EX-99 3 exh99.txt AMERICAN MEDICAL SECURITY GROUP, INC. EXHIBIT 99 [American Medical Security Group LOGO] P. O. Box 19032 Green Bay, WI 54307-9032 [ News Release ] For more information contact: [ for Immediate Release ] Cliff Bowers Vice President Corporate Communications (920) 661-2766 AMERICAN MEDICAL SECURITY GROUP REPORTS FIRST QUARTER 2003 FINANCIAL RESULTS o NET INCOME OF $0.48 PER SHARE IN QUARTER; UP 30% YEAR OVER YEAR o GUIDANCE OF $1.85 TO $1.95 PER SHARE FOR 2003 AFFIRMED o COMBINED RATIO CONTINUES SEQUENTIAL IMPROVEMENT o FAVORABLE FLORIDA APPEALS COURT RULING GREEN BAY, Wis. - May 6, 2003 - American Medical Security Group, Inc. (NYSE: AMZ) (AMS), today reported net income of $6.5 million or $0.48 per diluted share for the first quarter of 2003. Net income in the period is the highest since AMZ shares became publicly traded in 1998. The company's net income per share includes $0.02 of realized capital gains from investments. The first quarter 2003 results compare to income of $5.4 million or $0.37 per share in the first quarter of 2002 before the cumulative effect of a change in accounting principle associated with the adoption of SFAS No. 142 (write-down of goodwill). More Ad One "We are pleased with our profitability in the quarter, and we remain focused on revenue and membership growth," said Samuel V. Miller, AMS Chairman, President & Chief Executive Officer. "While total revenue is still not up to our expectations, we fully expect to achieve our 2003 earnings projections." "We will accomplish that through a combination of pricing discipline, expense control and the extensive action plans we've implemented throughout our business. We believe the 10% increase in new member enrollment we experienced in the first quarter compared to the fourth quarter of 2002 is evidence those plans are beginning to take hold." REVENUE & MEMBERSHIP Total revenues for the first quarter of 2003 were $187.6 million. This compares to total revenues of $190.5 million and $203.7 million for the fourth quarter and first quarter of 2002, respectively. Total health membership was 552,303 at the end of the first quarter compared to 571,461 at the end of the fourth quarter of 2002, and 613,151 at the end of the first quarter of 2002. According to AMS, its products and support programs are very well positioned for existing market conditions, and it anticipates quarterly improvements in total membership and revenue beginning later this year. The roll-out of the company's MedOne Security product, increased agent recruiting, and a new marketing approach to small group products called, "Defined Contribution at Work," are driving increased monthly new member enrollment and should aid the company's growth in upcoming quarters. HEALTH SEGMENT LOSS RATIO The health segment loss ratio for the first quarter of 2003 was 67.9%, down from 68.5% in the first quarter of last year and up compared to 67.4% for the fourth quarter of 2002. More Ad Two HEALTH SEGMENT EXPENSE RATIO For the first quarter of 2003, the company's health segment expense ratio was 27.9%, a slight improvement over the 28.2% recorded in the first quarter of 2002 and 28.4% for the fourth quarter of 2002. HEALTH SEGMENT COMBINED RATIO The combined ratio - total health segment loss ratio plus the expense ratio - was 95.8% in the first quarter of 2003, compared to 96.7% in the first quarter of 2002. The combined ratio was 95.9% in the fourth quarter of 2002. CASH FLOW & BALANCE SHEET Cash used in operations in the first quarter of 2003 was $3.6 million. This primarily reflects the anticipated seasonal pay-down of AMS' claim inventory at year-end as well as other annual expenditures made in the period. AMS expects cash flow to follow seasonal patterns and improve in subsequent quarters of 2003. At March 31, 2003, AMS had a book value of $14.68 per share, compared to $12.19 at the end of the first quarter of 2002. EARNINGS GUIDANCE AMS has reconfirmed its earnings guidance range for 2003 of $1.85 to $1.95 per share, an increase of 14% to 19% over 2002. Earnings for the second quarter of 2003 are expected to be approximately $0.47 per share. OTHER COMPANY NEWS On January 7, 2003, the company announced that its board had authorized it to purchase up to $10 million of its outstanding common shares. The share repurchase plan allows AMS to buy back its shares, from time to time, in open market or privately negotiated transactions, subject to price and market conditions. Under this authority, AMS purchased approximately 53,000 of its outstanding common shares during the first quarter of 2003. The shares were purchased at an average price of $12.46 per share, and at an aggregate cost of approximately $0.7 million. More Ad Three In addition, AMS