-----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, EogVgJ3jYkCOhx5gV5s+78lPJoHJGW6PgK2nFHY4ELDXumxKmXrdF5juRbNJ1jBi maCP/PNq2jyeWHR7rnzYTg== 0000950152-05-001763.txt : 20050304 0000950152-05-001763.hdr.sgml : 20050304 20050304160037 ACCESSION NUMBER: 0000950152-05-001763 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050302 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050304 DATE AS OF CHANGE: 20050304 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08483 FILM NUMBER: 05661376 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 8-K 1 l12564ae8vk.txt CERES GROUP, INC. 8-K UNITED STATES 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): March 2, 2005 CERES GROUP, INC. (Exact Name of Registrant as Specified in Charter) DELAWARE 0-8483 34-1017531 (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Incorporation) Identification Number) 17800 ROYALTON ROAD, CLEVELAND, OHIO 44136 (Address of principal executive offices) (440) 572-2400 (Registrant's telephone number, including area code) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On March 2, 2005, Ceres Group, Inc. issued a press release regarding earnings for the fourth quarter and the full year ended December 31, 2004. A copy of the press release is attached hereto as Exhibit 99.1. ITEM 9.01 EXHIBITS. Exhibit 99.1 Press Release, dated March 2, 2005, announcing earnings for the fourth quarter and the full year ended December 31, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CERES GROUP, INC. /s/ Kathleen L. Mesel --------------------- By: Kathleen L. Mesel Its: Corporate Secretary Dated: March 4, 2005 EX-99.1 2 l12564aexv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 (CRES LOGO) CERESNEWSCERESNEWSCERESNEWSCERESNEWSCERESNEWS CERESNEWSCERESNEWSCERESNEWSCERESNEWSCERESNEWS CERESNEWSCERESNEWSCERESNEWSCERESNEWSCERESNEWS FOR FURTHER INFORMATION: David I. Vickers, Chief Financial Officer (440) 878-2941 Gayle M. Vixler, Senior Vice President (440) 572-8848 CERES GROUP REPORTS FOURTH QUARTER AND 2004 RESULTS AND PROVIDES 2005 GUIDANCE CLEVELAND, OH, MARCH 2, 2005 FOR THE QUARTER: o Net operating income of $2.5 million ($0.07 per share) o Net income of $2.6 million ($0.08 per share) o Senior Segment pre-tax operating income of $5.1 million o Medical Segment pre-tax operating loss of $0.7 million FOR THE FULL YEAR 2004: o Net operating income of $15.9 million ($0.45 per share) o Net income of $19.1 million ($0.55 per share) o Senior Segment pre-tax operating income of $18.5 million o Medical Segment pre-tax operating income of $8.3 million Ceres Group, Inc. (NASDAQ: CERG) today reported net operating income of $2.5 million ($0.07 per share) for the fourth quarter of 2004, excluding a $0.1 million reduction to the charge from the previously announced California litigation settlements, net of tax. This compares to net operating income of $4.1 million ($0.12 per share) for the fourth quarter of 2003, excluding $0.4 million ($0.01 per share) from net realized investment gains. (See Reconciliation of Non-GAAP Financial Measures contained on page 7 of this press release.) Net income was $2.6 million ($0.08 per share) in the fourth quarter of 2004, compared to $4.5 million ($0.13 per share) for the fourth quarter of 2003. For the full year 2004, the company reported net operating income of $15.9 million ($0.45 per share), excluding $0.3 million ($0.01 per share) from net realized investment gains, a $2.0 million ($0.06 per share) charge from the previously announced California litigation settlements, net of tax, and a $5.0 million ($0.14 per share) benefit related to a decrease in the valuation allowance for deferred taxes. This compares to net operating income of $15.4 million ($0.45 per share) for 2003, excluding $1.2 million ($0.04 per share) from net realized investment gains, $2.7 million ($0.08 per share) related to a decrease in the valuation allowance for deferred taxes, and income of $3.6 million ($0.11 per share) Ceres Group, Inc. Page 2 from the discontinued operations of Pyramid Life Insurance Company, a subsidiary that was sold on March 31, 2003. (See Reconciliation of Non-GAAP Financial Measures contained on page 7 of this press release.) Net income was $19.1 million ($0.55 per share) for 2004, compared to $22.9 million ($0.67 per share) for 2003, including $3.6 million ($0.11 per share) from discontinued operations. "Although we faced challenges this year, our financial condition remains strong with our book value (equity per common share before accumulated other comprehensive income) increasing approximately 11% in 