-----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, KrJj9jszgB/2saxMUadbECRD28ejrgZAkR1lcnjgMny9J/zbSJwrj+8E43eM17aA BbnI7TxXv/VUrWm47FWYsw== 0000878897-99-000015.txt : 19990514 0000878897-99-000015.hdr.sgml : 19990514 ACCESSION NUMBER: 0000878897-99-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MEDICAL SECURITY GROUP INC CENTRAL INDEX KEY: 0000878897 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 391431799 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13154 FILM NUMBER: 99620815 BUSINESS ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 BUSINESS PHONE: 9206611111 MAIL ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 FORMER COMPANY: FORMER CONFORMED NAME: UNITED WISCONSIN SERVICES INC /WI DATE OF NAME CHANGE: 19930328 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ COMMISSION FILE NUMBER 1-13154 AMERICAN MEDICAL SECURITY GROUP, INC. (Exact name of Registrant as specified in its charter) WISCONSIN 39-1431799 (State of Incorporation) (I.R.S. Employer Identification No.) 3100 AMS BOULEVARD GREEN BAY, WISCONSIN 54313 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (920) 661-1500 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, no par value, outstanding as of April 30, 1999: 16,653,269 shares AMERICAN MEDICAL SECURITY GROUP, INC. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets-- March 31, 1999 and December 31, 1998..........................3 Condensed Consolidated Statements of Income-- Three months ended March 31, 1999 and 1998....................5 Condensed Consolidated Statements of Cash Flows-- Three months ended March 31, 1999 and 1998....................6 Notes to Condensed Consolidated Financial Statements-- March 31, 1999................................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................11 Item 3. Quantitative and Qualitative Disclosures About Market Risk.....15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...............................16 Signatures.....................................................17 Exhibit Index................................................EX-1 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1999 1998 ------------------------------------ (000'S OMITTED) ASSETS Investments: Securities available for sale, at fair value: Fixed maturities $ 292,272 $ 293,096 Equity securities-preferred 2,130 2,457 Fixed maturity securities held to maturity, at amortized cost 3,541 3,361 ------------------------------------ Total Investments 297,943 298,914 Cash and Cash Equivalents 24,262 10,648 Other Assets: Property and equipment, net 35,093 35,356 Goodwill and other intangibles, net 115,060 116,093 Other assets 46,043 37,711 ------------------------------------ Total Other Assets 196,196 189,160 ------------------------------------ Total Assets $ 518,401 $ 498,722 ==================================== See Notes to Condensed Consolidated Financial Statements
3 AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1999 1998 ------------------------------------- (000'S OMITTED) LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Medical and other benefits payable $ 130,761 $ 113,133 Advance premiums 21,451 18,157 Payables and accrued expenses 23,864 23,439 Notes payable 53,763 55,064 Other liabilities 23,641 22,478 ------------------------------------- Total Liabilities 253,480 232,271 Redeemable preferred stock - Series A adjustable rate nonconvertible, $1,000 stated value, 25,000 shares authorized - - Shareholders' Equity: Preferred stock (no par value, 475,000 shares authorized) - - Common stock (no par value, $1 stated value, 50,000,000 shares authorized, 16,653,262 and 16,653,179 issued and outstanding at March 31, 1999 and December 31, 1998, respectively) 16,653 16,653 Paid-in capital 187,949 188,981 Retained earnings 62,567 59,572 Accumulated other comprehensive income (loss), net of taxes of $1,211,000 and $642,000 at March 31, 1999 and December 31, 1998, respectively (2,248) 1,245 ---------------- ----------------- Total Shareholders' Equity 264,921 266,451 ---------------- ----------------- Total Liabilities and Shareholders' Equity $ 518,401 $ 498,722 ===================================== See Notes to Condensed Consolidated Financial Statements
4 AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, -------------------------------------- 1999 1998 -------------------------------------- (000'S OMITTED, EXCEPT PER SHARE DATA) Revenues: Insurance premiums $ 262,892 $ 234,959 Net investment income 4,975 6,081 Other revenue 6,186 4,800 -------------------------------------- Total Revenues 274,053 245,840 Expenses: Medical and other benefits 198,407 179,285 Selling, general and administrative 68,681 59,042 Interest 894 2,371 Amortization of goodwill and other intangibles 1,048 2,240 -------------------------------------- Total Expenses 269,030 242,938 -------------------------------------- Income From Continuing Operations, Before Income Taxes 5,023 2,902 Income Tax Expense 2,028 1,351 -------------------------------------- Income From Continuing Operations 2,995 1,551 Income from Discontinued Operations Less Applicable Income Taxes - 4,840 -------------------------------------- Net Income $ 2,995 $ 6,391 ====================================== Earnings Per Common Share - Basic Income from continuing operations $ 0.18 $ 0.09 Income from discontinued operations - 0.29 -------------------------------------- Net Income Per Common Share $ 0.18 $ 0.38 Earnings Per Common Share - Diluted Income from continuing operations $ 0.18 $ 0.09 Income from discontinued operations - 0.29 -------------------------------------- Net Income Per Common Share $ 0.18 $ 0.38 ====================================== See Notes to Condensed Consolidated Financial Statements
5 AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, ------------------------------------------ 1999 1998 ------------------------------------------ (000'S OMITTED) OPERATING ACTIVITIES: Income from continuing operations $ 2,995 $ 1,551 Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities: Depreciation and amortization 2,590 3,874 Net realized investment (gains) losses 61 (876) Deferred income tax benefit (expense) (430) 334 Changes in operating accounts: Other assets (8,347) (5,899) Medical and other benefits payable 17,628 (10,830) Advance premiums 3,293 1,962 Payables and accrued expenses 425 (6,886) Other liabilities 2,442 10,509 ------------------------------------------ Net Cash Provided by (Used in) Operating Activities 20,657 (6,261) INVESTING ACTIVITIES: Acquisition of subsidiaries (net of cash and cash equivalents acquired of $2,773,000) - 2,623 Purchases of available for sale securities (147,926) (82,278) Proceeds from sale of available for sale securities 142,590 66,001 Proceeds from maturity of available for sale securities 700 - Purchases of held to maturity securities (200) - Purchases of property and equipment (993) (395) Proceeds from sale of property and equipment 85 54 ------------------------------------------ Net Cash Used in Investing Activities (5,744) (13,995) FINANCING ACTIVITIES: Cash dividends paid - (1,982) Issuance of common stock 1 893 Borrowings under line of credit agreement 5,000 - Repayment on line of credit agreement (5,000) - Repayment of notes payable (1,300) (408) ------------------------------------------ Net Cash Used in Financing Activities (1,299) (1,497) Net Cash Provided by Discontinued Operations - 128 ------------------------------------------ Cash and Cash Equivalents: Net increase (decrease) 13,614 (21,625) Balance at beginning of year 10,648 45,291 ------------------------------------------ Balance at End of Period $ 24,262 $ 23,666 ========================================== See Notes to Condensed Consolidated Financial Statements
