<PAGE> 1
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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
From the transition period from ____________ to _____________
Commission File Number 0-14320
UICI
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2044750
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 McEwen, Suite 200, Dallas, Texas 75244
- --------------------------------------- ----------
(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--46,231,145 shares as of August 4, 1999.
<PAGE> 2
INDEX
UICI AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated condensed balance sheets-June 30, 1999
(unaudited)-and December 31, 1998 3
Consolidated condensed statements of income
(unaudited)-Three months ended June 30, 1999 and 1998
and six months ended June 30, 1999 and 1998 4
Consolidated statements of comprehensive income
(unaudited)-Three months ended June 30, 1999 and 1998
and six months ended June 30, 1999 and 1998 5
Consolidated condensed statements of cash flows
(unaudited)-Six months ended June 30, 1999 and 1998 6
Notes to consolidated condensed financial statements
(unaudited)-June 30, 1999 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
2
<PAGE> 3
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited) (Note)
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Securities available for sale--
Fixed maturities, at fair value
(cost: 1999--$878,388; 1998--$865,589) ... $ 859,997 $ 886,406
Equity securities, at fair value
(cost: 1999--$25,234; 1998--$18,521) ..... 25,090 18,764
Mortgage and collateral loans .................... 8,532 8,266
Policy loans ..................................... 20,528 21,332
Investment in unconsolidated subsidiary .......... 45,310 45,843
Short-term investments ........................... 200,643 209,616
------------ ------------
Total investments .......................... 1,160,100 1,190,227
Student loans ...................................... 966,180 670,429
Credit card loans .................................. 208,247 136,280
Cash ............................................... 11,966 16,900
Agents' receivables ................................ 15,255 11,249
Reinsurance receivables ............................ 80,910 89,566
Receivables from related parties ................... -- 14,069
Due premiums and other receivables ................. 32,702 39,675
Investment income due and accrued .................. 61,518 41,022
Deferred acquisition costs ......................... 83,781 93,008
Goodwill ........................................... 141,505 108,346
Property and equipment, net ........................ 58,088 51,938
Other .............................................. 17,346 12,346
------------ ------------
$ 2,837,598 $ 2,475,055
============ ============
LIABILITIES
Policy liabilities:
Future policy and contract benefits .............. $ 461,939 $ 468,297
Claims ........................................... 297,669 317,298
Unearned premiums ................................ 87,198 110,569
Other policy liabilities ......................... 20,676 20,590
Federal income taxes ............................... 14,007 36,111
Other liabilities .................................. 89,864 91,133
Notes payable to related parties ................... 156 497
Time deposits ...................................... 157,059 98,913
Short-term debt .................................... 5,075 29,778
Long-term debt ..................................... 80,196 21,268
Student loan short-term debt ....................... 331,019 318,853
Student loan long-term notes ....................... 672,668 350,173
------------ ------------
2,217,526 1,863,480
MINORITY INTERESTS .................................... 13,846 16,784
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share ............. 464 464
Preferred stock, par value $.01 per share .......... -- --
Additional paid-in capital ......................... 163,523 166,489
Treasury stock ..................................... (4,575) --
Accumulated other comprehensive income:
Net unrealized investment gains (losses) ......... (12,340) 13,412
Retained earnings .................................. 459,154 414,426
------------ ------------
606,226 594,791
------------ ------------
$ 2,837,598 $ 2,475,055
============ ============
</TABLE>
NOTE: The balance sheet as of December 31, 1998 has been derived from the
audited financial statements at that date.
See notes to consolidated condensed financial statements.
3
<PAGE> 4
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
Premiums
Health .............................................. $ 176,307 $ 191,385 $ 350,786 $ 373,195
Life premiums and other considerations .............. 11,734 12,510 23,807 25,227
Investment income ..................................... 20,686 19,809 41,902 41,411
Other interest income ................................. 28,607 7,028 46,555 8,143
Credit card fees ...................................... 45,614 21,804 100,192 38,587
Other fee income ...................................... 25,803 26,486 55,501 52,788
Other income .......................................... 869 19,704 1,982 35,369
Gains (losses) on sale of investments ................. (586) 2,045 1,395 3,862
---------- ---------- ---------- ----------
309,034 300,771 622,120 578,582
BENEFITS AND EXPENSES
Benefits, claims, and settlement expenses ............. 124,160 144,214 265,632 290,088
Underwriting, acquisition, and insurance expenses ..... 66,311 69,077 127,656 139,357
Other expenses ........................................ 53,205 55,550 93,465 97,256
Provisions for doubtful accounts ...................... 14,491 4,220 41,586 7,859
Interest expense ...................................... 1,207 646 2,215 1,375
Interest expense - student loan borrowings ............ 13,343 4,388 23,868 4,388
---------- ---------- ---------- ----------
272,717 278,095 554,422 540,323
INCOME BEFORE FEDERAL INCOME TAXES
AND MINORITY INTERESTS ............................ 36,317 22,676 67,698 38,259
Federal income taxes ..................................... 11,714 7,406 22,001 12,537
---------- ---------- ---------- ----------
INCOME BEFORE MINORITY INTERESTS .................... 24,603 15,270 45,697 25,722
Minority interests ....................................... 755 812 969 3,107
---------- ---------- ---------- ----------
NET INCOME .......................................... $ 23,848 $ 14,458 $ 44,728 $ 22,615
========== ========== ========== ==========
BASIC EARNINGS PER COMMON SHARE ..................... $ 0.52 $ 0.31 $ 0.97 $ 0.49
