SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): MAY 24, 1999
AMERICAN MEDICAL SECURITY GROUP, INC.
(Exact name of Registrant as specified in its charter)
WISCONSIN 1-13154 39-1431799
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
3100 AMS BOULEVARD, GREEN BAY, WISCONSIN 54313
(Address of principal executive offices) (Zip Code)
(920) 661-1500
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On May 24, 1999, American Medical Security Group, Inc. (the "Company" or
the "Registrant") issued a press release announcing plans to take an after-tax
charge of up to $6 million or $0.36 per share in the second quarter of 1999 to
strengthen its medical claims reserves. The reserve strengthening is the result
of an adverse medical loss ratio trend identified by the Company in the second
quarter of 1999. The adverse medical loss ratio trend relates primarily to the
Company's Florida one- and two-life group health business where a turnaround
strategy implemented by management which was focused on returning Florida
business to profitability, has developed more slowly than anticipated. In
addition, certain segments of the Company's older blocks of business are being
affected by higher than anticipated claims utilization. These affected segments
represent 14% of medical membership, as of March 31, 1999, and 17% of the
Company's medical premiums for the first quarter of 1999.
In the first quarter of 1999, the Company acquired a block of group health
business from Continental Assurance Company ("CNA") which represented
approximately 72,000 new members. This acquisition resulted in the transfer of a
large claims backlog from CNA which delayed the processing of the Company's own
claims. The adverse loss ratio trend was temporarily obscured by the claims
processing delays. Corrective action plans have been put into place to mitigate
the obscuring effect of possible future claims processing delays.
As a result of this charge and the adverse trend, management expects the
medical loss ratio for 1999 to be somewhat higher than the 76.7% reported for
1998. Consequently, earnings per share for the second, third and fourth quarters
of 1999 are anticipated to be below management's original expectations.
Excluding the identified under-performing segments, management believes its
medical business is meeting profit expectations. Management also expects its
dental and group life businesses to continue to perform as expected. The Company
had a tangible book value per share of $9.13 as of March 31, 1999. Management
expects the charge to have a negligible effect on the Company's financial
strength.
FORWARD LOOKING STATEMENTS
Statements contained in this report that are not historical facts are
forward-looking statements subject to inherent risks and uncertainties that may
cause actual results or events to differ materially from those contemplated by
such forward-looking statements. The terms "anticipate", "believe", "estimate",
"expect", "objective", "plan", "project" and similar expressions are intended to
identify forward-looking statements. In addition to the assumptions and other
factors referred to specifically in connection with such statements, factors
that may cause actual results or events to differ materially from those
contemplated by such forward looking statements, include, among others, (1) the
effects of either federal or state health care reform or other legislation; (2)
rising health care costs, including the Company's ability to predict such costs
and adequately price its products; (3) changes in membership utilization and
risk; (4) government regulations, including changes in insurance, health care
and other regulatory conditions; (5) delays in regulatory approvals, and
regulatory action resulting from market conduct activity and general
administrative compliance with state and federal laws; (6) general business
conditions, including competitive practices and demand for the Company's
products; (7) development of or changes in claims reserves; (8) rating agency
policies and practices; (9) general economic conditions, including changes in
interest rates and the effect of such changes on the Company's investment
portfolio; (10) the Company's ability to integrate acquisitions; (11) unforeseen
costs or consequences of Year 2000 issues; (12) the retention of key management
and technical employees, and (13) other factors that may be referred to in the
Company's reports filed with the Securities and Exchange Commission from time to
time.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS:
See the Exhibit Index following the Signature page of this report,
which is incorporated herein by reference.
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SIGNATURE
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.
AMERICAN MEDICAL SECURITY GROUP, INC.
Dated: JUNE 24, 1999 /S/ GARY D. GUENGERICH
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Gary D. Guengerich
Executive Vice President & Chief Financial Officer
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<CAPTION>
AMERICAN MEDICAL SECURITY GROUP, INC.