6 AMERICAN MEDICAL SECURITY GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1999 NOTE A. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the American Medical Security Group, Inc. ("AMSG" or the "Company") annual report or Form 10-K for the year ended December 31, 1998. NOTE B. DISCONTINUED OPERATIONS On May 27, 1998, the Board of Directors of the Company, then known as United Wisconsin Services, Inc. ("UWS"), approved a plan to spin off its managed care companies and specialty management business to its shareholders (the "Spin-off"). In connection with the Spin-off, UWS changed its name to "American Medical Security Group, Inc." On September 25, 1998, the distribution date, shareholders of AMSG received one share of common stock of a newly formed company, Newco/UWS, Inc. ("Newco/UWS"), for every share of AMSG owned as of September 11, 1998, the record date. The net assets of Newco/UWS consisted of assets and liabilities of the managed care and specialty business along with $70.0 million in debt that was assumed by Newco/UWS in conjunction with the Spin-off. Newco/UWS was renamed United Wisconsin Services, Inc. AMSG has obtained a private ruling from the Internal Revenue Service to the effect that the Spin-off qualifies as tax free to AMSG, Newco/UWS and to AMSG shareholders. The operations of Newco/UWS are reflected in discontinued operations through September 25, 1998. All prior periods of the Company's financial statements have been restated to reflect Newco/UWS operations as discontinued operations. Interest expense on the $70.0 million in debt assumed by Newco/UWS is reflected in continuing operations through September 11, 1998. 7 NOTE C. EARNINGS PER SHARE Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding, adjusted for the effect of dilutive employee stock options. The following table provides a reconciliation of the number of weighted average basic and diluted shares outstanding:
Three Months Ended March 31, ---------------------------------- 1999 1998 ---------------- ----------------- Weighted average common shares outstanding - Basic 16,653,226 16,515,874 Effect of dilutive stock options 173,473 171,410 ---------------- ----------------- Weighted average common shares outstanding - Dilutive 16,826,699 16,687,284 ================ =================
Other options to purchase shares were not included in the computation of earnings per diluted common share because the options' exercise prices were greater than the average market price of the outstanding common shares for the period. In addition, 1,000,000 options, which were at exercise prices greater than the average market price of the common stock, were surrendered in the first quarter of 1999. NOTE D. COMPREHENSIVE INCOME Comprehensive loss from continuing operations was $0.5 million for the three months ended March 31, 1999. Comprehensive income from continuing operations and discontinued operations was $0.8 million and $5.8 million, respectively, for the three months ended March 31, 1998. Comprehensive income for the Company is net income plus or minus unrealized gains or losses, net of income tax effects, on certain investments in debt and equity securities. NOTE E. SEGMENT INFORMATION The Company has two reportable segments: 1) health insurance products and 2) life insurance products. The Company's health insurance products consist of the following coverages related to small group preferred provider organization products: fully insured medical, self funded medical, dental and short-term disability. Life products consist primarily of group term-life insurance. Operations not directly related to the business segments (i.e., corporate investment income, interest expense on corporate debt, amortization of goodwill and intangibles, unallocated overhead expenses and health maintenance organization ("HMO") operations) are included in "All Other". The reportable segments are managed separately because they differ in the nature of the products offered and in profit margins. The Company evaluates segment performance based on profit or loss from operations before income taxes, not including gains and losses on the Company's investment portfolio. The accounting policies of the reportable segments are the same as those used to report the Company's consolidated financial statements. Intercompany transactions have been eliminated prior to reporting reportable segment information. 8 A reconciliation of segment income before income taxes to consolidated income from continuing operations before income taxes is as follows:
Three Months Ended March 31, -------------------------------- 1999 1998 ---------------- --------------- (000'S OMITTED) Health $ 3,481 $ (393) Life 1,876 2,426 All other (334) 869 ---------------- --------------- $ 5,023 $ 2,902 ================ ===============
Operating results and statistics for each of the Company's segments are as follows:
Three Months Ended March 31, ----------------------------------- 1999 1998 ----------------- ----------------- (000'S OMITTED, EXCEPT FINANCIAL STATISTICS) HEALTH SEGMENT OPERATING RESULTS Revenues: Insurance premiums $ 246,652 $ 222,872 Net investment income 2,268 2,137 Other revenue 5,212 3,507 ----------------- ----------------- Total Revenues 254,132 228,516 Expenses: Medical and other benefits 187,420 174,145 Selling, general and administrative 63,231 54,764 ----------------- ----------------- Total Expenses 250,651 228,909 ----------------- ----------------- Income Before Income Taxes $ 3,481 $ (393) ================= ================= FINANCIAL STATISTICS Loss ratio 76.0% 78.1% Expense ratio 23.5% 23.0% ----------------- ----------------- Combined ratio 99.5% 101.1% ================= ================= Membership at End of Period: Medical: Fully insured 586,042 512,182 Self funded 49,264 68,746 ----------------- ----------------- Total medical* 635,306 580,928 Dental 357,860 451,772 *Total medical membership of the Company includes HMO membership of 26,820 and 13,657 at March 31, 1999 and 1998 respectively. HMO operations are not included in health segment operating results.