========== ========== ========== ==========
DILUTED EARNINGS PER COMMON SHARE ................... $ 0.50 $ 0.31 $ 0.94 $ 0.49
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
UICI AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income ...................................................... $ 23,848 $ 14,458 $ 44,728 $ 22,615
Other comprehensive income (loss), before tax:
Unrealized gains (losses) in securities:
Unrealized holding gains (losses) arising during period .... (20,994) 5,956 (40,631) 82
Less: reclassification adjustment for gains (losses)
included in net income ................................... (350) 763 1,036 2,625
--------- --------- --------- ---------
Other comprehensive gains (losses),
before tax ......................................... (21,344) 6,719 (39,595) 2,707
Income tax (expense) benefit related to items of
other comprehensive income ............................... 7,459 (2,347) 13,843 (948)
--------- --------- --------- ---------
Other comprehensive gains (losses), net of tax ....... (13,885) 4,372 (25,752) 1,759
--------- --------- --------- ---------
Comprehensive income ............................................ $ 9,963 $ 18,830 $ 18,976 $ 24,374
========= ========= ========= =========
</TABLE>
5
<PAGE> 6
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ...................................................... $ 44,728 $ 22,615
Adjustments to reconcile net income to
cash provided by operating activities:
Increase (decrease) in policy liabilities ..................... (41,104) 14,852
Increase (decrease) in other liabilities ...................... (1,269) 5,036
Increase (decrease) in federal income taxes payable ........... (8,734) 1,238
Decrease (increase) in deferred acquisition costs ............. 9,227 (328)
Decrease (increase) in accrued investment income .............. (20,496) 11,798
Decrease (increase) in reinsurance and other receivables ...... 26,731 (23,070)
Depreciation and amortization ................................. 8,288 4,292
Provision for doubtful accounts ............................... 41,586 7,859
Net income attributable to minority interests ................. 969 3,107
Gains on sale of investments .................................. (1,395) (3,862)
Other items, net .............................................. (4,999) (3,689)
---------- ----------
Cash Provided by Operating Activities ..................... 53,532 39,848
---------- ----------
INVESTING ACTIVITIES
Increase in student loans ....................................... (295,951) (275,430)
Increase in credit card loans ................................... (113,353) (42,733)
Increase in other investments ................................... (44,017) (10,981)
Increase in agents' receivables ................................. (4,006) (1,820)
Decrease (increase) in property and equipment ................... (11,653) 1,858
---------- ----------
Cash Used in Investing Activities ......................... (468,980) (329,106)
---------- ----------
FINANCING ACTIVITIES
Net cash provided from time deposits ............................ 58,146 32,150
Deposits from investment products ............................... 8,353 6,755
Withdrawals from investment products ............................ (16,521) (20,218)
Proceeds from student loan borrowings ........................... 704,240 286,538
Repayment of student loan borrowings ............................ (369,579) --
Proceeds from debt .............................................. 78,407 1,252
Repayments of debt .............................................. (44,523) (11,681)
Purchase of treasury stock ...................................... (4,575) --
Distributions to minority interests ............................. (3,434) (3,725)
---------- ----------
Cash Provided by Financing Activities ..................... 410,514 291,071
---------- ----------
Net Increase (Decrease) in Cash ........................... (4,934) 1,813
Net Cash at Beginning of Period ........................... 16,900 15,932
---------- ----------
Cash at End of Period ..................................... $ 11,966 $ 17,745
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE> 7
UICI AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
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, such financial statements 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 six-month period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. 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, 1998. Certain amounts in the 1998
financial statements have been reclassified to conform with the 1999 financial
statement presentation.
NOTE B--RECENT PRONOUCEMENTS
The Company is assessed amounts by state guaranty funds to cover losses of
policyholders of insolvent or rehabilitated insurance companies, by state
insurance oversight agencies to cover the operating expenses of such agencies
and by other similar legislative entities. These mandatory assessments may be
partially recovered through a reduction in future premium taxes in certain
states. Effective January 1, 1999, the Company adopted the provisions of AICPA
Statement of Position 97-3 ("SOP 97-3"), under which these assessments are
accrued in the period in which they are incurred. The effects of initially
adopting SOP 97-3 were not material to the Company.
In June 1999, the Financial Accounting Standards Board agreed to defer for one
year the effective date of Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. Under the new rules, Statement 133 is
effective for all fiscal quarters for fiscal years beginning after June 15,
2000. Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant
effect on the results of operations or the financial position of the Company.
NOTE C--ACQUISITION
Effective May 1, 1999, the Company acquired all of the minority interest in
United Membership Marketing Group, Inc. ("UMMG") for a cash purchase price of
$32.3 million and, in connection with the acquisition, recorded $35.9 million
in goodwill to be amortized over twenty five years. The acquisition was funded
with existing cash and Company borrowings. As part of this transaction, UMMG
entered into seven-year exclusive marketing agreements with American Fair
Credit Association ("AFCA") and American Credit Educators ("ACE"). For
financial reporting purposes the acquisition was accounted for using the
purchase method of accounting. The Company does not anticipate that this
transaction will have a material impact on the results of operations for the
Company in 1999.