2004 to $5.72 per share," said Tom Kilian, president and chief executive officer of Ceres. "While our Medical Segment results were in line with our internal projections, results in our Senior Segment were negatively impacted by a higher-than-expected loss ratio on our Medicare supplement block in the second half of the year. Looking ahead, we intend to maintain our current strategy as we work on developing new products, improving customer service, enhancing agent relationships and increasing profitability and return on equity in both business segments." SEGMENT RESULTS Ceres reports its financial results in two primary business segments: Senior and Medical. For 2003, the segment results exclude the discontinued operations of Pyramid Life Insurance Company. SENIOR SEGMENT (MEDICARE SUPPLEMENT, LONG-TERM CARE, DENTAL, LIFE INSURANCE, AND ANNUITIES) Pre-tax operating income for the quarter was $5.1 million, compared to $6.4 million in the fourth quarter of 2003. Pre-tax income for the quarter was $5.1 million, compared to $6.7 million in 2003. Pre-tax operating income for the full year was $18.5 million, compared to $19.0 million for 2003. Pre-tax income for the full year was $18.5 million, compared to $19.9 million for 2003. Benefits, claims, losses and settlement expenses in the Senior Segment were $36.7 million, compared to $30.9 million for the fourth quarter of 2003. The Senior Segment benefit and claims loss ratio was 75.6%, compared to 69.9% in the fourth quarter of 2003. The Medicare supplement loss ratio for the fourth quarter of 2004 was 70.9%, compared to 65.5% in the same quarter of last year and 75.2% in the third quarter of 2004. The increase in the Medicare supplement loss ratio was primarily caused by an increase in claims frequency on Medicare Part B physician claims. For 2004, rate increases on this business were approximately 5% based on an estimate of claims trend when the 2004 rate increases were filed. However, claims trends in 2004 were approximately 10%, resulting in the higher-than-anticipated loss ratio. In addition, the company experienced a reduced positive impact due to seasonality. For the full year, benefits, claims, losses and settlement expenses in the Senior Segment were $138.5 million, compared to $127.5 million for 2003. The Senior Segment benefit and claims loss ratio was 75.6%, compared to 73.7% for 2003. In 2004, improved long-term care experience and favorable development in long-term care reserves were more than offset by increases in the Medicare supplement loss ratio. The Medicare supplement loss ratio was higher than expected for the full year, as well as compared to the prior year. The Medicare supplement loss ratio for the full year of 2004 was 71.9%, compared to 67.1% in 2003. The increase is a result of the increase in claims frequency noted above. "We conducted an extensive study to better understand the increased claims frequency we experienced on our Medicare supplement business in the second half of the year," Kilian said. "To help ensure ongoing stability, we also thoroughly reviewed our product pricing and filed and received approval for rate increases based on this increased claim trend. Ceres Group, Inc. Page 3 "Sales increased in the fourth quarter compared with the third quarter of 2004, and also rose compared with the year-ago quarter primarily due to the introduction of senior products in our Central Reserve Life Insurance Company subsidiary," Kilian added. "We believe that these new sales will contribute to premium growth in 2005 and beyond. Ongoing loss ratio and pricing analysis remains a top priority for us." MEDICAL SEGMENT (CATASTROPHIC AND COMPREHENSIVE MEDICAL PLANS) The company reported a pre-tax operating loss for the quarter of $0.7 million, compared to pre-tax operating income of $0.9 million for the fourth quarter of 2003. The pre-tax loss for the quarter was $0.6 million, compared to pre-tax income of $1.1 million for the same period in 2003. Pre-tax operating income for the full year was $8.3 million, which was comparable to 2003. Pre-tax income for the full year, including the $3.1 million pre-tax charge from the California litigation settlements, was $5.2 million, compared to $8.8 million for 2003. As the company previously announced, two California lawsuits (of which one was a class action) pending against the company and several of its insurance subsidiaries relating primarily to challenges to premium increases for California holders of major medical policies issued by its subsidiaries were settled in September 2004. The settlements include