recently reported that it had received a favorable ruling in a Florida Appeals Court affirming the legality of its prior rating practices in that state. The decision reverses an order that would have suspended the company's license to sell new business in that state for one year. The order had been stayed pending the appeal. Also, AMS announced the hiring of industry veteran, John R. Lombardi, to serve as its Executive Vice President & Chief Financial Officer. Lombardi previously held senior financial management positions with Aetna and Cigna. American Medical Security Group, through its operating subsidiaries, markets health care benefits and insurance products to small businesses, families and individuals. Insurance products of American Medical Security Group are underwritten by United Wisconsin Life Insurance Company. The company serves customers nationwide through partnerships with professional, independent agents and quality health care providers. It provided health coverage for 552,303 members as of March 31, 2003. # # # AMS WILL HOST A CONFERENCE CALL TO DISCUSS ITS FINANCIAL RESULTS ON WEDNESDAY, MAY 7, 2003, AT 10:00 A.M. (CENTRAL TIME). INTERESTED PARTIES MAY LISTEN TO THE CONFERENCE CALL LIVE VIA THE INVESTOR SECTION OF THE COMPANY'S WEBSITE AT WWW.EAMS.COM. LISTEN-ONLY ACCESS TO THE LIVE CONFERENCE CALL IS ALSO AVAILABLE BY DIALING 913-981-5549. FOLLOWING THE LIVE CALL, A REPLAY WILL BE AVAILABLE UNTIL MIDNIGHT, FRIDAY, MAY 9, 2003, BY DIALING 719-457-0820 (CODE 432970). THIS PRESS RELEASE AND FINANCIAL AND OTHER STATISTICAL INFORMATION CONTAINED IN THE CONFERENCE CALL WILL APPEAR IN THE INVESTOR SECTION OF THE COMPANY'S WEBSITE AT WWW.EAMS.COM. CAUTIONARY STATEMENT: Some of the statements contained in this press release are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward-looking statements express expectations for or about the future, rather than historical fact. Forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such statements. Such risks and uncertainties include, among others, unexpected increases in health care costs; the company's ability to predict future health care costs and adequately price its products; the company's ability to expand its distribution network, generate new sales, sell new products and retain existing members; the company's ability to control expenses during a time of declining revenue and membership; legislative and regulatory matters, including delays in regulatory approvals, changes in government regulation, regulatory action resulting from market conduct activity; general business conditions, including competitive practices and demand for the company's existing and new products; adverse outcomes of legal and administrative proceedings; publicity about the company; development of and changes in claims reserves; general economic conditions that impact the performance of the company's investment portfolio or decisions of consumers to purchase our products; and other factors that may be referred to in American Medical Security Group, Inc.'s reports filed with the Securities and Exchange Commission from time to time. Forward-looking statements made in this release express expectations only as of the date they are made. The Company does not undertake any obligation to update or revise such statements as a result of new information or future events. AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, ------------------------------- (THOUSANDS, EXCEPT PER COMMON SHARE DATA) 2003 2002 -------------------------------------------------------------------------------------------------------------------- REVENUES Insurance premiums $ 179,055 $ 194,401 Net investment income 3,402 3,924 Net realized investment gains 375 14 Other revenue 4,786 5,405 -------------------------------------------------------------------------------------------------------------------- Total revenues 187,618 203,744 EXPENSES Medical and other benefits 120,334 131,800 Selling, general and administrative 56,329 62,024 Interest 339 494 Amortization of intangibles 238 183 -------------------------------------------------------------------------------------------------------------------- Total expenses 177,240 194,501 -------------------------------------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of a change in accounting principle 10,378 9,243 Income tax expense 3,915 3,813 -------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of a change in accounting principle 6,463 5,430 Cumulative effect of a change in accounting principle - (60,098) -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 6,463 $ (54,668) ==================================================================================================================== Earnings (loss) per