7
<PAGE> 8
NOTE D--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Net income available to common shareholders .... $ 23,848 $ 14,458 $ 44,728 $ 22,615
-------- -------- -------- --------
Weighted average shares outstanding--
basic earnings per share .................. 46,231 46,229 46,292 46,229
Effect of dilutive securities:
Employee stock options .................... 1,379 29 1,324 30
-------- -------- -------- --------
Weighted average shares outstanding--
dilutive earnings per share ............... 47,610 46,258 47,616 46,259
-------- -------- -------- --------
Basic earnings per common share ................ $ 0.52 $ 0.31 $ 0.97 $ 0.49
======== ======== ======== ========
Diluted earnings per common share .............. $ 0.50 $ 0.31 $ 0.94 $ 0.49
======== ======== ======== ========
</TABLE>
NOTE E--LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various pending legal
proceedings arising in the ordinary course of business, including some
asserting significant damages arising from claims under insurance policies,
disputes with agents and other matters. Based in part upon the opinion of
counsel as to the ultimate disposition of such lawsuits and claims, management
believes that the liability, if any, resulting from the disposition of such
proceedings will not be material to the Company's financial condition or
results of operations.
The Company and its Chairman are involved in litigation with a third
party concerning the distribution of cash proceeds from the sale of SunTech
Processing Systems, LLC ("STP") assets in February 1998 (the "Sun Communications
Litigation"). The District Court ruled in December 1998 that, as a matter of
law, a March 1997 agreement governing the distribution of cash sale proceeds
should be read in the manner urged by Sun Communications, Inc. ("Sun") and
consistent with the court-appointed liquidator's previous ruling. The Court also
entered a judgment finding that UICI violated Texas securities disclosure laws
and directing distribution of the sales proceeds in the manner urged by Sun. The
Court also awarded the plaintiff $1.7 million in attorneys' fees, which amount
could be increased to $2.1 million under certain circumstances. UICI believes
that the Court was incorrect in its finding that UICI violated Texas securities
laws and the awarding of attorneys' fees, and UICI has filed a formal notice of
appeal of the Court's decision. However, the Company does not intend to directly
appeal the District Court's ruling with regard to the distribution of the sales
proceeds. The Company's Chairman has filed a notice of appeal in his personal
capacity as a party to the March 1997 agreement, but he has not determined
whether or how he will proceed with that appeal.
The District Court's December 1998 ruling left unresolved the
disposition of approximately $6.0 million of cash sales proceeds, to which the
Company believes it is entitled in accordance with the interpretation of the
March 1997 agreement adopted by the Court. The Company believes that it is
probable that the outcome of the appeal and/or potential settlement, if any,
will not materially affect the distribution of the cash sales proceeds to the
Company as contemplated by the District Court's final judgment.
8
<PAGE> 9
On June 1, 1999, the Company was named as a nominal defendant in a
shareholder derivative action filed in the District Court of Dallas County,
Texas (the "Shareholder Derivative Litigation"). The plaintiff has asserted on
behalf of UICI various derivative claims brought against the individual
defendants (which include certain officers, directors and former directors of
the Company), alleging, among other things, breach of fiduciary duty,
conversion, waste of corporate assets, constructive fraud, negligent
misrepresentation, conspiracy and breach of contract. The plaintiff in the
Shareholder Derivative Action is also the private third-party plaintiff in the
Sun Communications Litigation referred to above, and the claims made in the
Shareholder Derivative Litigation arose out of the same transactions that serve
as the factual underpinning to the Sun Communications Litigation referred to
above.
See Part II, Item 1 for additional information concerning the
Shareholder Derivative Litigation.
NOTE F--SEGMENT INFORMATION
The Company's operating segments are: (i) Insurance, which includes
the businesses of the Self Employed Agency Division, the Student Insurance
Division, the OKC Division, the Special Risk Division and the National Motor
Club Division; (ii) Financial Services, which includes the businesses of the
Credit Services Division, the Educational Finance Group Division, the Insurdata
Division and Other Business Units and (iii) Other Key Factors. Other Key
Factors include investment income not allocated to the other segments, interest
and general expenses relating to corporate operations, amortization of
goodwill, realized gains or losses on sale of investments and the operations of
the Company's AMLI subsidiary. Allocations of investment income and certain
general expenses are based on a number of assumptions and estimates, and the
business segments reported operating results would change if different methods
were applied. Certain assets are not individually identifiable by segment and,
accordingly, have been allocated by formulas. Segment revenues include premiums
and other policy charges and considerations, net investment income, and fees
and other income. Operations which do not constitute reportable operating
segments have been combined with Other Key Factors. Depreciation expense and
capital expenditures are not considered material. Management does not allocate
income taxes to segments. Transactions between reportable operating segments
are accounted for under respective agreements which are generally at cost.