9
Three Months Ended March 31, ----------------------------------- 1999 1998 ----------------- ----------------- (000'S OMITTED, EXCEPT FINANCIAL STATISTICS) LIFE SEGMENT OPERATING RESULTS Revenues: Insurance premiums $ 6,660 $ 6,470 Net investment income 51 55 Other revenue 72 40 ----------------- ----------------- Total Revenues 6,783 6,565 Expenses: Medical and other benefits 2,773 2,135 Selling, general and administrative 2,134 2,004 ----------------- ----------------- Total Expenses 4,907 4,139 ----------------- ----------------- Income Before Income Taxes $ 1,876 $ 2,426 ================= ================= FINANCIAL STATISTICS Loss ratio 41.6% 33.0% Expense ratio 31.0% 30.4% ----------------- ----------------- Combined ratio 72.6% 63.4% ================= ================= Membership at end of period 307,674 238,824
10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW American Medical Security Group, Inc., formerly known as United Wisconsin Services, Inc., together with its subsidiary companies ("AMSG" or the "Company"), is a provider of life and health insurance products for individuals and employer groups. The Company's principal product offering is small group health insurance. It also sells individual and large group health insurance and group life, dental, prescription drug, disability and accidental death insurance. The Company's products are actively marketed in 33 states and the District of Columbia through independent agents. The Company's products generally provide discounts to insureds that utilize preferred provider organizations. The average group size is eight lives. HISTORY Prior to and for most of the year 1998, the business of the Company, then known as "United Wisconsin Services, Inc.", consisted of two main components: the small group business and the managed care and specialty business. On September 11, 1998, the Company contributed all of its subsidiaries comprising the managed care and specialty business to a newly created subsidiary named "Newco/UWS, Inc.", a Wisconsin corporation ("Newco/UWS"). On September 25, 1998, the Company spun off the managed care and specialty business through a distribution of 100% of the issued and outstanding shares of common stock of Newco/UWS to the Company's shareholders of record as of September 11, 1998. The Company thereupon adopted its current name of "American Medical Security Group, Inc." and Newco/UWS changed its name to "United Wisconsin Services, Inc." The net assets of Newco/UWS consisted of assets and liabilities of the managed care and specialty management business along with $70.0 million in debt that was assumed by Newco/UWS in conjunction with the Spin-off. The operations of Newco/UWS are reflected in discontinued operations through September 25, 1998. Interest expense on the $70.0 million in debt assumed by Newco/UWS is reflected in continuing operations through September 11, 1998. After the Spin-off, the business of the Company consisted solely of the Company's small group insurance business. The continuing operations of the Company reflect the historical small group insurance portion of the Company's business. RESULTS OF CONTINUING OPERATIONS INSURANCE PREMIUMS Insurance premiums for the three months ended March 31, 1999 increased 11.9% to $262.9 million from $235.0 million for the same period in 1998. Effective January 1, 1999, the Company acquired the majority of the fully insured group health business of Continental Assurance Company ("CNA"). The results for the three months ended March 31, 1999 included $28.5 million of premium related to the CNA acquired business. Average fully insured medical premium per member per month during the three month period ended March 31, 1999 increased 2.4% to $126 compared to $123 during the same period in 1998. Medical membership (including HMO members) at March 31, 1999 increased 11.4% to 662,126 from 594,585 at March 31, 1998. New sales growth combined with the addition of CNA business has caused the membership in force to grow. 11 NET INVESTMENT INCOME Net investment income includes investment income and realized gains (losses) on investments. Net investment income for the three months ended March 31, 1999 declined 18.2% to $5.0 million from $6.1 million for the three months ended March 31, 1998. The decline is due to lower average annual investment yields and a decrease in realized gains of $0.9 million. Average annual investment yields, excluding realized gains and losses, were 6.7% and 7.5% for the three months ended March 31, 1999 and 1998, respectively. Investment gains and losses are realized in the normal investment process in response to market opportunities. Average invested assets for the three months ended March 31, 1999 and March 31, 1998 were $299.2 million and $276.2 million, respectively. OTHER REVENUE Other revenue increased to $6.2 million for the three months ended March 31, 1999 from $4.8 million for the same period in 1998. The increase is primarily due to an increase in fee revenue associated with the Pan American Life Insurance Company business acquired July 1998 and CNA business acquired January 1999, offset by lower self funded fee revenue on smaller self funded membership. Management expects that other revenue will decline slightly during the remainder of 1999 as the acquired blocks of business run off. LOSS RATIO The health segment loss ratio for the three months ended March 31, 1999 was 76.0% compared with 78.1% for the three months ended March 31, 1998. The improved loss ratio for the quarter reflects the cancellation of unprofitable business during the second half of 1998, including the one-life dental business effective July 1, 1998, increased margin on new business, and the repricing of existing business. The first quarter 1999 loss ratio reflects a higher loss ratio on the business acquired from CNA than experienced on the Company's existing business. The health loss ratio for the remainder of 1999 is dependent upon future events including claim cost trends, membership utilization and regulatory approvals and actions. Management continues to pursue rate increases aggressively in various states where the loss ratio has not responded as quickly as expected. However, there can be no guarantee that these actions will have the desired effect on the health loss ratio in future periods or when such results may be realized. The life segment loss ratio for the three months ended March 31, 1999 was 41.6% compared to 33.0% for the three months ended March 31, 1998. The increase in the life loss ratio for the first quarter of 1999 is due primarily to a fluctuation in claims experience. Management expects the life loss ratio to return to historical patterns during the remainder of 1999. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE RATIO The selling, general and administrative ("SGA") expense ratio for health segment products for the three months ended March 31, 1999 was 23.5% compared with 23.0% for the three months ended March 31, 1998. The increase in the SGA expense ratio is the result of higher commissions on new policy sales offset by a lower administrative expense ratio resulting from a leveraging of the Company's operations over increased revenues. OTHER EXPENSES Interest expense decreased to $0.9 million for the three months ended March 31, 1999 from $2.4 million for the same period in the prior year. The decrease in interest expense reflects the assumption of $70.0 million in debt by Newco/UWS on September 11, 1998, as part of the spin-off transaction, as described in Note B of the Notes to Condensed Consolidated Financial Statements. Amortization of goodwill and other intangibles totaled $1.0 million for the first quarter of 1999, compared with $2.2 million of amortization expense for the first quarter of 1998. The decline in amortization is principally due to the write-off of the Company's distribution system intangible asset at December 31, 1998, as described in 12 the Company's annual report on Form 10-K for the year ended December 31, 1998. Management believes that no other material impairment of goodwill and other intangible assets existed at March 31, 1999. The effective tax rate was 40.4% for the three months ended March 31, 1999 compared with 46.6% for the three months ended March 31, 1998. The effective tax rate is impacted primarily by level amortization of non-deductible goodwill in relation to varying pretax income. LIQUIDITY AND CAPITAL RESOURCES The Company's sources of cash flow consist primarily of insurance premiums, administrative fee revenue and investment income. The primary uses of cash include medical and other benefits and operating expense payments. Positive cash flows are invested pending future payments of medical and other benefits and other operating expenses. The Company's investment policies are designed to maximize yield, preserve principal and provide liquidity to meet anticipated payment obligations. The Company's cash flow from operations was positive at $20.7 million for the three months ended March 31, 1999. This compares to negative cash flow from operations of $6.3 million for the three months ended March 31, 1998. The positive results are due to an increase in claims inventory, growth in membership and lower debt costs as a result of the assumption of $70.0 million in debt by Newco/UWS in September 1998. The Company's investment portfolio from continuing operations consists primarily of investment grade bonds and has limited exposure to equity securities. At March 31, 1999, $295.8 or 99.3% of the Company's investment portfolio was invested in bonds. At December 31, 1998, $296.5 or 99.2% of the Company's investment portfolio was invested in bonds. The bond portfolio had an average quality rating of Aa3 at March 31, 1999, and A1 at December 31, 1998, as measured by Moody's Investor Service. The majority of the bond portfolio was classified as available for sale. The Company has no investment in mortgage loans, non-publicly traded securities (except for principal only strips of U.S. Government securities), real estate held for investment or financial derivatives. The Company's insurance subsidiaries operate in states that require certain levels of regulatory capital and surplus and may restrict dividends to their parent companies. The National Association of Insurance Commissioners has adopted risk-based capital ("RBC") standards for life and health insurers designed to evaluate the adequacy of statutory capital and surplus in relation to various business risks faced by such insurers. The RBC formula is used by state insurance regulators as an early warning tool to identify insurance companies that potentially are inadequately capitalized. At December 31, 1998, the Company's principal insurance company subsidiaries had an RBC ratio that was substantially above the levels which would require regulatory action. The Company has a five year revolving line of credit with a maximum commitment of $70.0 million, and a $10.0 million sublimit for swingline loans. The outstanding line of credit balance at March 31, 1999 was $45.2 million, which is included in notes payable. In addition to internally generated funds and periodic borrowings on its bank line of credit, the Company believes that additional financing to facilitate long-term growth could be obtained through equity offerings, debt offerings, or bank borrowings, as market conditions may permit or dictate. 13 YEAR 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Computer equipment and software devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather that the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. The Company has divided the Year 2000 issues facing the organization into three major sections: 1) software applications developed in-house ("In-house Applications"); 2) software applications acquired from a third party that have been customized by the Company ("Customized Applications"); and 3) software applications acquired from a third party that have not been customized by the Company and those products and services provided to the Company by third parties ("Third Party Products"). In-house Applications represent the primary operating software of the Company and include applications that perform premium billing and cash posting, claims adjudication and commission payment processing. The project to make all In-House Applications Year 2000 compliant was completed in November 1998. The deletion of temporary bridges and workfiles used to facilitate communication between compliant and non-compliant computer codes during the course of the implementation was completed in early March 1999. Customized Applications include electronic data interchange applications, publishing systems, fax capabilities, accounting packages and other special application software as well as utility software packages that serve as links between different packages. Each of these software packages is currently being upgraded or replaced. It is anticipated that all Customized Applications will be compliant prior to the end of the third quarter of 1999. With respect to Third Party Products, the Company has reviewed its business processes that may have Year 2000 concerns performed by, with or through external business associates. This includes computer hardware, telephone systems, security systems and numerous other products as well as third party applications that have not been customized by the Company. The Company has evaluated various third parties that provide products or services, such as printing companies, power and utility companies and other vendors. Where appropriate, agreements with third party vendors have been amended and Year 2000 compliance certifications have been obtained. Significant business partners and vendors will be required to provide the Company with Year 2000 certified products or services. Such products and services are being tested by the Company to validate the compliance certification. The Company estimates this portion of the plan is approximately 80% complete, is on schedule and is planned for completion in September 1999.