(COMMISSION FILE NO. 1-13154)
EXHIBIT INDEX
TO
FORM 8-K CURRENT REPORT
Date of Report: May 24, 1999
<S> <C> <C> <C>
INCORPORATED HEREIN FILED
EXHIBIT NO. DESCRIPTION BY REFERENCE TO HEREWITH
99 Press Release dated May 24, 1999 X
</TABLE>
EX-1
EXHIBIT 99
AMZ AMERICAN FOR MORE INFORMATION CONTACT:
LISTED MEDICAL SECURITY
NYSE RX FOR GOOD HEALTH(R) GARY GUENGERICH
Executive Vice-President & CFO
P.O. Box 19032 (920)661-2486
Green Bay, WI 54307-9032
MIKE LAVIN
Investor Relations
- ------------------------------------------ (920)661-2354
NEWS
RELEASE CLIFF BOWERS
Corporate Communications
- ------------------------------------------ (920)661-2766
FOR IMMEDIATE RELEASE
AMS WILL STRENGTHEN RESERVES;
TEMPERS 1999 EARNINGS EXPECTATIONS
GREEN BAY, Wis. -- MAY 24, 1999 -- American Medical Security Group, Inc.
(NYSE:AMZ) said today that it plans to take an after-tax charge in the second
quarter of up to $6 million or $0.36 per share to strengthen its medical claims
reserves relating primarily to its Florida business and certain segments of its
older blocks of business.
The reserve strengthening is the result of an adverse medical loss ratio
trend which the company identified in the second quarter of 1999.
As a result of this charge and the adverse trend, the company expects its
medical loss ratio for 1999 to be slightly higher than the 76.7% reported for
1998. Consequently, earnings per share for 1999 are expected to be below current
consensus analyst estimates.
AMS cited two factors as significantly contributing to the loss ratio
trend:
o Results from the company's turnaround strategy for its Florida business are
developing more slowly than anticipated.
o The loss ratio on certain segments of older blocks of business is being
affected by higher than anticipated claims utilization.
These affected segments represent 14% of medical membership, as of March
31, 1999, and 17% of the company's medical premiums for the first quarter 1999.
"We are clearly disappointed with this turn of events," said Sam Miller,
AMS Chairman, President & Chief Executive Officer. "However, we have full
confidence in the corrective action plans we have put in place."
According to Gary Guengerich, Executive Vice President and Chief Financial
Officer, "The medical loss ratio trend was obscured by delays in the processing
of AMS' claims brought on by a large claims backlog that was transferred to the
company when it acquired the CNA block of business during the first quarter of
1999."
According to the company, its medical business, excluding the
under-performing segments, is meeting profit expectations. Its dental and group
life businesses are also performing up to expectations.
Because of the company's strong balance sheet, as evidenced by AMS'
tangible book value of $9.13 per share (as of March 31, 1999), the charge will
have a negligible effect on its financial strength, the company said.
American Medical Security Group, through its operating divisions, markets
health care benefits and insurance products to small businesses, families and
individuals. The company serves customers nationwide through partnerships with
professional, independent agents and quality health care providers. It provides
and administers health care benefits for 662,126 medical members (as of March
31, 1999). The company's internet address is WWW.AMSCHOICES.COM.
# # # # #
CAUTIONARY STATEMENT: The statements contained in this press release which are
not historical facts are forward-looking statements subject to inherent risks
and uncertainties that may cause actual results or events to differ materially
from those contemplated by such forward-looking statements. In addition to the
assumptions and other factors referred to specifically in connection with such
statements, factors that may cause actual results or events to differ materially
from those contemplated by such forward looking statements, include, among
others, the effects of health care reform or other legislation; the Company's
ability to predict rising health care costs and adequately price its products;
changes in membership utilization and risk; government regulations, including
changes in insurance, health care and other regulatory conditions; delays in
regulatory approvals, and regulatory action resulting from market conduct
activity and general administrative compliance with state and federal laws;
general business conditions, including competitive practices and demand for the
Company's products; development of and changes in claims reserves; rating agency
policies and practices; general economic conditions, including the effect of
changes in interest rates on the Company's investment portfolio; unforeseen
costs or consequences of Year 2000 issues; and other factors that may be
referred to in American Medical Security Group, Inc.'s reports filed with the
Securities & Exchange Commission from time to time.
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