<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): December 10, 1998
FOUNDATION HEALTH SYSTEMS, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
-------------
(State or other jurisdiction of incorporation)
1-12718 95-4288333
-------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
21600 Oxnard Street, Woodland Hills, California 91367
-----------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (818) 676-6978
Not Applicable
(Former name or former address, if changed since last report)
PAGE 1 OF 8
EXHIBIT INDEX IS LOCATED AT PAGE 4
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
BUSINESS INSURANCE GROUP, INC.
On December 10, 1998, the Registrant sold all the outstanding capital stock of
its wholly-owned subsidiary, Business Insurance Group, Inc. ("BIG"), to Superior
National Insurance Group, Inc. ("Superior"), pursuant to a Purchase Agreement
(the "Purchase Agreement") dated as of May 5, 1998, by and between Foundation
Health Corporation ("FHC"), a wholly-owned subsidiary of the Registrant, and
Superior. Pursuant to the terms of the Purchase Agreement, the Registrant
funded the purchase of reinsurance from a third party reinsurance company that
will cover up to $175 million of adverse loss development related to BIG and its
subsidiaries. The sale of BIG was completed by the Registrant as part of its
plan to discontinue its worker's compensation insurance business (the
"Discontinued Operations") through divestiture of its worker's compensation
insurance subsidiaries (see "Management's Discussion and Analysis of Financial
Condition and Results of OperationsBDiscontinued Operations" in the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
In addition to the sale of the capital stock of BIG, FHC and Superior have
entered into several agreements pursuant to which FHC's administrative services
businesses will continue to provide certain services to Superior for a period of
five years after closing. Superior is the parent company for several specialty
workers' compensation insurers operating throughout California and in Phoenix,
Arizona.
The Registrant received approximately $200 million in cash, net of preclosing
costs, additional capital contributions to BIG, the closing of intercompany
accounts and the cost of reinsurance.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
The consolidated financial statements of the Registrant filed as part
of: (i) the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and (ii) the Registrant's Quarterly Reports on Form 10-Q
for the quarters ended June 30, 1998 and September 30, 1998 are incorporated
by reference. Such consolidated financial statements have been restated
pursuant to applicable accounting principles and regulations to reflect the
Discontinued Operations.
(c) EXHIBITS
<TABLE>
<CAPTION>
Item No. Exhibit Index
-------- -------------
<S> <C>
10.1 Purchase Agreement, dated May 5, 1998, by and
between Foundation Health Corporation and Superior
National Insurance Group, Inc. (filed as Exhibit
10.65 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, which
is incorporated by reference herein)
99.1 Press Release issued December 10, 1998
</TABLE>
2
<PAGE>
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 hereunto duly authorized.
FOUNDATION HEALTH SYSTEMS, INC.
By: /s/ Michael E. Jansen, Esq.
-----------------------------------------
Michael E. Jansen, Esq.
Vice President, Assistant General Counsel
and Assistant Secretary
Date: December 23, 1998
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page No.
<S> <C> <C>
10.1 Purchase Agreement, dated May 5, 1998, by and N/A
between Foundation Health Corporation and Superior
National Insurance Group, Inc. (filed as Exhibit
10.65 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998,
which is incorporated by reference herein)
99.1 Press release issued December 10, 1998 5
</TABLE>
4
<PAGE>
FHS NEWS
Foundation Health Systems, Inc. --------------
R E L E A S E
FHS Media Contact: Lisa Haines
(818) 676-7912
[email protected]
FHS Investor Contact: David Olson
(818) 676-6978
[email protected]
Superior National Contact: J. Chris Seaman
(818) 878-2240
[email protected]
FHS COMPLETES SALE OF WORKERS' COMP SUBSIDIARIES
TO SUPERIOR NATIONAL
LOS ANGELES, December 10, 1998 - Foundation Health Systems, Inc. (NYSE:FHS)
announced that it successfully completed the sale of certain workers'
compensation risk-bearing subsidiaries to Superior National Insurance Group,
Inc. (Superior National) (NASDAQ:SNTL) today. The sale of these non-core
subsidiaries is expected to yield the Company approximately $200 million in
cash, plus certain tax benefits to be realized in future periods. Proceeds will
be used to reduce debt.
"This completes an important first step in our strategic plan to focus on
FHS' core operations," said Jay M. Gellert, president and chief executive
officer of FHS. "Divesting certain non-core operations and reducing company
debt are two critical components in our plan to achieve consistent profitable
growth in the future."
FHS announced its intent to sell its workers' compensation risk-bearing
subsidiaries on February 17th of this year. The transaction with Superior
National was announced on May 5, 1998. On October 16, 1998. Superior National
received
1
<PAGE>
shareholder approval and on November 20, 1998, Superior National completed a
rights offering which was necessary to complete the transaction.
The sale includes California Compensation Insurance Company (CalComp),
California's largest private workers' compensation insurance carrier, and
Business Insurance Company which offers workers' compensation coverage in 42
states outside California. The sale also includes Combined Benefits
Insurance Company, which is licensed in California for both workers'
compensation and accident and health.
FHS will complete its sale of Commercial Compensation Insurance Company,
which writes workers' compensation coverage in New York, upon receipt of
required regulatory approvals. Superior National has placed approximately
$6.77 million in an escrow account which will be released to FHS upon receipt
of regulatory approval and completion of the sale.
Certain statements contained in this press release are "forward looking"
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve risks and uncertainties
and actual results may differ materially from those results expressed or implied
by such "forward looking" statements. For more information please refer to the
Risk Factors section of the company's various filings with the Securities and
Exchange Commission and the respective documents incorporated by reference
therein.
Superior National Insurance Group, Inc. is the parent company of Superior
National Insurance Company, and Superior Pacific Casualty Company, specialty
workers' compensation insurers operating in California through branch offices
located in
2
<PAGE>
Sacramento, Pleasanton, Fresno, Woodland Hills, Irvine and San Diego, and in
Phoenix, Arizona.
FHS is the nation's fourth-largest publicly traded managed health care
company. Its mission is to enhance quality of life for its customers by
offering products distinguished by their quality, service and affordability.
The company's HMO, insured PPO and government contracts subsidiaries provide
health benefits to more than six million individuals in 18 states through
group, individual, Medicare risk, Medicaid and CHAMPUS programs. FHS
subsidiaries also offer managed health care products related to PPO networks,
behavioral health, dental, vision and prescription drugs, and offer managed
health care product coordination for multi-region employers and administrative
services for medical groups and self-funded benefits programs.
# # #
3
