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 June 30, 1998
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
From the transition period from to
------ ------
Commission File Number 0-14320
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UICI
----
(Exact name of registrant as specified in its charter)
Delaware 75-2044750
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 McEwen, Suite 200, Dallas, Texas 75244
- ------------------------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (972) 392-6700
Not Applicable
--------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the 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, $.01 Par
Value--46,229,000 shares as of June 30, 1998.
INDEX
UICI AND SUBSIDIARIES
Page
PART I. FINANCIAL INFORMATION
Consolidated condensed balance sheets-June 30, 1998
and December 31, 1997 ........................................... 3
Consolidated condensed statements of income-Three months
ended June 30, 1998 and 1997 and the six months ended
June 30, 1998 and 1997 .......................................... 4
Consolidated statements of comprehensive income-Three
months ended June 30, 1998 and 1997 and the six months
ended June 30, 1998 and 1997 .................................... 5
Consolidated condensed statements of cash flows-Six
months ended June 30, 1998 and 1997 ............................. 6
Notes to consolidated condensed financial
statements-June 30, 1998 ........................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 13
--------------------------------
SIGNATURES .................................................. 14
2
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
1998 1997
(Unaudited) (Note)
---------- ----------
ASSETS
Investments:
Securities available for sale--
Fixed maturities, at fair value
(cost: 1998--$838,265; 1997--$811,757) ........... $ 860,598 $ 831,460
Equity securities, at fair value
(cost: 1998--$23,063; 1997--$12,302) ............. 25,394 14,555
Student loans ............................................ 286,684 11,254
Mortgage and collateral loans ............................ 20,342 27,023
Policy loans ............................................. 21,674 22,173
Credit card loans ........................................ 88,942 54,068
Real estate investments .................................. 38,468 32,193
Short-term investments ................................... 113,519 141,040
---------- ----------
Total investments .................................. 1,455,621 1,133,766
Cash ....................................................... 17,745 15,932
Agents' receivables ........................................ 15,482 13,662
Reinsurance receivables .................................... 74,242 78,696
Due premiums and other receivables ......................... 62,751 58,822
Investment income due and accrued .......................... 25,861 14,063
Deferred acquisition costs ................................. 99,939 99,611
Goodwill ................................................... 117,493 111,067
Property and equipment, net ................................ 43,146 46,634
Other ...................................................... 10,748 7,130
---------- ----------
$1,923,028 $1,579,383
========== ==========
LIABILITIES
Policy liabilities:
Future policy and contract benefits ...................... $ 472,063 $ 487,024
Claims ................................................... 290,635 258,821
Unearned premiums ........................................ 94,238 105,696
Other policy liabilities ................................. 15,745 19,751
Federal income taxes ....................................... 21,433 19,891
Other liabilities .......................................... 72,976 60,477
Funds held for others ...................................... 53,731 25,957
Short-term debt ............................................ 9,734 20,184
Long-term debt ............................................. 30,039 30,018
Student loan credit facility ............................... 286,538 --
---------- ----------
1,347,132 1,027,819
MINORITY INTERESTS ............................................ 15,232 15,274
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share ..................... 462 462
Preferred stock, par value $.01 per share .................. -- --
Additional paid-in capital ................................. 165,891 165,891
Net unrealized investment gains ............................ 16,039 14,280
Retained earnings .......................................... 378,272 355,657
560,664 536,290
---------- ----------
$1,923,028 $1,579,383
========== ==========
NOTE: The balance sheet as of December 31, 1997 has been derived from the
audited financial statements at that date.
See notes to consolidated condensed financial statements.
3
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
REVENUES
Premiums
Health ........................................... $191,385 $144,739 $373,195 $281,775
Life premiums and other considerations ........... 14,142 11,277 26,859 22,944
Net investment income .............................. 26,837 20,869 49,554 41,195
Fees and other income .............................. 67,993 47,033 126,743 77,419
Gains on sale of investments ....................... 2,045 264 3,862 1,102
-------- -------- -------- --------
302,402 224,182 580,213 424,435
BENEFITS AND EXPENSES
Benefits, claims, and settlement expenses .......... 148,897 98,563 294,771 192,268
Underwriting, acquisition, and other expenses ...... 125,795 92,129 241,420 166,398
Interest expense ................................... 5,034 671 5,763 1,351
-------- -------- -------- --------
279,726 191,363 541,954 360,017
INCOME BEFORE FEDERAL INCOME TAXES
AND MINORITY INTERESTS ........................... 22,676 32,819 38,259 64,418
Federal income taxes .................................. 7,033 11,100 11,873 21,225
-------- -------- -------- --------
INCOME BEFORE MINORITY INTERESTS ................. 15,643 21,719 26,386 43,193
Minority interests .................................... 1,185 775 3,771 1,957
-------- -------- -------- --------
NET INCOME ....................................... $ 14,458 $ 20,944 $ 22,615 $ 41,236
======== ======== ======== ========
NET INCOME PER SHARE ............................. $0.31 $0.46 $0.49 $0.91
===== ===== ===== =====
See notes to consolidated condensed financial statements.