YEAR 2000 PLAN PERCENT COMPLETE COMPLETION DATE In-house Applications 100% March 1999 Customized Applications 76% September 1999 Third Party Products 80% September 1999
The cost of the Year 2000 project is being funded through operating cash flows and is not expected to be material to the Company's financial position. Through March 31, 1999, the Company had incurred costs of $2.5 million ($0.5 million in 1999) relating to the Year 2000 project. For the remainder of 1999, the Company anticipates an additional cost of $0.6 million which will be expensed as incurred. The Company has made capital expenditures of $4.2 million through March 31, 1999, and expects to make an additional $0.7 million in capital expenditures to complete the project. 14 The Company is developing a comprehensive analysis of the operational problems and costs (including loss of revenues) that could result from the unlikely failure by the Company and certain third parties to complete efforts necessary to achieve Year 2000 compliance on a timely basis. The majority of the contingency plans has been developed and documented for dealing with the worst case scenarios with the highest chance of occurring. The Company currently plans to complete such analysis and contingency planning during the second quarter of 1999. The costs of the project and the dates on which the Company plans to complete the necessary Year 2000 modifications are based on management's best estimates, which were derived using numerous assumptions of future events including the continued availability of certain resources, third party remediation plans and other factors. There can be no guarantee that these timelines or estimates will be achieved. Actual results could differ materially from those planned. Specific factors that might cause such material differences to occur include, but are not limited to, the availability and cost of personnel trained in this area; the ability to locate and correct all relevant computer codes; and the ability of the Company's significant suppliers, customers and others with which it conducts business, including federal, state and local governmental agencies, to identify and resolve their own Year 2000 issues and similar uncertainties. Due to these uncertainties, the Company may face certain claims, the impact of which is not currently estimable. No assurance can be given that the cost of defending and resolving such claims, if any, will not significantly affect the Company's results of operations. Although the Company has some agreements with third party vendors and suppliers that contain indemnification provisions that protect the Company under certain circumstances relating to Year 2000 issues, there can be no assurances that such indemnification provisions will cover all of the Company's liabilities and costs related to Year 2000 claims by third parties. 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 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk exposure has not changed substantially from the year ended December 31, 1998. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - "Market Risk Exposure" in the Company's annual report or Form 10-K for the year ended December 31, 1998. 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS See the Exhibit Index following the Signature page of this report, which is incorporated herein by reference. (b) REPORTS ON FORM 8-K The Company did not file any Form 8-K reports during the quarter ended March 31, 1999. 16 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 thereunto duly authorized. DATE: MAY 12, 1999 ---------------- AMERICAN MEDICAL SECURITY GROUP, INC. /s/ Gary D. Guengerich --------------------------------------------------------- Gary D. Guengerich Executive Vice President and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer and duly authorized to sign on behalf of the Registrant) 17 AMERICAN MEDICAL SECURITY GROUP, INC. (COMMISSION FILE NO. 1-13154) EXHIBIT INDEX TO FORM 10-Q QUARTERLY REPORT for quarter ended March 31, 1999
INCORPORATED HEREIN FILED EXHIBIT NO. DESCRIPTION BY REFERENCE TO HEREWITH 3.1 Restated Articles of Incorporation of Exhibit 3.1 to the Company's Annual American Medical Security Group, Inc. Report on Form 10-K for the year (the "Company") dated as of February 17, ended December 31, 1998 (the "1998 1999 10-K") 3.2 Bylaws of the Company as amended and Exhibit 3.2 to 1998 10-K restated February 17, 1999 10.1 Equity Incentive Plan as amended and Exhibit 10.1 to 1998 10-K restated March 15, 1999 10.2 Amendment dated March 30, 1999 to X Employment and Noncompetition Agreement between American Medical Security Holdings, Inc. ("AMS Holdings") and Wallace J. Hilliard 10.3 Option Surrender Agreement dated March X 30, 1999 between AMS Holdings and Wallace J. Hilliard 10.4 Amendment dated March 30, 1999 to X Employment and Noncompetition Agreement between AMS Holdings and Ronald A. Weyers 10.5 Option Surrender Agreement dated March X 30, 1999 between AMS Holdings and Ronald A. Weyers 27.1 Financial Data Schedule X 27.2 Restated Financial Data Schedule X (three months ended March 31, 1998) EX-1