Financial information by operating segment for revenues, income before federal
income taxes and minority interests, and identifiable assets is summarized as
follows:
9
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Revenues
Insurance:
Self Employed Agency ......... $ 143,338 $ 155,571 $ 290,018 $ 304,772
Student Insurance ............ 29,707 27,765 55,794 53,619
OKC Division ................. 23,561 24,650 47,545 49,691
Special Risk ................. 14,258 17,998 28,805 35,529
National Motor Club .......... 7,644 7,793 14,342 14,846
---------- ---------- ---------- ----------
218,508 233,777 436,504 458,457
Financial Services:
Credit Services .............. 52,345 23,476 111,159 41,375
Educational Finance Group .... 28,196 12,780 51,569 20,261
Insurdata .................... 11,620 10,537 22,835 20,405
Other Business Units ......... 228 18,097 349 32,497
---------- ---------- ---------- ----------
92,389 64,890 185,912 114,538
Other Key Factors .............. 7,023 8,190 17,340 18,413
---------- ---------- ---------- ----------
Intersegment Eliminations ...... (8,886) (6,086) (17,636) (12,826)
---------- ---------- ---------- ----------
Total Revenues .................... $ 309,034 $ 300,771 $ 622,120 $ 578,582
========== ========== ========== ==========
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Income (loss) before federal income taxes
and minority interest:
Insurance:
Self Employed Agency ...................... $ 14,248 $ 243 $ 17,399 $ (6,049)
Student Insurance ......................... 743 2,237 1,503 4,629
OKC Division .............................. 4,927 4,999 10,445 9,533
Special Risk .............................. 1,052 2,115 602 3,400
National Motor Club ....................... 1,156 1,714 2,255 2,728
--------- --------- --------- ---------
22,126 11,308 32,204 14,241
Financial Services:
Credit Services ........................... 11,525 8,342 26,347 13,747
Educational Finance Group ................. 1,153 (2,544) 2,379 (2,382)
Insurdata ................................. 331 905 1,155 1,876
Other Business Units ...................... -- (218) -- 19
--------- --------- --------- ---------
13,009 6,485 29,881 13,260
Other Key Factors ............................ 1,182 4,883 5,613 10,758
--------- --------- --------- ---------
$ 36,317 $ 22,676 $ 67,698 $ 38,259
========= ========= ========= =========
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(In thousands)
<S> <C> <C>
Identifiable Assets
Insurance:
Self Employed Agency ......... $ 420,760 $ 444,240
Student Insurance ............ 57,719 87,303
OKC Division ................. 592,813 585,055
Special Risk ................. 46,075 51,580
National Motor Club .......... 25,124 26,038
----------- -----------
1,142,491 1,194,216
Financial Services:
Credit Services .............. 270,775 195,242
Educational Finance Group .... 1,112,563 773,412
Insurdata .................... 19,668 22,338
Other Business Units ......... 19,557 19,226
----------- -----------
1,422,563 1,010,218
Other Key Factors ............... 272,544 270,621
----------- -----------
Total assets ........... $ 2,837,598 $ 2,475,055
=========== ===========
</TABLE>
The Student Insurance assets decreased mainly to the decrease in
unearned premiums. These single premium policies are earned over the
approximate one year term of the policy for the current school year and
therefore the unearned premiums are lower at or near the end of the school
year. This decrease is consistent with prior years.
The increase in the Credit Services segment assets is primarily
attributable to the increase in the number of ACE accounts processed from
December 31, 1998 to June 30, 1999.
The increase in the Educational Finance Group assets is due to
increased loan origination volume.
NOTE G--SUBSEQUENT EVENTS
Effective July 26, 1999, EFG acquired for $58.2 million 100% of the
outstanding stock of AMS Investment Group, Inc., a holding company whose
principal operations include those of Academic Management Services, Inc.
("AMS"). AMS provides tuition payment plans and also originates student loans.
The acquisition was financed with Company borrowings. For financial reporting
purposes, the acquisition will be accounted for using the purchase method of
accounting, and, as a result, the assets and liabilities acquired will be
recorded at fair value on the date acquired. The Company expects to
preliminarily record goodwill in connection with its acquisition of AMS in the
amount of approximately $48 million, which will be ratably amortized over a
period of twenty-five (25)years. The Company does not anticipate that the AMS
transaction will have a material impact on the results of operations of the
Company in 1999.
Effective August 6, 1999, EFG completed a $650 million single seller
asset-backed commercial paper conduit through its special purpose entity, EFG
Funding, LLC. Approximately $515 million of commercial paper was issued in a
private placement, bearing annual interest at rates ranging from 5.05% to
5.69%. The conduit will issue commercial paper from time to time with
maturities from one (1) to two hundred seventy (270) days. Liquidity support is
provided by a separate banking facility. The commercial paper received ratings
of A1/P1/F1 from Standard & Poor's, Moody's, and Fitch, respectively.
11
<PAGE> 12
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 June 30, 1999, compared to net
income of $0.31 per share for the comparable period in 1998. Included in net
income are losses from the sale of investments of $0.01 per share for the three
month period ended June 30, 1999, compared to gains of $0.03 per share for the
comparable period in 1998. For the six-month period ended June 30, 1999, net
income was $0.94 per share compared to net income of $0.49 per share for the
comparable period in 1998. Included in net income are gains from the sale of
investments of $0.02 per share and $0.05 per share for the six month period
ended June 30, 1999 and June 30, 1998, respectively..