payments to class members and others, as well as certain attorneys' fees and costs. The company recorded a pre-tax charge of $3.1 million ($2.0 million after tax, or $0.06 per share) in 2004. These California litigation settlements do not involve any admission of wrongdoing by the company or any subsidiary. Benefits, claims, losses and settlement expenses in the Medical Segment were $45.0 million, compared to $51.6 million in the fourth quarter of 2003. The Medical Segment benefit and claims loss ratio was 76.2%, compared to 75.1% for the fourth quarter of 2003. The fourth quarter 2004 loss ratio reflects a higher level of seasonality as policyholders shifted to products with higher average deductible levels. For the year, benefits, claims, losses and settlement expenses in the Medical Segment were $176.1 million, compared to $226.2 million for 2003. The Medical Segment benefit and claims loss ratio was 71.3%, compared to 74.1% for 2003. This improvement was primarily due to favorable run-off of prior year claim reserves. "I am encouraged that the decline of our major medical premium has moderated to approximately 7% on an annualized basis," Kilian said. "In addition, new medical sales increased compared with last year. We are pleased with the early results of our health savings account (HSA) qualified products, which are currently comprising approximately half of our new sales to small employer groups and 10% to individuals, families and associations. We will continue our niche marketing strategy which emphasizes products, pricing, states and distributors with the greatest profit potential." OUTLOOK FOR 2005 "Our focus in 2005 is to carefully manage both of our business segments for increased profitability," Kilian said. "Product development will remain a priority for us as we introduce new products to provide more choice for consumers and agents. We are also committed to improving our processes to give our agents and customers the best service possible." Ceres Group, Inc. Page 4 The company expects to achieve net operating income in a range of $0.50 to $0.53 per diluted share for the full year of 2005, based on continued growth in the company's Senior Segment, and stabilization of the revenue decline and improved claim trends in the company's Medical Segment. Net operating income excludes certain items that, in the opinion of management, may not be indicative of overall operating trends. For example, in the company's results for 2004, net operating income excluded the impact of net realized investment gains, the California litigation settlements, and reductions in the deferred tax valuation allowance. "We believe we have set an aggressive but achievable plan in both of our business segments to meet our 2005 goals," Kilian said. "In our Senior Segment, we expect our premiums to increase approximately 13% and our expense ratio to improve," Kilian said. "A primary focus for us will be managing our loss ratios, particularly on the Medicare supplement block which we expect will be consistent with 2004. We have received and implemented rate increases which average approximately 11%." For 2005, the company has planned several new senior product rollouts, including Medicare supplement plans for its Provident American Life and Health Insurance Company subsidiary, as well as additional ancillary products to expand its overall senior product portfolio. Ceres also plans to participate, either directly or by partnering with another carrier, in offering insureds a prescription drug plan pursuant to the Medicare Modernization Act of 2003. The company will pursue additional products and distribution channels that align with the company's overall marketing strategy. "In our Medical Segment, we expect premiums to decrease approximately 5% on an annualized basis and the loss ratio to remain comparable to 2004," Kilian said. "We expect to achieve increased profits in this segment through expense reductions and continued concentration on improving our long-term profit margins and return on equity." During the first half of the year, Ceres plans to introduce a new series of major medical products that will feature three levels of coverage, a variety of deductible and coinsurance options, and optional benefits. This new series of products will also promote consistency across the company's distribution channels. Ceres' goal is to provide products that improve its profit margin, provide value for consumers, and give agents more options to sell. In both of its business segments, the company expects to continue improving its administrative