EX-10.2 2 EXHIBIT 10.2 AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT THIS AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Amendment") is executed this 30th day of March, 1999, by and between AMERICAN MEDICAL SECURITY HOLDINGS, INC., a Wisconsin corporation, (the "Company") and a wholly-owned subsidiary of American Medical Security Group, Inc., a Wisconsin corporation ("AMSG"), and WALLACE J. HILLIARD, an individual ("Employee"). RECITALS WHEREAS, the Company and Employee are party to that certain Employment and Noncompetition Agreement dated December 3, 1996 (the "Employment Agreement"); and WHEREAS, the Company and Employee have entered into that certain Option Surrender Agreement of even date herewith; and WHEREAS, pursuant to Section 5.3 of the Employment Agreement, the parties desire to amend the Employment Agreement to extend the terms of the Employment Agreement for a period of two years and three months. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows. 1. AMENDMENT TO TERM OF EMPLOYMENT. Section 1.1 of the Employment Agreement shall be deleted in its entirety, and the following shall be inserted in its place: 1.1 TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, for the period commencing on the date hereof and ending on March 3, 2005, subject to earlier termination as hereinafter set forth in Article III (the "Employment Term"). 2. AMENDMENT TO POSITION AND DUTIES. The last sentence of Section 1.2 of the Employment Agreement shall be deleted and the following inserted in its place. The Company shall provide such secretarial assistance and office space to Employee during the first five (5) years of the employment term as may be reasonably requested by Employee; provided that the Company shall be required to provide secretarial assistance and office space only to the extent consistent with its practice during the first two (2) years of this Agreement. 3. AMENDMENT TO BASE SALARY PROVISION. Section 2.1 of the Employment Agreement shall be deleted in its entirety, and the following shall be inserted in its place: 2.1 BASE SALARY. The Company shall pay Employee an annual salary as follows: (i) $750,000 per year during the first year; (ii) $500,000 per year thereafter for the shorter of two years or such time as Employee is not available to devote Employee's entire business time, attention and energies exclusively to the business of the Company (as such determination is made by the Board of Directors including by reason of "disability" as set forth in Section 3.1(c) hereof); (iii) $500,000 per year thereafter for a period of two years and three months ($41,667 per month); and $100,000 per year thereafter for a period of three years ("Base Salary"), payable in accordance with the normal payroll practices of the Company. 4. OTHER TERMS AND CONDITIONS. Except as set forth in this Amendment, all other terms and conditions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed on the date first set forth above. AMERICAN MEDICAL SECURITY HOLDINGS, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: Secretary & General Counsel ----------------------------------------------- EMPLOYEE /S/ WALLACE J. HILLIARD --------------------------------------------------- Wallace J. Hilliard EX-10.3 3 EXHIBIT 10.3 OPTION SURRENDER AGREEMENT THIS OPTION SURRENDER AGREEMENT ("Agreement") is executed this 30th day of March, 1999, by and among AMERICAN MEDICAL SECURITY HOLDINGS, INC., a Wisconsin corporation ("Company"), AMERICAN MEDICAL SECURITY GROUP, INC. ("AMSG") and WALLACE J. HILLIARD, an individual ("Employee"). RECITALS WHEREAS, Employee is a party to that certain Equity Incentive Plan Nonqualified Stock Option Award Agreement with AMSG f/k/a United Wisconsin Services, Inc. dated December 3, 1996, (the "Option Agreement"), a copy of which is attached hereto as EXHIBIT A; and WHEREAS, subsequent to the date of the Option Agreement, AMSG effected a spin-off (the "Spin-off") of its managed care business to a new formed corporation, Newco/UWS, Inc. n/k/a United Wisconsin Services, Inc. ("New UWSI"); WHEREAS, the Spin-off resulted in Employee having stock options with AMSG for 530,000 shares of AMSG stock (the "AMZ Stock Options"), and stock options with New UWSI for 530,000 shares of New UWSI stock (the "UWZ Stock Options"); and WHEREAS, Company and Employee are parties to that certain Employment and Noncompetition Agreement dated December 3, 1996, by and between AMSH and Employee (the "Employment Agreement"), a copy of which is attached hereto as EXHIBIT B; and WHEREAS, Company has, at all times since December 3, 1996, been a subsidiary of AMSG; and WHEREAS, Employee desires to surrender the AMZ Stock Options in exchange for an extended term of employment under the Employment Agreement; and WHEREAS, the Company desires to accept such surrender and extend such employment. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows. 1. SURRENDER OF THE OPTIONS. Employee hereby surrenders the AMZ Stock Options to AMSG which consist of 530,000 options to purchase common stock of AMSG pursuant to the Option Agreement, as amended as a consequence of the Spin-off. Employee further acknowledges that the AMZ Stock Options represent all of the options to purchase shares of AMSG held by Employee and that this surrender of the AMZ Stock Options fully waives Employee's rights in and to the AMZ Stock Options and all rights derived therefrom or appertaining thereto, including, but not limited to, any and all vested rights. Notwithstanding the foregoing, the surrender hereunder of the AMZ Stock Options shall in no way affect employee's rights under the UWZ Stock Options; it being the understanding of the parties that whatever rights the Employee has under the UWZ Stock Options shall remain in full force and effect. 