996. Certain amounts in the 1996 financial statements have been
reclassified to conform with the 1997 financial statement presentation.
NOTE B--STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effective of stock options will be excluded. The impact of
Statement No. 128 on the calculation of fully diluted earnings per share for
these quarters is not expected to be material.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December 15, 1997,
with earlier application permitted. This statement establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements.
Also in June 1997, the FASB issued Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information." The statement is effective
for fiscal years beginning after December 15, 1997 with earlier application
permitted. This statement significantly changes the way public companies report
segment information in annual financial statements and also requires those
companies to report selected segment information in interim financial reports to
shareholders.
6
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements set forth herein or incorporated by reference herein from
the Company's filings that are not historical facts are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
Actual results may differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: changes in general economic
conditions, including the performance of financial markets, and interest rates;
competitive, regulatory or tax changes that affect the cost of or demand for the
Company's products; health care reform, ability to predict and effectively
manage claims related to health care costs; reliance on key management and
adequacy of claim liabilities. The Credit Card segment's future results also
could be adversely affected by the possibility of future economic downturns
causing an increase in credit losses. Investors are also directed to other risks
and uncertainties discussed in documents filed by the Company with the
Securities and Exchange Commission, specifically the Company's prospectus filed
April 26, 1996 and the Company's report on Form 10-K for the year ended December
31, 1996.
PART I. FINANCIAL INFORMATION
ITEM 2 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations
UICI and its subsidiaries (the "Company") reported net income of $0.50 per share
for the three month period ended September 30, 1997 compared to net income of
$0.42 per share for the comparable period in 1996. Included in net income are
gains from the sale of investments of $0.03 per share for the three month period
ended September 30, 1997. There were no gains from the sale of investments for
the three month period ended September 30, 1996. For the nine month period ended
September 30, 1997, net income was $1.41 per share compared to $1.23 per share
in 1996. Included in net income were gains from the sale of investments of $0.04
and $0.01 per share for the nine month periods ended September 30, 1997 and
1996, respectively.
The Company's business segments are: (i) Health Insurance, which includes
the businesses of the Self-Employed Health Insurance Division and the Student
Health Insurance Division; (ii) Life Insurance and Annuity; (iii) Credit
Services; and (iv) Corporate and Other, which includes the businesses of the
Institutional Technology & Outsourcing Division, the Real Estate Division, the
Student Loan Division, acquired in the second quarter of 1997, investment income
not allocated to the other segments, interest expense, and general expenses
relating to corporate operations, goodwill and realized gains (losses) on sale
of investments. Net investment income is allocated to the Health Insurance
segment and the Life Insurance and Annuity segment based on policyholder
liabilities. The interest rate for the allocation is based on a high credit
quality investment portfolio with a duration consistent with the duration of the
segment's policy liabilities.
7
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 COMPARED TO 1996
HEALTH PREMIUMS. Health premiums increased to $149.3 million for the three
month period in 1997 from $119.3 million in 1996, an increase of 25%, and
increased to $431.1 million for the nine month period in 1997 from $366.5
million in 1996, an increase of 18%. The increase was primarily due to the
growth in sales of new health insurance policies sold by Cornerstone Marketing
of America ("CMA") and the increase in direct business sold by United Group
Association ("UGA"). In 1997, the coinsurance percentage on both in force and
new health insurance policies issued by AEGON increased to 60.0 from 57.5% in
1996.
LIFE PREMIUMS AND OTHER CONSIDERATIONS. Life premiums and considerations
increased to $12.3 million for the three month period in 1997 from $11.0 million
in 1996, an increase of 12%, and remained relatively constant for the nine month
period in 1997 as compared to 1996. The increase for the three month period is
due to the continued growth in sales of new life policies. For the nine month
period in 1997 when compared to 1996, the growth in sales of new life policies
was offset by the decrease in retention of credit life business.
NET INVESTMENT INCOME. Net investment income increased to $20.7 million for
the three month period in 1997 from $18.0 million in 1996, an increase of 15%,
and increased to $61.9 million for the nine month period in 1997 from $51.9
million in 1996, an increase of 16%. The increase was due to an increase in
invested assets and yield on invested assets.
FEES AND OTHER INCOME. Fees and other income increased to $53.2 million for
the three month period in 1997 from $28.5 million in 1996, an increase of 87%,
and increased to $130.6 million for the nine month period in 1997 from $80.2
million in 1996, an increase of 63%. The increase relates primarily to the
companies acquired in the third quarter of 1996 and first quarter of 1997 by the
Institutional Technology & Outsourcing Division, the Real Estate Division which
was acquired in the fourth quarter of 1996, the acquisitions
8
<PAGE>
in the Health Insurance segment and the acquisition of Educational Finance
Group ("EFG") in the second quarter of 1997.