platform and use of technology. In addition, the company is emphasizing electronic claims procedures and programs designed to provide customers with faster, more efficient service. "Our sales and marketing team has been working to enhance relationships with our distributors," Kilian added. "We have improved our training and communication, and have simplified the process by which our agents can cross-sell our products. We are also focusing on recruiting new agents as well as assisting agents with their sales efforts through co-op marketing programs and national recruiting campaigns." "In summary, I am optimistic about our strategic initiatives, and believe they will help us to achieve our goals for the year," Kilian said. "I am also confident that we have the long-term strategy and fundamental strengths within our organization to provide greater shareholder value through consistent, profitable growth." Ceres Group, Inc. Page 5 A conference call with management regarding fourth quarter and 2004 results is scheduled for 10:00 a.m. (Eastern) on Thursday, March 3, 2005. To listen to the live conference call over the Internet, go to www.ceresgp.com or http://phx.corporate-ir.net/playerlink.zhtml?c=71415&s=wm&e=960227. To listen to the webcast, please log onto this site at least 15 minutes prior to the call to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available after the call. FINANCIAL TABLES TO FOLLOW Ceres Group, Inc. Page 6 CERES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, -------------------------- -------------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- REVENUES Premiums, net Medical $ 59,013 $ 68,687 $ 247,002 $ 305,441 Senior and other 48,522 44,187 183,220 172,885 ---------- ---------- ---------- ---------- Total premiums, net 107,535 112,874 430,222 478,326 Net investment income 6,982 6,518 26,216 25,090 Net realized gains 22 561 423 1,891 Fee and other income 4,800 6,948 19,463 28,875 ---------- ---------- ---------- ---------- 119,339 126,901 476,324 534,182 ---------- ---------- ---------- ---------- BENEFITS, LOSSES AND EXPENSES Benefits, claims, losses and settlement expenses Medical 44,976 51,617 176,143 226,249 Senior and other 36,688 30,887 138,490 127,491 ---------- ---------- ---------- ---------- Total benefits, claims, losses and settlement expenses 81,664 82,504 314,633 353,740 Selling, general and administrative expenses 33,461 35,756 134,563 146,857 Net (deferral) amortization and change in acquisition costs and value of business acquired (55) 1,140 4,571 5,953 Interest expense and financing costs 177 594 684 1,620 ---------- ---------- ---------- ---------- 115,247 119,994 454,451 508,170 ---------- ---------- ---------- ---------- Income from continuing operations before federal income taxes 4,092 6,907 21,873 26,012 Federal income tax expense 1,451 2,450 2,756 6,647 ---------- ---------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS 2,641 4,457 19,117 19,365 ---------- ---------- ---------- ---------- Discontinued operations Income from operations of Pyramid Life (less tax expense of $3,223) -- -- -- 5,732 Loss on sale of Pyramid Life (less tax benefit of $79) -- -- -- (2,149) ---------- ---------- ---------- ---------- INCOME FROM DISCONTINUED OPERATIONS -- -- -- 3,583 ---------- ---------- ---------- ---------- NET INCOME $ 2,641 $ 4,457 $ 19,117 $ 22,948 ========== ========== ========== ========== BASIC EARNINGS PER SHARE Continuing operations $ 0.08 $ 0.13 $ 0.55 $ 0.56 Discontinued operations -- -- -- 0.11 ---------- ---------- ---------- ---------- Net income $ 0.08 $ 0.13 $ 0.55 $ 0.67 ========== ========== ========== ========== DILUTED EARNINGS PER SHARE Continuing operations $ 0.08 $ 0.13 $ 0.55 $ 0.56 Discontinued operations -- -- -- 0.11 ---------- ---------- ---------- ---------- Net income $ 0.08 $ 0.13 $ 0.55 $ 0.67 ========== ========== ========== ========== Basic weighted average shares outstanding 34,518 34,370 34,467 34,311 Diluted weighted average shares outstanding 34,653 34,488 34,904 34,347