The Company's business segments are: (i ) Insurance, which includes
the businesses of the Self Employed Agency Division, the Student Insurance
Division, the OKC Division, the Special Risk Division and the National Motor
Club Division; (ii) Financial Services, which includes the businesses of the
Credit Services Division, the Educational Finance Group Division, the Insurdata
Division and Other Business Units and (iii) Other Key Factors. Allocation of
investment income is based on a number of assumptions and estimates and the
business segments reported operating results would change if different methods
were applied. Segment revenues include premiums and other policy charges and
considerations, net investment income, and fees and other income. Financial
information by segment for revenues and income before federal income taxes and
minority interests is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Revenues
Insurance:
Self Employed Agency ......... $ 143,338 $ 155,571 $ 290,018 $ 304,772
Student Insurance ............ 29,707 27,765 55,794 53,619
OKC Division ................. 23,561 24,650 47,545 49,691
Special Risk ................. 14,258 17,998 28,805 35,529
National Motor Club .......... 7,644 7,793 14,342 14,846
---------- ---------- ---------- ----------
218,508 233,777 436,504 458,457
Financial Services:
Credit Services .............. 52,345 23,476 111,159 41,375
Educational Finance Group .... 28,196 12,780 51,569 20,261
Insurdata .................... 11,620 10,537 22,835 20,405
Other Business Units ......... 228 18,097 349 32,497
---------- ---------- ---------- ----------
92,389 64,890 185,912 114,538
Other Key Factors .............. 7,023 8,190 17,340 18,413
---------- ---------- ---------- ----------
Inter Segment Eliminations ..... (8,886) (6,086) (17,636) (12,826)
---------- ---------- ---------- ----------
Total Revenues .................... $ 309,034 $ 300,771 $ 622,120 $ 578,582
========== ========== ========== ==========
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Income (loss) before federal income taxes
and minority interest
Insurance:
Self Employed Agency ...................... $ 14,248 $ 243 $ 17,399 $ (6,049)
Student Insurance ......................... 743 2,237 1,503 4,629
OKC Division .............................. 4,927 4,999 10,445 9,533
Special Risk .............................. 1,052 2,115 602 3,400
National Motor Club ....................... 1,156 1,714 2,255 2,728
--------- --------- --------- ---------
22,126 11,308 32,204 14,241
Financial Services:
Credit Services ........................... 11,525 8,342 26,347 13,747
Educational Finance Group ................. 1,153 (2,544) 2,379 (2,382)
Insurdata ................................. 331 905 1,155 1,876
Other Business Units ...................... -- (218) -- 19
--------- --------- --------- ---------
13,009 6,485 29,881 13,260
Other Key Factors ............................ 1,182 4,883 5,613 10,758
--------- --------- --------- ---------
$ 36,317 $ 22,676 $ 67,698 $ 38,259
========= ========= ========= =========
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1999 COMPARED TO 1998
Self Employed Agency Division ("SEA"). Operating income for the three
months ended June 30, 1999 for the SEA Division increased to $14.2 million from
$243,000 in the comparable 1998 period, an increase of $14.0 million, and for
the six months ended June 30, 1999 operating income increased to $17.4 million
from a loss of $6.0 million in the comparable 1998 period. The increases are
the result of rate increases implemented in 1998 and success in directing a
larger portion of new sales to the traditional indemnity products. Revenue for
the three months ended June 30, 1999 for the SEA Division decreased to $143.3
million from $155.6 million for the same period in 1998, and for the six months
ended June 30, 1999 revenue decreased to $290.0 million compared to $304.8
million in the comparable 1998 period. The decrease in revenues in the 1999
periods reflects the negative impact on new sales and recruiting efforts of the
rate increases implemented in 1998.
Student Insurance. Operating income for the three months ended June
30, 1999 for the Student Insurance Division decreased to $743,000 from $2.2
million for the same period in 1998, a decrease of $1.5 million, and for the
six-month period in 1999 operating income decreased to $1.5 million from $4.6
million in the comparable 1998 period. The decrease in operating income
continues to reflect lower margins resulting from aggressive pricing in the
1998/1999 school year. Revenue for the three months ended June 30, 1999 from
the Student Insurance Division increased to $29.7 million from $27.8 million in
the corresponding 1998 period, and for the six month period ended June 30, 1999
revenue increased to $55.8 million from $53.6 million in the 1998 period.
OKC Division. Operating income for the OKC Division was comparable for
the three-month 1999 and 1998 periods, and for the six months ended June 30,
1999 operating income increased to $10.4 million from $9.5 million in the
corresponding 1998 period. Revenues for the three months ended June 30, 1999
for the OKC Division decreased to $23.6 million from $24.7
13
<PAGE> 14
million in the comparable 1998 period, and for the six month 1999 period
revenues decreased to $47.5 million from $49.7 million in the comparable
six-month period of 1998. This decrease in revenues was primarily due to a
decrease in revenue from closed blocks of business.
Special Risk Division. Operating income for the three months ended
June 30, 1999 for the Special Risk Division decreased to $1.1 million from $2.1
million in the comparable 1998 period, and for the six months ended June 30,
1999 operating income decreased to $602,000 from $3.4 million in the 1998
six-month period. Revenue for the three months ended June 30, 1999 decreased to
$14.3 million from $18.0 million in the corresponding 1998 period, and for the
six months ended June 30, 1999 revenue decreased to $28.8 million from $35.5
million in the comparable 1998 period. The decrease in operating income and
revenue in the 1999 periods was primarily due to a decrease in revenue from
closed blocks of business and renewal actions taken by the Company designed to
eliminate unprofitable business.
National Motor Club. Operating income for the three months ended June
30, 1999 for the National Motor Club decreased to $1.2 million from $1.7
million in 1998, a decrease of $500,000, and for the six months ended June 30,
1999 operating income decreased to $2.3 million from $2.7 million in the
comparable 1998 period, a decrease of $400,000. Operating income for the three
and six month periods ended June 30, 1998 included approximately $400,000 of
non-recurring income from the sale of a building. Revenues for the three and
six month periods of 1999 are comparable to revenues in the corresponding 1998
periods.
Credit Services. Operating income for the three months ended June 30,
1999 for the Company's Credit Services business increased to $11.5 million from
$8.3 million in the 1998 period, and for the six months ended June 30, 1999
operating income increased to $26.3 million from $13.7 million in the six
months ended June 30, 1998. Revenues for the three months ended June 30, 1999
increased to $52.3 million from $23.5 million in the comparable 1998 period,
and for the six months ended June 30, 1999 revenues increased to $111.2 million
from $41.4 million in the six month 1998 period. The increase in operating
income and revenues in 1999 compared to 1998 was primarily attributable to the
increase in the number of ACE accounts processed from December 31, 1998 to June
30, 1999.
Educational Finance Group ("EFG"). EFG`s operating income for the
three months ended June 30, 1999 increased to $1.2 million from a loss of $2.5
million in the 1998 three-month period, and for the six months ended June 30,
1999 operating income increased to $2.4 million from a loss of $2.4 million for
the same period in 1998. The increase was primarily due to increased loan
originations and fundings, as well as a reduction in the net interest on the
various financing arrangements in place to fund EFG's student loan portfolio.