GAINS (LOSSES) ON SALE OF INVESTMENTS. The Company recognized gains
(losses) on the sale of investments of $1.9 and $3.0 million for the three and
nine month periods in 1997, respectively, compared to $(73,000) and $670,000 for
the same periods in 1996. Included in the gains on sale of investments for the
nine months ending September 30, 1997 are $4.7 million in gains from the sale of
two dental benefit companies. The amount of realized gains or losses on the sale
of investments is a function of interest rates, market trends and the timing of
sales. In addition, the net unrealized investment gains on securities classified
as "available for sale," reported as a separate component of stockholders'
equity and net of applicable income taxes and minority interests was $10.7
million at September 30, 1997 compared to $2.2 million at December 31, 1996.
BENEFITS, CLAIMS, AND SETTLEMENT EXPENSES. Benefits, claims, and settlement
expenses increased to $102.8 million for the three month period in 1997 from
$76.9 million in 1996, an increase of 34%, and increased to $295.1 million for
the nine month period in 1997 from $246.4 million in 1996, an increase of 20%.
The increase was primarily due to the growth in premium volume and a higher loss
ratio in the Health Insurance segment. As a percentage of revenues, these
expenses decreased to 43% and 45% for the three and nine month periods in 1997,
respectively, from 44% and 46% for the same periods in 1996. The decrease in
these expenses were the result of the increased revenues from the Credit
Services segment, the Institutional Technology & Outsourcing Division and the
Real Estate Division whose expenses are primarily classified as underwriting,
acquisition and other expenses.
UNDERWRITING, ACQUISITION AND OTHER EXPENSES. Underwriting, acquisition and
other expenses increased to $98.3 million for the three month period in 1997
from $70.3 million in 1996, an increase of 40%, and increased to $264.7 million
for the nine month period in 1997 from $203.9 million in 1996, an increase of
30%. The increase was primarily due to the growth in premium volume, costs
associated with the operations of the Credit Services segment, businesses
acquired in the third quarter of 1996 and first quarter of 1997 by the
Institutional Technology & Outsourcing Division, acquisitions in the Health
Insurance segment and acquisition of EFG. As a percentage of revenues, these
expenses increased to 41% and 40% for the three and nine month periods in 1997,
respectively, from 40% and 38% for the same periods in 1996. The increase was
primarily the result of the increased costs from the Institutional Technology &
Outsourcing Division and the acquisitions in the Health Insurance segment and
the Student Loan Division.
9
<PAGE>
FEDERAL INCOME TAXES. The Company's effective tax rate varies from the
federal tax rate of 35% primarily due to the small life insurance company
deduction allowed for certain insurance subsidiaries of the Company.
INCOME BEFORE FEDERAL INCOME TAXES AND MINORITY INTERESTS ("OPERATING
INCOME"). Operating income increased to $35.4 million for the three month period
in 1997 from $28.9 million in 1996, an increase of 22%, and increased to $99.8
million for the nine month period in 1997 from $82.4 million in 1996, an
increase of 21%. Operating income (loss) for each of the Company's business
segments and divisions was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) (Dollars in thousands)
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Health Insurance:
Self-Employed Health Insurance Division ....... $ 13,003 $ 15,701 $ 43,642 $ 44,102
Student Health Insurance Division ............. 4,407 3,572 12,396 11,019
-------- -------- -------- --------
Total Health Insurance ...................... 17,410 19,273 56,038 55,121
Life Insurance and Annuity ...................... 4,957 3,121 12,842 10,770
Credit Services ................................. 5,516 4,915 15,212 10,794
Corporate and Other:
Institutional Technology & Outsourcing Division (1,031) (1,185) (3,936) (1,929)
Real Estate Division .......................... 1,095 -- 2,915 --
Other ......................................... 7,423 2,781 16,717 7,651
-------- -------- -------- --------
Total Corporate and Other ................... 7,487 1,596 15,696 5,722
-------- -------- -------- --------
$ 35,370 $ 28,905 $ 99,788 $ 82,407
======== ======== ======== ========
</TABLE>
HEALTH INSURANCE. Operating income for the Health Insurance business
decreased to $17.4 million for the three month period in 1997 from $19.3 million
in 1996, a decrease of 10%, and increased to $56.0 million for the nine month
period in 1997 from $55.0 million in 1996, an increase of 2%. The decrease for
the three month period is attributed to an increase in the loss ratio due to a
large health claim settlement and losses recognized during the quarter in the
credit health business.
