EX-99.1 2 exh99_1.htm EXHIBIT 99.1 Exhibit 99.1

Exhibit 99.1

PRESS RELEASE
Source: Ascent Assurance, Inc.
 
Corporate Contact:
Cynthia B. Koenig
Chief Financial Officer
(817) 878-3732

FOR IMMEDIATE RELEASE:                               
November 4, 2004                                                


ASCENT ASSURANCE REPORTS THIRD QUARTER RESULTS

FORT WORTH, Texas, November 4, 2004…Ascent Assurance, Inc. (AASR.OB) today reported a net loss of ($3.7) million, or ($.07) per common share, for the third quarter of 2004 which included non-recurring charges of ($4.5) million, comprised of ($3.0) million for executive compensation and severance and ($1.5) million from discontinued operations. Excluding non-recurring charges, net income from continuing operations was $766,000 for the third quarter of 2004. In comparison, for the third quarter of 2003, the Company’s net loss was ($1.0) million, or ($.16) per common share, and the loss from continuing operations was ($723,000).

For the nine months ended September 30, 2004, the Company reported a net loss of ($2.6) million and, after preferred stock dividends of $430,000, the net loss applicable to common stockholders was ($3.0) million, or ($.08) per share. Excluding non-recurring charges for executive compensation and severance, net income from continuing operations was $2.3 million for the nine months ended September 30, 2004. For the corresponding prior year period, the net loss was ($477,000) and, after preferred stock dividends of $1.8 million, the loss applicable to common stockholders was ($2.2) million or ($.34) per share. Net income from continuing operations for the nine months ended September 30, 2003 was $280,000.

Effective September 1, 2004, Benjamin M. Cutler, former Chairman of Assurant Health (previously Fortis Health), was appointed Chairman and Chief Executive Officer of the Company. In connection with Mr. Cutler’s employment agreement, the Company recorded a $2 million liability for deferred compensation and $308,000 in employment expenses for the third quarter of 2004. In addition, the Company paid severance expense of approximately $727,000 to its former Chairman.

The Company’s fee and service operations are comprised of several non-insurance related businesses, including a printing subsidiary that has incurred substantial net operating losses for the past several years. In September 2004, the Company decided to exit the printing business and subsequently entered into a definitive agreement to sell its printing subsidiary effective October 29, 2004. The Company’s loss from discontinued operations of ($1.5) million for the third quarter of 2004 is comprised of a ($1.2) million loss on sale of the printing subsidiary and a ($252,000) operating loss.

Total revenues were $25.8 million and $78.2 million for the third quarter and nine months ended September 30, 2004, respectively, as compared to $29.6 million and $90.0 million for the corresponding 2003 periods. Total premium revenues decreased by $2.5 million or 9.7% for the third quarter and $7.4 million or 9.6% for the nine months ended September 30, 2004 as compared to the corresponding prior year periods. The benefits and claims to premium ratios were 64.3% and 65.8% for the three and nine months ended September 30, 2004, respectively, as compared to 68.3% and 68.1% for the corresponding 2003 periods.

Mr.  Cutler, commenting on third quarter operations said: “Our immediate goal is to sharpen our focus on product design and pricing as well as marketing, distribution and customer service. Elimination of non-core operations such as the printing subsidiary is just one facet of that strategy. During the next year, we expect to lay a solid foundation for sustained profitable growth.”

Ascent Assurance, Inc. is an insurance holding company primarily focused on individual health insurance for self-employed individuals and small business owners. Products are distributed through career agent organizations which are wholly owned subsidiaries. The Company’s goal is to combine the talents of its employees and agents to market competitive and profitable insurance products and provide superior customer service in every aspect of operations. (www.ascentassurance.com)

Note Regarding Use of Non-GAAP Financial Information

To supplement the consolidated financial statements presented in accordance with GAAP, the Company used non-GAAP measures to disclose, “Excluding non-recurring charges, net income from continuing operations was $766,000 for the third quarter of 2004” and “Excluding non-recurring charges for executive compensation and severance, net income from continuing operations was $2.3 million for the nine months ended September 30, 2004.” The following table exhibits the reconciliation of the non-GAAP financial measures to the presentation under GAAP:

  Third Quarter
2004		   Year to Date
Sept. 30, 2004
Net loss from continuing operations     ($2,269 )   ($764 )  
Special executive compensation and severance    3,035      3,035  
Excluding non-recurring charges,  
    net income from continuing operations   $766     $2,271  

The Company believes that the non-GAAP measure provides useful information to both management and investors, thus providing a more meaningful comparison between the information for the third quarters of 2004 and 2003 and year to date September 30, 2004 and 2003. The presentation of this information is not meant to be considered in isolation, or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