Revenues for the three months ended June 30, 1999 increased to $28.2 million
from $12.8 million in the corresponding 1998 period, and for the six months
ended June 30, 1999 revenues increased to $51.6 million from $20.3 million in
the 1998 period.
On June 11, 1999, an EFG special purpose financing subsidiary sold, in
a private placement transaction, $319.5 million principal amount of Auction
Rate Student Loan-Backed Notes at an interest rate of 5.038%. The interest rate
on the notes will be reset monthly by an auction process. The notes were sold
in two tranches and the final maturity on the notes is November 2022.
14
<PAGE> 15
Insurdata. Operating income for the three months ended June 30, 1999
for Insurdata decreased to $331,000 from $905,000 in the comparable 1998
period, and for the six months ended June 30, 1999 operating income decreased
to $1.2 million from $1.9 million in the 1998 period. The decrease was
primarily due to restructuring costs associated with the consolidation of
imaging production centers and an increased investment in Internet-based
solutions. Revenues in the three months ended June 30, 1999 increased to $11.6
million from $10.5 million in the corresponding 1998 period, and for the six
months ended June 30, 1999 revenues increased to $22.8 million from $20.4
million in the comparable 1998 period. Of Insurdata's total revenue in the six
months ended June 30, 1999, $11.4 million was attributable to data processing
services provided to the health insurance operations of UICI, compared to $10.3
million of such revenue in the six month period ended June 30, 1998.
Other Business Units. During 1998, this category ceased to exist, with
the Other Business Units sold, closed or transferred to other categories.
Other Key Factors. The Other Key Factors category includes investment
income not allocated to the other segments, interest expense on corporate debt,
general expenses relating to corporate operations, amortization of goodwill,
realized gains or losses on sale of investments and the operations of the
Company's AMLI subsidiary. Operating income for the three months ended June 30,
1999 associated with this category decreased to $1.2 million from $4.9 million
in the three months ended June 30, 1998, and for the six months ended June 30,
1999 such operating income decreased to $5.6 million from $10.8 million in the
comparable 1998 period. The decrease in operating income in the three and six
month periods was primarily due to a decrease in realized gains on sale of
investments and an increase in interest and general expenses, which were
partially offset by an increase in investment income not allocated to the other
segments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's invested assets decreased to $1,160 million at June 30,
1999 compared to $1,190 million at December 31, 1998. The primary sources for
the asset reduction were the decreases in market values of the fixed maturity
securities held as "available for sale" and withdrawals (net of deposits) from
investment products. These decreases were partially offset by cash provided by
current operations, corporate borrowings, and an increase in restricted cash
held by EFG at June 30, 1999. The decrease in market values of the fixed
maturity securities held as "available for sale" was the direct result of
increases in long-term interest rates.
The growth in the credit card receivables portfolio from $136 million
at December 31, 1998 to $208 million at June 30, 1999 was funded using time
deposits at United Credit National Bank ("UCNB") and cash provided from current
operations. The growth in the student loans from $670 million at December 31,
1998 to $966 million at June 30, 1999 was funded from the proceeds of student
loan borrowings and the issuance of long term notes, which indebtedness in the
aggregate increased from $669 million at December 31, 1998 to $1,004 million at
June 30, 1999.
On June 11, 1999, an EFG special purpose financing subsidiary sold, in
a private placement transaction, $319.5 million principal amount of Auction
Rate Student Loan-Backed Notes at an initial interest rate of 5.038%. The
interest rate on the notes will be reset monthly by an auction process. The
notes were sold in two equal tranches and mature in November 2022.
15
<PAGE> 16
The notes received a "AAA" credit rating from Standard & Poor's and Fitch IBCA
and an "Aaa " rating from Moody's Investor Services.
On May 17, 1999, the Company closed on a $100 million unsecured line
of credit with a group of commercial banks. Amounts outstanding under the line
of credit bear interest at an annual rate of seventy-five (75) basis points
(0.75%) over LIBOR. As of June 30, 1999, the Company had borrowed $60 million
on this line of credit, of which $50 million was used to repay $50 million of
debt outstanding under the Company's prior bank facility and the remaining $10
million was used to fund the UMMG acquisition. Subsequent to June 30, 1999, the
Company had borrowed the remaining $40 million, primarily to partially finance
the AMS acquisition and to provide working capital.
YEAR 2000 READINESS
State of Readiness. Some of the Company's older computer programs were
written using two digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software that recognize a
date using "00" as the year 1900 rather than the year 2000. This could cause a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send premium
notices, process credit cards or student loans or engage in similar normal
business activities. As a result, the Company has implemented a project
intended to ensure that hardware and software systems operated or licensed in
the Company's business are designed to operate and properly manage dates beyond
December 31, 1999 ("Year 2000 Ready"). To date, the Year 2000 Project has
assessed the Company's information technology and operating systems ("IT
Systems") and is assessing non-information technology systems, including
embedded technology, relating to, among other systems, security systems,
elevator systems and heating, ventilating and air conditioning systems ("Non-IT
Systems"). The Year 2000 Project consists of five phases: (i) awareness, (ii)
assessment, (iii) analysis, design and remediation, (iv) testing and validation
and (v) creation of contingency plans in the event of Year 2000 failures.
IT Systems. The Company has completed the first four phases of the
Year 2000 project for substantially all of its IT Systems. The Company is in
the process of completing the contingency plans of substantially all of its
mission critical IT systems, and this phase is currently expected to be
completed by the end of the third quarter of 1999.