Ceres Group, Inc. Page 7 CERES GROUP, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) In this press release, the company presented net operating income, net operating income per share, and Medical and Senior Segment pre-tax operating income, which are non-GAAP financial measures. Management uses non-GAAP financial measures to evaluate the company's performance for the periods presented, and believes that these measures of profitability provide a meaningful presentation of the underlying earnings of the company's operations. Net operating income, net operating income per share, and Medical and Senior Segment pre-tax operating income exclude certain items that, in the opinion of management, may not be indicative of overall operating trends. These non-GAAP measures should not be considered an alternative to measurements required by GAAP. Ceres' calculation of these measures may differ from similar measures used by other companies and investors should be careful when comparing the company's non-GAAP financial measures to those of other companies. For the periods presented, net operating income, net operating income per share, and Medical and Senior Segment pre-tax operating income exclude the results of the discontinued operations of Pyramid Life Insurance Company (a subsidiary that was sold on March 31, 2003), realized gains on the sale of investments, the California litigation settlements, and reductions to the valuation allowance for deferred taxes. The following is a reconciliation to the most directly comparable GAAP financial measure:
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, -------------------------- -------------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- NET OPERATING INCOME Net operating income $ 2,497 $ 4,092 $ 15,874 $ 15,445 Net realized gains 22 561 423 1,891 Income taxes on net realized gains (1) (8) (196) (148) (662) California litigation settlements 200 -- (3,050) -- Income taxes (benefit) on California litigation settlements (1) (70) -- 1,068 -- Reduction of the valuation allowance for deferred taxes -- -- 4,950 2,691 ---------- ---------- ---------- ---------- Income from continuing operations $ 2,641 $ 4,457 $ 19,117 $ 19,365 ========== ========== ========== ========== NET OPERATING INCOME PER SHARE DATA (DILUTED) Net operating income per share $ 0.07 $ 0.12 $ 0.45 $ 0.45 Net realized gains, net of tax (1) -- 0.01 0.01 0.04 California litigation settlements, net of tax (1) -- -- (0.06) -- Reduction of the valuation allowance for deferred taxes -- -- 0.14 0.08 ---------- ---------- ---------- ---------- Net income per share from continuing operations $ 0.08 $ 0.13 $ 0.55 $ 0.56 ========== ========== ========== ========== SENIOR SEGMENT PRE-TAX OPERATING INCOME Senior Segment pre-tax operating income $ 5,131 $ 6,434 $ 18,473 $ 19,011 Net realized gains (losses) (36) 244 11 905 ---------- ---------- ---------- ---------- Senior Segment profit before federal income taxes $ 5,095 $ 6,678 $ 18,484 $ 19,916 ========== ========== ========== ========== MEDICAL SEGMENT PRE-TAX OPERATING INCOME (LOSS) Medical Segment pre-tax operating income (loss) $ (745) $ 906 $ 8,264 $ 8,284 Net realized gains (losses) (56) 207 (36) 550 California litigation settlements 200 -- (3,050) -- ---------- ---------- ---------- ---------- Medical Segment profit (loss) before federal income taxes $ (601) $ 1,113 $ 5,178 $ 8,834 ========== ========== ========== ==========
(1) Taxes on net realized gains and the California litigation settlements are based upon a 35% effective tax rate for all periods. Note: Income per share amounts may not total due to rounding of individual components. Ceres Group, Inc. Page 8 CERES GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, DECEMBER 31, 2004 2003 --------------- --------------- ASSETS Investments $ 494,951 $ 484,280 Cash and cash equivalents 22,635 26,394 Reinsurance receivable 130,345 143,397 Deferred acquisition costs 67,074 69,609 Value of business acquired 10,952 13,034 Goodwill and licenses 14,097 14,097 Other assets 25,939 23,103 --------------- --------------- TOTAL ASSETS $ 765,993 $ 773,914 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Policy liabilities and benefits accrued $ 489,829 $ 504,493 Deferred reinsurance gain 6,562 9,456 Other policyholders' funds 19,016 20,821 Debt 10,750 13,000 Other liabilities 35,018 41,005 --------------- --------------- TOTAL LIABILITIES 561,175 588,775 Stockholders' equity 204,818 185,139 --------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 765,993 $ 773,914 =============== =============== Equity per common share: After accumulated other comprehensive income (1) $ 5.93 $ 5.38 Before accumulated other comprehensive income (1) 5.72 5.17 Book value per share excluding goodwill and licenses 5.52 4.97
- ---------- (1) Accumulated other comprehensive income relates primarily to the net unrealized gain (loss) on available-for-sale securities. Ceres Group, Inc. Page 9 CERES GROUP, INC. AND SUBSIDIARIES INDUSTRY SEGMENT DATA (EXCLUDING OPERATIONS OF PYRAMID LIFE INSURANCE COMPANY) UNAUDITED (IN THOUSANDS)
THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, --------------------------- --------------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- MEDICAL Revenues Net premiums $ 59,013 $ 68,687 $ 247,002 $ 305,441 Net investment income 934 1,350 4,392 5,598 Net realized gains (losses) (56) 207 (36) 550 Other income 3,958 4,724 16,851 21,680 ---------- ---------- ---------- ---------- 63,849 74,968 268,209 333,269 ---------- ---------- ---------- ---------- Expenses Benefits and claims 44,976 51,617 176,143 226,249 Other operating expenses 19,474 22,238 86,888 98,186 ---------- ---------- ---------- ---------- 64,450 73,855 263,031 324,435 ---------- ---------- ---------- ---------- Segment profit (loss) before federal income taxes $ (601) $ 1,113 $ 5,178 $ 8,834 ========== ========== ========== ========== SENIOR AND OTHER Revenues Net premiums $ 48,522 $ 44,187 $ 183,220 $ 172,885 Net investment income 6,048 5,168 21,820 19,487 Net realized gains (losses) (36) 244 11 905 Other income 842 2,223 2,612 7,188 ---------- ---------- ---------- ---------- 55,376 51,822 207,663 200,465 ---------- ---------- ---------- ---------- Expenses Benefits and claims 36,688 30,887 138,490 127,491 Other operating expenses 13,593 14,257 50,689 53,058 ---------- ---------- ---------- ---------- 50,281 45,144 189,179 180,549 ---------- ---------- ---------- ---------- Segment profit before federal income taxes $ 5,095 $ 6,678 $ 18,484 $ 19,916 ========== ========== ========== ========== CORPORATE AND OTHER Revenues Net investment income $ -- $ -- $ 4 $ 5 Net realized gains 114 110 448 436 Other income -- 1 -- 7 ---------- ---------- ---------- ---------- 114 111 452 448 ---------- ---------- ---------- ---------- Expenses Interest expense and financing costs 177 594 684 1,620 Other operating expenses 339 401 1,557 1,566 ---------- ---------- ---------- ---------- 516 995 2,241 3,186 ---------- ---------- ---------- ---------- Segment loss before federal income taxes $ (402) $ (884) $ (1,789) $ (2,738) ========== ========== ========== ========== INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL INCOME TAXES $ 4,092 $ 6,907 $ 21,873 $ 26,012 ========== ========== ========== ========== Medical loss ratio 76.2% 75.1% 71.3% 74.1% Senior loss ratio 75.6% 69.9% 75.6% 73.7% Overall loss ratio 75.9% 73.1% 73.1% 74.0%
Ceres Group, Inc. Page 10 ABOUT CERES GROUP Ceres Group, Inc., through its insurance subsidiaries, provides a wide array of health and life insurance products through two primary business segments. Ceres' Medical Segment includes major medical health insurance for individuals, families, associations and small businesses. The Senior Segment includes senior health, life and annuity products for Americans age 55 and over. To help control medical costs, Ceres also provides medical cost management services to its insureds. Ceres' nationwide distribution channels include independent agents and its electronic distribution system. Ceres is included in the Russell 3000(R) Index. For more information, visit www.ceresgp.com. This news release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the company. Forward-looking statements are statements other than historical information or statements of current condition. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements herein should not be regarded as representation by the company or any other person that the objectives or plans of the company will be achieved. Many factors could cause actual results to differ materially from those contemplated by such forward-looking statements, including, among others, failure to accurately predict claims liabilities, ability to develop, market and administer new and competitive products, the failure to successfully implement the business plans (including the company's growth strategy) for the company and its subsidiaries, business conditions and competition in the healthcare industry, developments in healthcare reform and other regulatory issues (including failure to meet statutory capital requirements), rising healthcare costs, adverse outcomes in litigation and related matters, performance of our reinsurers, and failure to comply with financial and other covenants in our loan agreements. This review of important factors should not be construed as exhaustive. Investors and others should refer to Ceres' filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2003, and its quarterly reports on Form 10-Q and other periodic filings, for a description of the foregoing and other factors. Ceres undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. ### -----END PRIVACY-ENHANCED MESSAGE-----