2. AMENDMENT OF THE EMPLOYMENT AGREEMENT. In consideration of Employee's surrender of the Options, the Company hereby extends Employee's employment with the Company in accordance with the Amendment to Employment and Noncompetition Agreement in the form attached hereto as EXHIBIT C. 3. NOTICES. Any notice required to be given pursuant to the terms and provisions hereof, unless otherwise indicated herein, shall be in writing and shall be hand-delivered or sent by certified mail, return receipt requested, postage prepaid as follows: If to the Company: American Medical Security Holdings, Inc. 3100 AMS Blvd. Green Bay, WI 54313 Attn: General Counsel If to American Medical Security Group, Inc.: American Medical Security Group, Inc. 3100 AMS Blvd. Green Bay, WI 54313 Attn: General Counsel If to Employee: Wallace J. Hilliard Hilliard Limited Partnership 840 Willard Drive Green Bay, WI 54313 Notices shall be deemed given when mailed to the address indicated above, or to such other address as either party may indicate to the other by written notice as herein requested. 4. ENTIRE AGREEMENT. This Agreement contains the entire understanding and the full and complete agreement of the parties, and supersedes and replaces any prior understandings and agreements between the parties, with respect to the subject matter hereof. 5. AMENDMENT. This Agreement may not be altered, amended, assigned or modified except in writing, signed by all of the parties hereto. 6. ASSIGNABILITY. This Agreement and the rights and duties set forth herein may not be assigned by the Employee or the Company, in whole or in part. This Agreement shall be binding on and inure to the benefit of each party and each party's respective heirs, legal representatives, successors and permitted assigns. 7. SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein. 8. WAIVER OF BREACH. The waiver by any party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any other party. 9. HEADINGS. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. 10. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Wisconsin without regard to conflicts of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. AMERICAN MEDICAL SECURITY HOLDINGS, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: Secretary & General Counsel ----------------------------------------------- AMERICAN MEDICAL SECURITY GROUP, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: Secretary & General Counsel ----------------------------------------------- EMPLOYEE /S/ WALLACE J. HILLIARD --------------------------------------------------- Wallace J. Hilliard EX-10.4 4 EXHIBIT 10.4 AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT THIS AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Amendment") is executed this 30th day of March, 1999, by and between AMERICAN MEDICAL SECURITY HOLDINGS, INC., a Wisconsin corporation, (the "Company") and a wholly-owned subsidiary of American Medical Security Group, Inc., a Wisconsin corporation ("AMSG"), and RONALD A. WEYERS, an individual ("Employee"). RECITALS WHEREAS, the Company and Employee are party to that certain Employment and Noncompetition Agreement dated December 3, 1996 (the "Employment Agreement"); and WHEREAS, the Company and Employee have entered into that certain Option Surrender Agreement of even date herewith; and WHEREAS, pursuant to Section 5.3 of the Employment Agreement, the parties desire to amend the Employment Agreement to extend the terms of the Employment Agreement for a period of two years and three months. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows. 1. AMENDMENT TO TERM OF EMPLOYMENT. Section 1.1 of the Employment Agreement shall be deleted in its entirety, and the following shall be inserted in its place: 1.1 TERM OF EMPLOYMENT. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, for the period commencing on the date hereof and ending on December 2, 2004, subject to earlier termination as hereinafter set forth in Article III (the "Employment Term"). 2. AMENDMENT TO POSITION AND DUTIES. The last sentence of Section 1.2 of the Employment Agreement shall be deleted and the following inserted in its place. The Company shall provide such secretarial assistance and office space to Employee during the first five (5) years of the employment term as may be reasonably requested by Employee; provided that the Company shall be required to provide secretarial assistance and office space only to the extent consistent with its practice during the first two (2) years of this Agreement. 3. AMENDMENT TO BASE SALARY PROVISION. Section 2.1 of the Employment Agreement shall be deleted in its entirety, and the following shall be inserted in its place: 2.1 BASE SALARY. The Company shall pay Employee an annual salary as follows: (i) $750,000 per year during the first year; (ii) $500,000 per year thereafter for the shorter of two years or such time as Employee is not available to devote Employee's entire business time, attention and energies exclusively to the business of the Company (as such determination is made by the Board of Directors including by reason of "disability" as set forth in Section 3.1(c) hereof); (iii) $500,000 per year thereafter for a period of two years; and $100,000 per year thereafter for a period of three years ("Base Salary"), payable in accordance with the normal payroll practices of the Company. 4. OTHER TERMS AND CONDITIONS. Except as set forth in this Amendment, all other terms and conditions of the Employment Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed on the date first set forth above. AMERICAN MEDICAL SECURITY HOLDINGS, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: SECRETARY & GENERAL COUNSEL ----------------------------------------------- EMPLOYEE /S/ RONALD A. WEYERS --------------------------------------------------- Ronald A. Weyers EX-10.5 5 4 EXHIBIT 10.5 OPTION SURRENDER AGREEMENT THIS OPTION SURRENDER AGREEMENT ("Agreement") is executed this 30th day of March, 1999, by and among AMERICAN MEDICAL SECURITY HOLDINGS, INC., a Wisconsin corporation ("Company"), AMERICAN MEDICAL SECURITY GROUP, INC. ("AMSG") and RONALD A. WEYERS, an individual ("Employee"). RECITALS WHEREAS, Employee is a party to that certain Equity