Non-IT Systems. The Company believes that Year 2000 non-readiness of
its own Non-IT Systems would not have a material adverse effect on the
Company's business or operations. Accordingly, the Company has primarily
focused its efforts on its IT Systems.
Readiness of Third Parties. The Company relies on hardware and
software of third parties as material components of its IT Systems, including
network access between the Company's data center and credit card transaction
processors. As part of the Year 2000 Project, the Company is testing such
software, hardware and interfaces for Year 2000 Readiness. In addition, the
Company is polling the third parties who provide software, hardware or data to
the Company regarding each of such third party's Year 2000 readiness plan and
state of readiness. The Company is requesting written responses from such third
parties that their software, hardware and data is, or will be on a timely
basis, Year 2000 ready.
16
<PAGE> 17
The Company provides services to third parties. If a Year 2000 problem
caused the interruption of such services to those customers, such interruption
could have a material adverse effect on the Company's business and the Company
could incur liability as a result.
Year 2000 Costs. The Company expects to incur internal labor costs, as
well as other expenses, in its Year 2000 Project. The Company's total estimated
cost of the project is approximately $10.5 million, of which approximately $8.3
million, cumulatively, was incurred as of June 30, 1999 and $2.1 million was
incurred during the six-month period ended June 30, 1999. Future costs of the
Year 2000 project will primarily result from the re-deployment of information
technology resources, although no significant internal IT Systems projects are
being deferred to further the Year 2000 Project. Costs associated with the Year
2000 project are expensed as incurred and are paid from operating cash flows.
Risks of Year 2000 Non-Readiness and Contingency Plans. The economy in
general may be adversely affected by risks associated with the Year 2000. The
Company's business, financial condition, and results of operations could be
materially adversely affected if systems that it operates or licenses to third
parties, or systems that are operated by other parties (e.g., utilities,
telecommunications service providers, data providers, associates, credit card
transaction processors) with which the Company's systems interface, are not
Year 2000 Ready in time. There can be no assurance that these systems will
continue to properly function and interface and will otherwise be Year 2000
Ready. Although the Company is not aware of any threatened claims related to
the Year 2000, the Company may be subject to litigation arising from such
claims and, depending on the outcome, such litigation could have a material
adverse affect on the Company. It is not clear whether the Company's insurance
coverage would be adequate to offset these and other business risks related to
the Year 2000.
The Company has not had any material processing disruptions to date
that were caused by Year 2000 issues. Internal testing provides the Company
with a level of confidence that, in a most reasonably likely "worst case"
scenario, these systems will not cause a material disruption on a
forward-looking basis. A most reasonably likely "worst case" scenario would
anticipate that it is possible that potential consequences would include, among
other possibilities, the inability to accurately and timely process benefit
claims, update customers' accounts, bill customers, calculate financial and
actuarial data, and report accurate data to management, shareholders, customers
and regulators. The Company cannot guarantee that it will be able to resolve
all of its Year 2000 issues. Any critical unresolved Year 2000 issues could
have a material adverse effect on the Company's results of operations,
liquidity or financial condition.
The expected costs of the Year 2000 Project and the date on which the
Company believes it will complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources and
other factors. However, there can be no assurance that these estimates will be
achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes and similar
uncertainties, the success in becoming Year 2000 Ready of third parties whose
software and hardware systems interface with the Company, the outcome of
possible Year 2000 litigation involving the Company and similar uncertainties.
17
<PAGE> 18
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 and the ability of the Company and
third party vendors to modify computer systems for the Year 2000 data
conversion in a timely manner. The Credit Services segment's future results
also could be adversely affected by the possibility of future economic
downturns causing an increase in credit losses or changes in regulations for
credit cards or credit card national banks. The Company has certain risks
associated with the Educational Finance Group business. The changes in the
Higher Education Act or other relevant federal or state laws, rules and
regulations and the programs implemented thereunder may adversely impact the
education credit market. In addition, existing legislation and future measures
by the federal government may adversely affect the amount and nature of federal
financial assistance available with respect to loans made through the U.S.
Department of Education. Finally the level of competition currently in
existence in the secondary market for loans made under the Federal Loan
Programs could be reduced, resulting in fewer potential buyers of the Federal
Loans and lower prices available in the secondary market for those loans.
Investors are also directed to other risks and uncertainties discussed in
documents filed by the Company with the Securities and Exchange Commission.
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates, and
other relevant market rate or price changes. Market risk is directly influenced
by the volatility and liquidity in the markets in which the related underlying
assets are traded.
The primary market risk to the Company's investment portfolio is
interest rate risk associated with investments and the amount of interest that
policyholders expect to have credited to their policies. The interest rate risk
taken in the investment portfolio is managed relative to the duration of the
liabilities. The Company's investment portfolio consists mainly of high
quality, liquid securities that provide current investment returns. The Company
believes that the annuity and universal life-type policies are generally
competitive with those offered by other insurance companies of similar size.
The Company does not anticipate significant changes in the primary market risk
exposures or in how those exposures are managed in the future reporting periods
based upon what is known or expected to be in effect in future reporting
periods.
Profitability of the student loans is affected by the spreads between
the interest yield on the student loans and the cost of the funds borrowed
under the various credit facilities. Although the interest rates on the student
loans and the interest rate on the credit facilities are variable, the interest
earned on the student loans uses the 91-day T-bill as the base rate while the
base rate on
18
<PAGE> 19
the credit facilities is LIBOR. The effect of rising interest rates is
generally small as both revenues and costs adjust to new market levels.
