-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C2XoTI7+ben/ZH1hBhxNY9VWQ13HiBgv7rRtkavojmOz5k3Kn3huNexMiBDCeNx8 HCyQGlhr7dw4962sspQFAA== 0000950152-01-502979.txt : 20010702 0000950152-01-502979.hdr.sgml : 20010702 ACCESSION NUMBER: 0000950152-01-502979 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERES GROUP INC CENTRAL INDEX KEY: 0000215403 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 341017531 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 000-08483 FILM NUMBER: 1671030 BUSINESS ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 BUSINESS PHONE: 2165722400 MAIL ADDRESS: STREET 1: 17800 ROYALTON RD CITY: STRONGSVILLE STATE: OH ZIP: 44136 FORMER COMPANY: FORMER CONFORMED NAME: CENTRAL RESERVE LIFE CORP DATE OF NAME CHANGE: 19920703 11-K 1 l89122ae11-k.txt CERES GROUP, INC. FORM 11-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _________________ COMMISSION FILE NUMBER: 0-8483 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: CERES GROUP, INC. 17800 Royalton Road Cleveland, Ohio 44136-5197 2 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE (MODIFIED CASH BASIS) DECEMBER 31, 2000 AND 1999 AND YEAR ENDED DECEMBER 31, 2000 TABLE OF CONTENTS Report of Independent Auditors........................................ 1 FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits (Modified Cash Basis).............................................. 2 Statement of Changes in Net Assets Available for Benefits (Modified Cash Basis).............................................. 3 Notes to Financial Statements (Modified Cash Basis)................... 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)......... 10 3 REPORT OF INDEPENDENT AUDITORS Board of Trustees Ceres Group, Inc. 401(k) Plan We have audited the accompanying statements of net assets available for benefits (modified cash basis) of the Ceres Group, Inc. 401(k) Plan (formerly The Retirement Plan for Employees of Central Reserve Life Insurance Company) as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits (modified cash basis) for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note B, the financial statements and supplemental schedule were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. In our opinion, the financial statements referred to above present fairly, in all material respects, information regarding the Plan's net assets available for benefits (modified cash basis) as of December 31, 2000 and 1999, and changes therein (modified cash basis) for the year ended December 31, 2000, on the basis of accounting described in Note B. Our audits were performed for the purposes of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. Cleveland, Ohio June 12, 2001 1 4 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (MODIFIED CASH BASIS)
DECEMBER 31, ------------------------------------------ 2000 1999 ------------------- ------------------- ASSETS Investments held by Massachusetts Mutual Life Insurance Company: Deposit Administration Group Annuity Contract #FL-2372 (variable interest rate), at contract value $ 6,465,956 $ 7,648,112 Ceres Group, Inc. Common Stock, at fair value 658,687 245,238 Pooled Separate Investment Accounts, at fair value 13,577,334 6,477,397 Participant loans 522,712 -- ------------------- ------------------- Net assets available for benefits $ 21,224,689 $ 14,370,747 =================== ===================
See notes to financial statements. 2 5 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (MODIFIED CASH BASIS) YEAR ENDED DECEMBER 31, 2000 ADDITIONS Investment income: Net appreciation in fair value of investments $ 13,074 Interest 419,864 -------------------- Total investment income 432,938 -------------------- Contributions Employer 319,049 Employee 1,302,017 Rollover 523,868 -------------------- Total contributions 2,144,934 -------------------- Transfers from Continental Retirement Savings Plan 8,914,806 -------------------- Total additions 11,492,678 -------------------- DEDUCTIONS Benefits paid to participants or beneficiaries 4,570,085 Administrative expenses 68,651 -------------------- Total deductions 4,638,736 -------------------- Net increase 6,853,942 Net assets available for benefits at beginning of year 14,370,747 -------------------- Net assets available for benefits at end of year $ 21,224,689 ==================== See notes to financial statements 3 6 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) DECEMBER 31, 2000 AND 1999 AND YEAR ENDED DECEMBER 31, 2000 A. DESCRIPTION OF THE PLAN Effective January 1, 2000, The Retirement Plan for Employees of Central Reserve Life Insurance Company was amended to change the name of the plan to the Ceres Group, Inc. 401(k) Plan (the "Plan"). In addition, the Continental Retirement Savings Plan ("Continental Plan") was merged into the Plan, effective January 1, 2000 and $8,914,806 was transferred to the Plan representing participant account balances of the Continental Plan as of that date. The following description provides only general information regarding the Plan and participants should refer to the plan document for a more complete description of the Plan's provisions. GENERAL Effective January 1, 1998, the Plan was amended to allow for participant contributions. Previously, the Plan was a non-contributory money purchase plan. As a result of the amendment, the participant's interest in employer contributions and subsequent earnings allocated to the participant's account prior to January 1, 1998 became 100% vested. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). All employees of Ceres Group, Inc. ("Ceres"), a public registrant, that have attained 18 years of age are eligible to participate in the Plan commencing the first day of the month following an individual's month of hire. PLAN CHANGES Effective January 1, 2000 and in addition to the changes noted above, the Plan was amended to provide for participant loans available, added the matching contribution equal to 25% of the participant's contribution of up to the first 6% of the annual compensation that a participant contributes to the Plan ("Company Match Contribution"), and include Continental General Insurance Company, a wholly-owned subsidiary of Ceres, as a participating employer in the Plan. Commencing August 1, 2000, employees of Pyramid Life Insurance Company ("Pyramid"), a wholly-owned subsidiary of Ceres acquired on July 26, 2000, are eligible to participate in the Plan. Certain Pyramid employees elected to convert their Unitrin, Inc. balances to the Plan and these contributions are included as rollovers on the Statement of Changes in Net Assets Available for Benefits. 4 7 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) (CONTINUED) A. DESCRIPTION OF THE PLAN (CONTINUED) CONTRIBUTIONS Participants may make contributions to the Plan through payroll deferrals. Participants can elect to make pre-tax contributions from 1% to 15% of their compensation. Additionally, participants can elect to make after-tax contributions up to 15% of their compensation. In addition to the Company Match Contribution, Ceres will match 100% of the participant's contributions to the Ceres Group, Inc. Stock Fund, up to a maximum $1,000 per year ("Stock Match Contribution"). In addition, Ceres may contribute to the Plan a profit sharing contribution, as determined by the Board of Directors ("Profit Sharing Contribution"). All eligible, active employees who have worked over 1,000 hours during the plan year and who are employed on the last day of the plan year share in this contribution. Participants who leave employment during the plan year due to retirement, death or disability will also share in the contribution. There was no profit sharing contribution made for the 2000 plan year. Employees may roll over funds into the Plan from other qualified plans. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) Ceres' contributions and (b) Plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. VESTING A participant's interest in the Profit Sharing Contribution, Company Match Contribution and Stock Match Contribution allocated to the participant's account becomes vested based upon years of service as follows: 0% vested up to three years; 33% vested after three years; 67% vested after 4 years; and 100% vested after five years. The accounts transferred from the Continental Plan are also fully vested except for the Continental General Employer Basic Contributions, which become vested based on years of 5 8 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) (CONTINUED) A. DESCRIPTION OF THE PLAN (CONTINUED service as follows: 0% vested up to three years; 20% vested after three years; 40% vested after four years; 60% vested after five years; 80% vested after six years; and 100% vested after 7 years. PARTICIPANT LOANS Participants may borrow up to half of their vested account balance. The smallest amount that may be borrowed is $1,000. The largest amount that may be borrowed is $50,000. Loan terms exceeding 5 years are permitted under the Plan. Participants may only have one outstanding loan. A loan is secured by the balance in the participant's account and bears interest at the Prime lending rate plus 1%. PAYMENT OF BENEFITS On termination of service, a participant may receive a lump-sum amount equal to the vested value of his or her account, or upon death, disability or retirement, elect to receive annual installments over a stated period of time, or over his or her lifetime. INVESTMENT OPTIONS Upon enrollment in the Plan, participants may direct their participant contributions and any Profit-Sharing Contribution for investment in any of the investment mediums offered by the Plan. However, there are two exceptions to a participant's right to exercise investment control as follows: - The first $1,000 of before-tax contributions that participant's direct for investment in the Company Stock Fund for any particular plan year must remain in the Company Stock Fund for a minimum of two years (to the extent they continue to be held under the Plan), commencing with the month those before-tax contributions actually are contributed and invested. This restriction does not apply to any investment in the Company Stock Fund, made with before-tax contributions that do not trigger Stock Match Contributions; and 6 9 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) (CONTINUED) A. DESCRIPTION OF THE PLAN (CONTINUED - All Stock Match Contributions, made by the Company because the participant agreed to invest all or portion of their before-tax contributions in the Company Stock Fund, must remain invested in the Company Stock Fund while held under the Plan. PLAN TERMINATION Ceres has the right under the Plan to discontinue contributions at any time and terminate the Plan, subject to the provisions of ERISA. In the event of termination of the Plan, participants will become 100 percent vested in their accounts and the assets of the Plan will be distributed to the participants based on the amounts in their respective accounts. B. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying financial statements are presented on a cash basis modified to the extent that net appreciation (depreciation) in the fair value of investments is recorded currently; certain other income, contributions and related assets are recognized when received rather than when earned; and certain expenses and related liabilities are recognized when paid rather than when incurred. VALUATION OF INVESTMENTS AND RELATED INCOME Ceres Group, Inc. Common Stock is valued at the last reported sales price of the stock on the last business day of the plan year. The Massachusetts Mutual Pooled Separate Investment Accounts are valued at the fair value, as determined by Massachusetts Mutual Life Insurance Company ("Massachusetts Mutual"), of the underlying investments. The Massachusetts Mutual Deposit Administration Group Annuity Contract ("DAC") is valued at contract value. DAC funds deposited during 2000 were guaranteed to earn 6.25%. DAC Funds deposited as of December 31, 1999 were guaranteed to earn 5.00%. Guaranteed interest rates are determined annually by Massachusetts Mutual Life Insurance Company. The aggregate cost of investment sales is the average cost per share or per unit at the time of the sale. Interest income is recorded when credited by Massachusetts Mutual. 7 10 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) (CONTINUED) B. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATION Certain prior year amounts have been restated to conform to the current year presentation. C. INVESTMENTS Massachusetts Mutual serves as the trustee for certain assets of the Plan with the balance held in trust by Investors Bank & Trust Company of Boston, Massachusetts. During 2000, the Plan's investments (including investments purchased, sold, as well as held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows: NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS --------------------- Ceres Group, Inc. Common Stock $ (64,307) Pooled Separate Accounts 77,381 --------------------- Total $ 13,074 ===================== 8 11 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) NOTES TO FINANCIAL STATEMENTS (MODIFIED CASH BASIS) (CONTINUED) C. INVESTMENTS (CONTINUED) Individual investments that represent 5% or more of the Plan's net assets are as follows:
DECEMBER 31, ---------------------------------------- 2000 1999 ------------------ ------------------ Deposit Administration Group Annuity Contract #FL-2372, variable interest rate--Guarantee Interest Fund $ 6,465,956 $ 7,648,112 Pooled Separate Investment Accounts Massachusetts Mutual Separate Investment Account BP, Destiny Moderate Fund 6,731,480 339,021 Massachusetts Mutual Separate Investment Account A, Core Equity Fund 2,076,652 2,934,241 Massachusetts Mutual Separate Investment Account M, Balanced Fund 1,091,120 1,640,921
D. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated January 7, 2000, stating the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. E. SUBSEQUENT EVENT Effective January 1, 2001, the Plan was amended to increase the Company Match Contribution to 50% of the participant's contribution of up to the first 6% of an individual's annual compensation that is contributed to the Plan. 9 12 CERES GROUP, INC. 401(K) PLAN (FORMERLY THE RETIREMENT PLAN FOR EMPLOYEES OF CENTRAL RESERVE LIFE INSURANCE COMPANY) EIN: 34-0970995 PLAN NUMBER: 001 SCHEDULE H, LINE 4I--SCHEDULE OF ASSETS (HELD AT END OF YEAR) DECEMBER 31, 2000
DESCRIPTION OF INVESTMENT IDENTITY OF ISSUE, INCLUDING MATURITY DATE, RATE UNITS/SHARES/ BORROWER, OF INTEREST, COLLATERAL, INTEREST CURRENT LESSOR, OR SIMILAR PARTY PAR OR MATURITY VALUE RATE VALUE - ---------------------------------------------------------------------------------------------------------------------- * Massachusetts Mutual Life Deposit Administration Group Annuity Insurance Company Contract #FL-2372, variable interest rate, Guarantee Interest Fund 6.20-6.25% $ 6,465,956 * Massachusetts Mutual Life Separate Investment Account M, Balanced Insurance Company Fund (Babson) 2,997 1,091,120 * Massachusetts Mutual Life Separate Investment Account A, Core Insurance Company Equity Fund (Babson) 400 2,076,652 * Massachusetts Mutual Life Separate Investment Account E, Core Insurance Company Bond Fund (Babson) 581 614,947 * Massachusetts Mutual Life Separate Investment Account BC, Destiny Insurance Company Conservative Fund 1,458 264,298 * Massachusetts Mutual Life Separate Investment Account I, Insurance Company International Equity Fund (Oppenheimer) 1,093 370,385 * Massachusetts Mutual Life Separate Investment Account BP, Destiny Insurance Company Moderate Fund 35,418 6,731,480 * Massachusetts Mutual Life Separate Investment Account BA, Destiny Insurance Company Aggressive Fund 3,894 764,214 * Massachusetts Mutual Life Separate Investment Account BE, Destiny Insurance Company Ultra Aggressive Fund 3,124 675,997 * Massachusetts Mutual Life Separate Investment Account W8, Equity Insurance Company Growth (Am. Century) 2,085 249,806 * Massachusetts Mutual Life Separate Investment Account S, Small Insurance Company Cap Equity (Babson) 181 127,913 * Massachusetts Mutual Life Separate Investment Account L, Growth Insurance Company Equity (MFS) 4,992 610,522 * Ceres Group, Inc. Ceres Group, Inc. Common Stock 89,689 658,687 * Loan participants Various maturities 6.81-10.5% 522,712 ------------------- $ 21,224,689 ===================
* Denotes party in interest. 10 13 Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. CERES GROUP, INC. 401(k) PLAN (formerly The Retirement Plan for Employees of Central Reserve Life Insurance Company) By: /s/ Charles E. Miller, Jr. ------------------------------------------------- Charles E. Miller, Jr. Plan Administrator Dated: June 28, 2001 11 EX-23 2 l89122aex23.txt EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-62657) pertaining to the Ceres Group, Inc. 401(k) Plan (formerly The Retirement Plan for Employees of Central Reserve Life Insurance Company), of our report dated June 12, 2001, with respect to the financial statements and schedule included in this Annual Report (Form 11-K) for the year ended December 31, 2000. /s/ Ernst & Young LLP Cleveland, Ohio June 25, 2001 12 -----END PRIVACY-ENHANCED MESSAGE-----