Incentive Plan Nonqualified Stock Option Award Agreement with AMSG f/k/a United Wisconsin Services, Inc. dated December 3, 1996, (the "Option Agreement"), a copy of which is attached hereto as EXHIBIT A; and WHEREAS, subsequent to the date of the Option Agreement, AMSG effected a spin-off (the "Spin-off") of its managed care business to a new formed corporation, Newco/UWS, Inc. n/k/a United Wisconsin Services, Inc. ("New UWSI"); WHEREAS, the Spin-off resulted in Employee having stock options with AMSG for 470,000 shares of AMSG stock (the "AMZ Stock Options"), and stock options with New UWSI for 470,000 shares of New UWSI stock (the "UWZ Stock Options"); and WHEREAS, Company and Employee are parties to that certain Employment and Noncompetition Agreement dated December 3, 1996, by and between AMSH and Employee (the "Employment Agreement"), a copy of which is attached hereto as EXHIBIT B; and WHEREAS, Company has, at all times since December 3, 1996, been a subsidiary of AMSG; and WHEREAS, Employee desires to surrender the AMZ Stock Options in exchange for an extended term of employment under the Employment Agreement; and WHEREAS, the Company desires to accept such surrender and extend such employment. NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows. 1. SURRENDER OF THE OPTIONS. Employee hereby surrenders the AMZ Stock Options to AMSG which consist of 470,000 options to purchase common stock of AMSG pursuant to the Option Agreement, as amended as a consequence of the Spin-off. Employee further acknowledges that the AMZ Stock Options represent all of the options to purchase shares of AMSG held by Employee and that this surrender of the AMZ Stock Options fully waives Employee's rights in and to the AMZ Stock Options and all rights derived therefrom or appertaining thereto, including, but not limited to, any and all vested rights. Notwithstanding the foregoing, the surrender hereunder of the AMZ Stock Options shall in no way affect employee's rights under the UWZ Stock Options; it being the understanding of the parties that whatever rights the Employee has under the UWZ Stock Options shall remain in full force and effect. 2. AMENDMENT OF THE EMPLOYMENT AGREEMENT. In consideration of Employee's surrender of the Options, the Company hereby extends Employee's employment with the Company in accordance with the Amendment to Employment and Noncompetition Agreement in the form attached hereto as EXHIBIT C. 3. NOTICES. Any notice required to be given pursuant to the terms and provisions hereof, unless otherwise indicated herein, shall be in writing and shall be hand-delivered or sent by certified mail, return receipt requested, postage prepaid as follows: If to the Company: American Medical Security Holdings, Inc. 3100 AMS Blvd. Green Bay, WI 54313 Attn: General Counsel If to American Medical Security Group, Inc. American Medical Security Group, Inc. 3100 AMS Blvd. Green Bay, WI 54313 Attn: General Counsel If to Employee: Ronald A. Weyers P. O. Box 12057 Green Bay, Wisconsin 54307-2057 Notices shall be deemed given when mailed to the address indicated above, or to such other address as either party may indicate to the other by written notice as herein requested. 4. ENTIRE AGREEMENT. This Agreement contains the entire understanding and the full and complete agreement of the parties, and supersedes and replaces any prior understandings and agreements between the parties, with respect to the subject matter hereof. 5. AMENDMENT. This Agreement may not be altered, amended, assigned or modified except in writing, signed by all of the parties hereto. 6. ASSIGNABILITY. This Agreement and the rights and duties set forth herein may not be assigned by the Employee or the Company, in whole or in part. This Agreement shall be binding on and inure to the benefit of each party and each party's respective heirs, legal representatives, successors and permitted assigns. 7. SEVERABILITY. If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein. 8. WAIVER OF BREACH. The waiver by any party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any other party. 9. HEADINGS. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. 10. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of Wisconsin without regard to conflicts of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. AMERICAN MEDICAL SECURITY HOLDINGS, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: Secretary & General Counsel ----------------------------------------------- AMERICAN MEDICAL SECURITY GROUP, INC. By: /S/ TIMOTHY J. MOORE ----------------------------------------------- Sr. Vice President of Corporate Affairs, Its: Secretary & General Counsel EMPLOYEE /S/ RONALD A. WEYERS --------------------------------------------------- Ronald A. Weyers EX-27.1 6 EXHIBIT 27.1
7 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN MEDICAL SECURITY GROUP, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 294,402 3,541 0 0 0 0 297,943 24,262 0 0 518,401 0 21,451 130,761 0 53,763 0 0 16,653 248,268 518,401 262,892 4,975 0 6,186 198,407 0 68,681 5,023 2,028 2,995 0 0 0 2,995 .18 .18 0 0 0 0 0 0 0
EX-27.2 7 EXHIBIT 27.2
7 THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN MEDICAL SECURITY GROUP, INC. (F/K/A UNITED WISCONSIN SERVICES, INC.) FOR THE THREE MONTHS ENDED MARCH 31, 1998, AS ADJUSTED TO REFLECT THE RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR CONTINUING OPERATIONS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 283,509 3,917 0 0 0 0 287,426 23,666 0 0 651,111 0 22,123 117,214 0 126,442 0 0 16,544 315,255 651,111 234,959 6,081 0 4,800 179,285 0 59,042 2,902 1,351 1,551 4,840 0 0 6,391 .38 .38 0 0 0 0 0 0 0
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