LIFE INSURANCE AND ANNUITY. Operating income for the Life Insurance and
Annuity business increased to $5.0 million for the three month period in 1997
from $3.1 million in 1996, an increase of 61%, and increased to $12.8 million
for the nine month period in 1997 from $10.8 million in 1996, an increase of
19%. The increase for the three and nine month periods in 1997 was primarily due
to a decrease in agency expenses, the continued growth from the sale of new life
policies, and the recognition of the Company's share of the profits on a closed
block of business.
CREDIT SERVICES. Operating income for the Credit Services segment increased
to $5.5 million for the three month period in 1997 from $4.9 million in 1996, an
increase of 12%, and increased to $15.2 million for the nine month period in
1997 compared to $10.8 million in 1996, an increase of 41%. The increase is
primarily due to the continued growth in new sales which increases revenue and
operating income.
10
<PAGE>
CORPORATE AND OTHER. Operating income for Corporate and Other increased to
$7.5 million for the three month period in 1997 from $1.6 million in 1996, an
increase of $5.9 million, and increased to $15.7 million for the nine month
period in 1997 from $5.7 million in 1996, an increase of $10.0 million. The
Institutional Technology & Outsourcing Division incurred operating losses of
$1.0 million for the three month period in 1997 compared to $1.2 million in
1996, and operating losses of $3.9 million for the nine month period ended in
1997 compared to an operating loss of $1.9 million in 1996. The increase in the
losses in this Division resulted primarily from increased losses at IPN Network.
The Company reported operating income for the Real Estate Division of $1.1
million for the three month period and $2.9 million for the nine month period
ended September 30, 1997. The Real Estate Division was started in the fourth
quarter of 1996 with the acquisition of Amli Realty Co.
Operating income from other corporate activities increased to $7.4 million
for the three month period in 1997 from $2.8 million in 1996, an increase of
$4.6 million, and $16.7 million for the nine month period in 1997 from $7.7
million in 1996, an increase of $9.0 million. The increase for the three month
period in 1997 as compared to 1996 was primarily due to an increase in
investment income not allocated to the other segments, the operating income from
the new Student Loan Division, and an increase in realized gains on the sale of
investments. The primary reason for the increase in investment income not
allocated to the other segments was due to the investment income earned on the
increased equity resulting from earnings and the net proceeds from the public
offering completed by the Company on May 1, 1996. The increase for the nine
month period in 1997 as compared to 1996 was primarily due to the increase in
investment income not allocated to the other segments and realized gains on the
sale of investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's invested assets remained relatively constant when compared to
December 31, 1996. The increase from the cash provided by operations was offset
by the acquisitions of subsidiaries and assets, and the withdrawals, net of
deposits, from the investment products during the nine month period ended
September 30, 1997.
In September 1996, the Company entered into three separate stock purchase
agreements with United Dental Care, Inc. to sell its three dental benefit
companies in the Institutional Technology & Outsourcing Division. The Company
completed two of the sales, one in October 1996, and one in January 1997, for a
realized gain of $2.0 million and $3.2 million, respectively. During the three
month period in 1997, the Company completed the third and final sale of its
dental benefit companies realizing a $1.5 million gain. The operations of the
dental benefit companies were not material to the operations of the Company.
Effective January 1, 1997, the Company acquired the remaining interest of
Insurdata Incorporated ("Insurdata") and UICI Administrators, Incorporated
("UAI") formerly Insurnational Insurance Administrators, Inc., based on a
predetermined formula price of $15.1 million. The Company acquired a majority
interest in Insurdata and UAI in October 1995.
11
<PAGE>
On April 1, 1996, the Company acquired AEGON's underwriting, claims management
and administrative capabilities related to products coinsured by the Company. In
connection with this transaction, UGA agents began to market health insurance
products of the Company rather than the coinsured product. Effective January 1,
1997, the Company acquired the agency force and certain assets of UGA for a
price equal to the net book value of the tangible assets acquired and assumed
certain agents commitments of $3.9 million. UGA was owned 100% by the Company's
Chairman at December 31, 1996. The tangible assets acquired consist primarily of
agent debit balances, a building, and related furniture and fixtures having a
net book value of $9.2 million, which approximates market value of the tangible
assets. The elimination of the sharing of business with AEGON and the
acquisition of the agency force are expected to have a positive impact on the
long term future of the Company.
In May 1997, the Company acquired 100% of Barron Risk Management Services,
Inc. ("Barron") for a purchase price of $5.0 million. The acquisition of Barron
was funded with existing cash. Barron's operations are reported in the Health
Segment.