The Credit Services Division's operations are subject to risk
resulting from interest rate fluctuations to the extent that there is a
difference between the amount of interest earned on the credit cards and the
amount of the interest paid on the time deposits. The maturity of the time
deposits is less than one year. The principal objective of the Company's
asset/liability management activities is to provide maximum levels of net
interest income while maintaining acceptable levels of interest rate and
liquidity risk and facilitating the funding needs of the Company.
PART II. OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various pending legal
proceedings arising in the ordinary course of business, including some asserting
significant damages arising from claims under insurance policies, disputes with
agents and other matters. Based in part upon the opinion of counsel as to the
ultimate disposition of such lawsuits and claims, management believes that the
liability, if any, resulting from the disposition of such proceedings will not
be material to the Company's financial condition or results of operations.
Sun Communications Litigation
The Company and its Chairman are involved in litigation with a third
party concerning the distribution of cash proceeds from the sale of SunTech
Processing Systems, LLC ("STP") assets in February 1998 (the "Sun Communications
Litigation"). The District Court ruled in December 1998 that, as a matter of
law, a March 1997 agreement governing the distribution of such cash proceeds
should be read in the manner urged by Sun Communications, Inc. ("Sun") and
consistent with a court-appointed liquidator's previous ruling. The Court
entered a judgment directing distribution of the sales proceeds in the manner
urged by Sun. The Court also entered a finding that UICI violated Texas
securities disclosure.laws and awarded the plaintiff $1.7 million in attorneys'
fees, which amount could be increased to $2.1 million under certain
circumstances. UICI believes that the Court was incorrect in its finding that
UICI violated Texas securities laws and the awarding of attorneys' fees, and
UICI has filed a formal notice of appeal of the trial court's decision. However,
the Company does not intend to directly appeal the District Court's ruling with
regard to the distribution of the cash sales proceeds. The Company's Chairman
has filed a notice of appeal in his personal capacity as a party to the March
1997 agreemant, but he has not determined whether or how he will proceed with
that appeal.
The District Court's December 1998 ruling left unresolved the
disposition of approximately $6.0 million of sales proceeds, to which the
Company believes it is entitled in accordance with the interpretation of the
March 1997 agreement adopted by the Court. The Company believes it is probable
that the outcome of the appeal and or potential settlement, if any, will not
materially affect the distribution of the cash sales proceeds to the Company as
contemplated by the District Court's final judgment.
Shareholder Derivative Litigation
On June 1, 1999, the Company was named as a nominal defendant in a
shareholder
19
<PAGE> 20
derivative action captioned Richard Schappel v. UICI, Ronald Jensen, Richard
Estell, Vernon Woelke, J. Michael Jaynes, Gary Friedman, John Allen, Charles T.
Prater, Richard Mockler and Robert B. Vlach, which was filed in the District
Court of Dallas County, Texas (the "Shareholder Derivative Litigation"). The
plaintiff has asserted on behalf of UICI various derivative claims brought
against the individual defendants, alleging, among other things, breach of
fiduciary duty, conversion, waste of corporate assets, constructive fraud,
negligent misrepresentation, conspiracy and breach of contract. Plaintiff seeks
to compel UICI's directors and officers to conduct a complete accounting and
audit relating to all related party transactions and to fully and completely
restate, report and disclose such transactions. Plaintiff further seeks to
recover for UICI's benefit all damages caused by such alleged breach of the
officers' and directors' duty to UICI. The plaintiff in the Shareholder
Derivative Litigation is also the private third-party plaintiff in the Sun
Communications Litigation, and the claims made in the Shareholder Derivative
Litigation arose out of the same transactions that serve as the factual
underpinning to the Sun Communications Litigation referred to above.
UICI has filed notice of removal to the U. S. District Court for the
Northern District of Texas on the basis that federal questions have been raised
which give jurisdiction to the matter to the federal district court. Plaintiff
has filed a motion to remand the case back to Texas state court.
At the regular quarterly meeting of the Company's Board of Directors
held on August 4, 1999, George Lane III and Stuart D. Bilton (non-employee
directors of the Company) were appointed, in accordance with Texas and Delaware
law, to serve as a special committee to investigate and assess on behalf of the
Company the underlying claims made in the Shareholder Derivative Litigation.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
NUMBER
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
20
<PAGE> 21
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: August 13, 1999 /s/ Gregory T. Mutz
--------------- -----------------------------------------
Gregory T. Mutz, President, Chief
Executive Officer, and Director
Date: August 13, 1999 /s/ William P. Benac
--------------- -----------------------------------------
William P. Benac, Vice President,
(Chief Financial Officer)
21
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 859,997
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 25,090
<MORTGAGE> 8,532
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,160,100
<CASH> 11,966
<RECOVER-REINSURE> 80,910
<DEFERRED-ACQUISITION> 83,781
<TOTAL-ASSETS> 2,837,598
<POLICY-LOSSES> 759,608
<UNEARNED-PREMIUMS> 87,198
<POLICY-OTHER> 20,676
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 1,088,958
0
0
<COMMON> 464
<OTHER-SE> 605,762
<TOTAL-LIABILITY-AND-EQUITY> 2,837,598
374,593
<INVESTMENT-INCOME> 41,902
<INVESTMENT-GAINS> 1,395
<OTHER-INCOME> 1,982
<BENEFITS> 265,632
<UNDERWRITING-AMORTIZATION> 7,365
<UNDERWRITING-OTHER> 120,291
<INCOME-PRETAX> 67,698
<INCOME-TAX> 22,001
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,728
<EPS-BASIC> 0.97
<EPS-DILUTED> 0.94
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