  (Forward-Looking Statements: The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This press release contains forward-looking statements regarding the intent, belief or current expectations of the Company and members of its senior management team. While the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Factors that would cause actual results to differ materially from those contemplated within this press release can be found in the Company’s Form 10-K for the year ended December 31, 2003 and Forms 10-Q for the quarters ended March 31, 2004 and June 30, 2004 and Form 8-K dated September 1, 2004. Such factors include, but are not limited to: any limitation imposed on the Company’s ability to control the impact of rising health care costs, especially prescription drugs, and rising medical service utilization rates through product and benefit design, underwriting criteria, premium rate increases, utilization management and negotiation of favorable provider contracts; the impact of changing health care trends on the Company’s ability to accurately estimate claim and settlement expense reserves; the ability of the Company to fund competitive commission advances to its agents from internally generated cash flow or external financing; developments in health care reform and other regulatory issues, including the Health Insurance Portability and Accountability Act and increased privacy regulation, and changes in laws and regulations in key states where the Company operates; the Company’s ability to meet minimum regulatory capital requirements for its Insurance Subsidiaries; the ability of the Company to make additional investment in its Insurance Subsidiaries in the form of capital contributions, if needed, in order for such subsidiaries to comply with regulatory capital or debt covenant requirements; and the loss of key management personnel.)





ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000’s omitted, except for per share amounts)
Unaudited

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
  
       2004    2003    2004    2003  
 
 
 
 
First-year premium   $ 4,036   $ 4,306   $ 12,038   $ 14,583  
Renewal premium    19,054    21,255    57,883    62,727  
 
 
 
 
      Total premiums    23,090    25,561    69,921    77,310  
Net investment income    1,362    1,563    4,093    4,798  
Fee and service income    882    1,838    2,790    5,795  
Other insurance revenues    448    558    1,415    1,805  
Net realized (loss) gain on investments    (15 )  53    (20 )  330  
 
 
 
 
      Total revenues    25,767    29,573    78,199    90,038  
 
 
 
 
Benefits and claims    14,842    17,447    46,013    52,620  
Change in deferred policy acquisition costs    429    561    740    583  
Commissions    2,507    2,859    7,702    9,127  
General and administrative expenses    5,454    5,416    15,855    16,938  
Fee and service operating expenses    666    1,554    2,124    4,957  
Special executive compensation and  
        severance    3,035    -    3,035    -  
Taxes, licenses and fees    843    921    2,729    2,775  
Interest expense on notes payable    260    624    765    1,844  
Interest expense on redeemable preferred stock    -    914    -    914  
 
 
 
 
      Total expenses    28,036    30,296    78,963    89,758  
 
 
 
 
(Loss) income from continuing operations before  
     income taxes    (2,269 )  (723 )  (764 )  280  
Federal income taxes    -    -    -    -  
 
 
 
 
      Net (loss) income from continuing operations    (2,269 )  (723 )  (764 )  280  
 
 
 
 
Loss from discontinued operations, before income  
     taxes    (1,458 )  (305 )  (1,843 )  (757 )
Federal income taxes    -    -    -    -  
 
 
 
 
      Net loss from discontinued operations    (1,458 )  (305 )  (1,843 )  (757 )
 
 
 
 
      Net loss    (3,727 )  (1,028 )  (2,607 )  (477 )
Preferred stock dividends    -    -    430    1,759  
 
 
 
 
Loss applicable to common stockholders   $ (3,727 ) $ (1,028 ) $ (3,037 ) $ (2,236 )
 
 
 
 
Basic and diluted loss from continuing  
         operations per common share   $ (.04 ) $ (.11 ) $ (.03 ) $ (.23 )
 
 
 
 
Basic and diluted loss per common share   $ (.07 ) $ (.16 ) $ (.08 ) $ (.34 )
 
 
 
 
      Weighted average shares outstanding:  
            basic and diluted    50,561    6,532    38,659    6,530  
 
 
 
 






ASCENT ASSURANCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000’s omitted)

September 30,
2004
 
December 31,
2003
     (Unaudited)  (Audited)  
Assets  
Investment assets, at market value   $ 105,058   $ 102,995  
Cash    1,153    2,244  
Accrued investment income    1,353    1,309  
Deferred policy acquisition costs    21,079    21,819  
Agent receivables, net    3,896    4,484  
Property and equipment    2,376    3,084  
Other assets    7,907    7,994  
      Total Assets   $ 142,822    143,929  
Liabilities and Equity  
Policy liabilities   $ 78,848   $ 81,068  
Notes payable    16,232    15,770  
Other liabilities    12,960    9,760  
      Total Liabilities    108,040    106,598  
Redeemable convertible preferred stock    -    37,504  
Common Stockholders' Equity (1)    34,782    (173 )
     Total Stockholders' Equity    34,782    37,331  
      Total Liabilities and Equity   $ 142,822   $ 143,929  

(1)  

Stockholders’ equity includes unrealized gains on investment assets of $3.2 million at September 30, 2004 and $3.1 million at December 31, 2003.