In June 1997, the Company acquired controlling interest in Educational
Finance Group ("EFG") for a purchase price of $20.0 million. The acquisition of
EFG was funded with existing cash of $18.0 million and a $2.0 million note
payable due on demand. The $2.0 million note payable was paid off in July 1997.
EFG develops innovative financial solutions that allow students and families to
afford the many costs associated with obtaining a post-secondary education. The
results of operations of EFG are reported in the Corporate and Other Segment
under Other.
In August 1997, the Company acquired substantially all of National Motor
Club Holdings, Inc. ("NMC") for a purchase price of $39.2 million. The
acquisition was funded with existing cash. NMC provides membership products such
as motor club services and accident related indemnity benefits. The results of
operations of EFG are reported in the Health Segment.
For financial reporting purposes, the Barron, EFG and NMC acquisitions were
accounted for using the purchase method of accounting, and as a result, the
assets and liabilities acquired were recorded at fair value on the date
acquired.
The Company loaned $15.0 million to two limited partnerships sponsored by AMLI
Realty Co., a wholly owned subsidiary of the Company. These loans are
collateralized by real estate with interest computed at the LIBOR rate plus 2%
and due monthly. The loans are due on March 31, 2000.
Goodwill increased $68.8 million when compared to December 31, 1996, as a result
of the 1997 acquisitions of the remaining interests of Insurdata and UAI, the
agency force and certain assets of UGA, Barron, EFG and NMC. The Company
recorded approximately $34.2 million and $16.9 million in goodwill for the NMC
and EFG acquisitions, respectively.
OTHER
On September 30, 1997, President and Chief Executive Officer, W. Brian
Harrigan resigned as an officer and director of the Company in order to join his
family-owned business as Chairman and Chief Executive Officer. The Board of
Directors of the Company elected Ronald L. Jensen, founder of UICI, to serve as
President and Chief Executive Officer of UICI.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 -- Exhibits and Reports on Form 8-K Number
------
(a) Exhibits.
Exhibit 11 - Statement Re: Computation of per share earnings 14
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UICI
----
(Registrant)
Date: November 13, 1997 /s/Ronald L. Jensen
----------------- -------------------
Ronald L. Jensen, Chairman of
the Board and President
(Chief Executive Officer)
Date: November 13, 1997 /s/Vernon R. Woelke
----------------- -------------------
Vernon R. Woelke, Treasurer
(Chief Financial Officer)
15
UICI AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Dollars and number of shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------ ------ ------ ------
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE:
<S> <C> <C> <C> <C>
Average shares outstanding ........ 45,290 43,467 45,209 40,858
Add:
Common stock equivalent of stock
options and warrants ........ 19 19 32 49
45,309 43,486 45,241 40,907
====== ====== ====== ======
Net income ........................ $22,614 $18,121 $63,850 $50,360
======= ======= ======= =======
Primary net income per share ...... $ 0.50 $ 0.42 $ 1.41 $ 1.23
======= ======= ======= =======
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
ASSUMING FULL DILUTION:
Average shares outstanding ........ 45,290 43,467 45,209 40,858
Add:
Common stock equivalent of stock
options and warrants ........ 24 20 36 52
------- ------- ------- -------
45,314 43,487 45,245 40,910
======= ======= ======= =======
Net income ........................ $22,614 $18,121 $63,850 $50,360
======= ======= ======= =======
Fully diluted net income per share $ 0.50 $ 0.42 $ 1.41 $ 1.23
======= ======= ======= =======
14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<DEBT-HELD-FOR-SALE> 811,065
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 15,572
<MORTGAGE> 28,701
<REAL-ESTATE> 30,739
<TOTAL-INVEST> 1,085,376
<CASH> 9,854
<RECOVER-REINSURE> 71,101
<DEFERRED-ACQUISITION> 85,044
<TOTAL-ASSETS> 1,450,539
<POLICY-LOSSES> 725,896
<UNEARNED-PREMIUMS> 90,807
<POLICY-OTHER> 15,218
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 30,240
0
0
<COMMON> 453
<OTHER-SE> 507,269
<TOTAL-LIABILITY-AND-EQUITY> 1,450,539
466,329
<INVESTMENT-INCOME> 61,861
<INVESTMENT-GAINS> 3,018
<OTHER-INCOME> 130,576
<BENEFITS> 295,098
<UNDERWRITING-AMORTIZATION> (1,854)
<UNDERWRITING-OTHER> 266,597
<INCOME-PRETAX> 99,788
<INCOME-TAX> 32,094
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,850
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