common share - basic: Income before cumulative effect of a change in accounting principle $ 0.50 $ 0.39 Cumulative effect of a change in accounting principle - (4.35) -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 0.50 $ (3.96) ==================================================================================================================== Earnings (loss) per common share - diluted: Income before cumulative effect of a change in accounting principle $ 0.48 $ 0.37 Cumulative effect of a change in accounting principle - (4.15) -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 0.48 $ (3.77) ====================================================================================================================
AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, (THOUSANDS, EXCEPT SHARE DATA) 2003 2002 -------------------------------------------------------------------------------------------------------------------- (Unaudited) ASSETS Investments: Fixed maturity securities available for sale, at fair value $ 283,595 $ 278,222 Fixed maturity securities held to maturity, at amortized cost 3,175 4,288 Trading securities, at fair value 1,142 926 -------------------------------------------------------------------------------------------------------------------- Total investments 287,912 283,436 Cash and cash equivalents 20,396 30,620 Property and equipment, net 34,112 33,061 Goodwill, net 32,846 32,846 Other intangibles, net 2,622 2,860 Other assets 50,737 46,117 -------------------------------------------------------------------------------------------------------------------- Total assets $ 428,625 $ 428,940 ==================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Medical and other benefits payable $ 131,650 $ 134,479 Advance premiums 17,300 15,200 Payables and accrued expenses 23,466 29,141 Notes payable 33,558 33,858 Other liabilities 32,736 33,512 -------------------------------------------------------------------------------------------------------------------- Total liabilities 238,710 246,190 Shareholders' equity: Common stock (no par value, $1 stated value, 50,000,000 shares authorized, 16,654,315 issued and 12,935,698 outstanding at March 31, 2003, 16,654,315 issued and 12,905,898 outstanding at December 31, 2002) 16,654 16,654 Paid-in capital 190,367 189,813 Retained earnings 9,321 2,858 Accumulated other comprehensive income (net of taxes of $4,357 at March 31, 2003 and $4,117 at December 31, 2002) 8,090 7,646 Treasury stock (3,718,617 shares at March 31, 2003 and 3,748,417 shares at December 31, 2002, at cost) (34,517) (34,221) -------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 189,915 182,750 -------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 428,625 $ 428,940 ====================================================================================================================
AMERICAN MEDICAL SECURITY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, --------------------------------- (THOUSANDS) 2003 2002 -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $ 6,463 $ (54,668) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of a change in accounting principle - 60,098 Depreciation and amortization 2,520 2,226 Net realized investment gains (375) (14) Increase in trading securities (216) (149) Deferred income tax benefit (1,154) (2,694) Changes in operating accounts: Other assets (3,698) 1,870 Medical and other benefits payable (2,829) (2,935) Advance premiums 2,100 (103) Payables and accrued expenses (5,675) (1,376) Other liabilities (711) 860 -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (3,575) 3,115 INVESTING ACTIVITIES Purchases of available for sale securities (42,425) (32,283) Proceeds from sale of available for sale securities 36,959 49,214 Proceeds from maturity of available for sale securities 1,775 - Purchases of held to maturity securities - (1,335) Proceeds from maturity of held to maturity securities - 1,295 Purchases of property and equipment (2,845) (2,799) Proceeds from sale of property and equipment 2 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (6,534) 14,092 FINANCING ACTIVITIES Issuance of common stock 845 262 Purchase of treasury stock (660) (19,540) Repayment of notes payable (300) (5,300) -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (115) (24,578) -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents: Net increase (decrease) (10,224) (7,371) Balance at beginning of year 30,620 24,975 -------------------------------------------------------------------------------------------------------------------- Balance at end of period $ 20,396 $ 17,604 ====================================================================================================================