SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 4, 1998
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UICI
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(Exact name of registrant as specified in its charter)
Delaware 0-14320 75-2044750
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation or organization Number) Identification No.)
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 392-6700
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Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS
On April 24, 1998, UICI announced earnings for the first quarter of 1998
would be less than the operating earnings of $0.44 per share for the first
quarter of 1997 and would not meet analyst expectations.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
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Exhibit Page
Number Description of Exhibit Number
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99.1 Press release announcing 1998 first quarter earnings to be lower
than expected 4
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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 hereunto duly authorized.
UICI
(Registrant)
Date May 4, 1998 By /s/ Ronald L. Jensen
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Ronald L. Jensen
Chairman of the Board, President
and Director
Date May 4, 1998 By /s/ Warren B. Idsal
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Warren B. Idsal
Vice President and Chief
Financial Officer
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UICI
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Contact: Warren B. Idsal
UICI
News Release 4001 McEwen, Suite 200
- ----------------------------------------------------- Dallas, Texas 75244
Phone: (972) 392-6700
(For Immediate Release)
UICI ANNOUNCES FIRST QUARTER EARNINGS TO BE LOWER THAN EXPECTED
DALLAS, TX, April 24, 1998----UICI (the "Company" NASDAQ: UICI) reported
earnings for the first quarter of 1998 will be less than the operating earnings
of $0.44 per share reported for the first quarter of 1997 and will not meet
analyst expectations. The decrease is due to lower earnings from the Self
Employed Agency Division (SEA). The lower earnings of SEA are the result of
conforming the method used to compute the claim reserves on SEA's business, as
explained below, and the continuing losses on certain managed care products.
UICI will not report any write offs or restructuring charges as a result of
these actions and overall insurance operations will report a profit. The
operating profits of the other business units for the first quarter of 1998 are
in line with expectations. The Company will announce the results of the first
quarter on May 5, 1998 prior to the Annual Shareholders Meeting which will be at
1:00 P.M., Central Daylight Time.
UICI indicated in its Annual Report that the claim reserving method employed by
the previous administrator of a portion of SEA's insurance business was not
comparable to the traditional reserving methods employed by UICI for its other
self employed health insurance. While both reserving methods are acceptable for
statutory and GAAP reporting, UICI's method is the more conservative of the two
methods. The decision to conform the two methods of computing reserves was made
to avoid the confusion caused by employing two methods at a time when a
continuing evaluation of rates and rate changes are critical in managing the
block to profitability. Conforming the two methods resulted in an increase in
overall claim reserves approximating $12 million at March 31, 1998.
Also discussed in the 1997 Annual Report as a major concern of the SEA Division
was that operating earnings were down in this Division from the prior year
because the managed care products sold by a Company agency had an operating loss
in 1997. In addition, the Company anticipated that these managed care products
would continue to produce losses in the first and second quarter of 1998.
The operating losses for the managed care products were worse than expected in
the first quarter of 1998 while the traditional indemnity products continued to
produce acceptable profits. The worse than expected results for the first
quarter were due to a higher loss ratio on those managed care products with
lower deductibles, and a slower than anticipated implementation of rate
increases on the managed care products in part due to obtaining regulatory
approval of the rate increases in certain states. The Company is continuing the
process of redesigning products, raising deductibles and co-payment amounts,
implementing approved rate increases, and reexamining our ability to earn
adequate returns in certain states. It will take three to six months for the
results of these actions to be reflected in the reported financial results.
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UICI
4001 McEwen Drive, Suite 200 Dallas, Texas 75244
972-392-6700 Fax: 972-392-6778
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The conforming of the reserves and the poor results of the managed care products
will cause the SEA Division to report a loss for the first quarter. With the
changes either made or to be made in pricing and product design as discussed
above, the operating losses on the managed care products are expected to
decrease each quarter for the remainder of 1998 which should make the SEA
Division profitable in each quarter during the remainder of 1998.
CORPORATE PROFILE:
UICI is a diversified financial services company headquartered in Dallas, Texas.
Through its subsidiaries, UICI offers insurance and financial services to niche
consumer markets. UICI companies also provide institutional technology and
outsourcing solutions to the insurance community.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995:
Certain statements in this press release are "forward looking statements" within
the meaning of the Private Securities Litigation Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results to differ materially. Such risks, uncertainties and other factors
include, but are not limited to, changes in general economic conditions, changes
in the regulatory environment, levels of competition including managed health
care competition in the health industry, interest rates on student loans and
other factors described in detail in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
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