4
UICI AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net income ............................................ $ 14,458 $ 20,944 $ 22,615 $ 41,236
Other comprehensive income, before tax:
Unrealized gains in securities:
Unrealized holding gains arising during period ... 6,719 16,078 2,707 2,589
Less: reclassification adjustment for
losses included in net income .................. -- (4,152) -- (673)
-------- -------- -------- --------
Other comprehensive gain, before tax ..... 6,719 11,926 2,707 1,916
Income tax related to items of
other comprehensive income ..................... (2,347) (3,211) (948) (521)
-------- -------- -------- --------
Other comprehensive gain, net of tax ..... 4,372 8,715 1,759 1,395
-------- -------- -------- --------
Comprehensive income .................................. $ 18,830 $ 29,659 $ 24,374 $ 42,631
======== ======== ======== ========
5
UICI AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended
June 30,
1998 1997
--------- --------
OPERATING ACTIVITIES
Net income.................................................. $ 22,615 $ 41,236
Adjustments to reconcile net income to
cash provided by operating activities:
Increase in policy liabilities............................ 14,852 4,458
Increase in funds held for others ........................ 27,774 --
Increase in other liabilities............................. 9,412 4,662
Increase (decrease) in federal income taxes payable ...... 574 (76)
Increase in deferred acquisition costs.................... (328) (7,155)
Increase in accrued investment income
and reinsurance and other receivables................. (11,272) (13,562)
Depreciation and amortization ............................ 4,292 4,210
Net income attributable to minority interests............. 3,771 1,957
Gains on sale of investments ............................. (3,862) (1,102)
Other items, net.......................................... (3,689) (1,931)
--------- --------
Cash Provided by Operations........................... 64,139 32,697
--------- --------
INVESTING ACTIVITIES
(Increase) decrease in other investments ................... (39,855) 44,781
(Increase) decrease in student loans ....................... (275,430) 4,175
Increase in agents' receivables............................. (1,820) (7,252)
Purchase of subsidiaries and assets, net of cash acquired
of $1,171 in 1997 ........................................ -- (38,265)
Minority interest purchased ................................ (6,000) (15,062)
Decrease (increase) in property and equipment .............. 1,858 (6,141)
--------- --------
Cash Used in Investing Activities .................... (321,247) (17,764)
--------- --------
FINANCING ACTIVITIES
Deposits from investment products .......................... 6,755 9,127
Withdrawals from investment products ....................... (20,218) (20,878)
Proceeds from student loan credit facility ................. 286,538 --
Proceeds from debt.......................................... 1,252 2,016
Repayments of debt ......................................... (11,681) (1,068)
Proceeds from exercise of stock options and warrants ....... -- 131
Purchase of treasury stock ................................. -- (194)
Distributions to minority interests ........................ (3,725) (1,462)
--------- --------
Cash Provided by (Used in) Financing Activities....... 258,921 (12,328)
--------- --------
Net Increase in Cash.................................. 1,813 2,605
Net Cash at Beginning of Period....................... 15,932 15,420
--------- --------
Cash at End of Period................................. $ 17,745 $ 18,025
========= ========
See notes to consolidated condensed financial statements.
6
UICI AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
June 30, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements for UICI
and its subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1997. Certain amounts in the 1997 financial statements have been
reclassified to conform with the 1998 financial statement presentation.
NOTE B--STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
Effective January 1, 1998, the Company adopted FASB Statement No. 130,
"Reporting Comprehensive Income." Statement 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is intended to be a more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has not
been recognized in the calculation of net income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for years beginning
after December 15, 1997. Statement 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt the new
requirements at December 31, 1998. Management does not anticipate that the
adoption of this statement will have a significant effect on the Company's
reported segments.
7
NOTE C--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net income available to common shareholders ........... $14,458 $20,944 $22,615 $41,236
------- ------- ------- -------
Weighted average shares outstanding--
basic earnings per share ......................... 46,229 45,209 46,229 45,174
Effect of dilutive securities:
Employee stock options ........................... 29 26 30 38
------- ------- ------- -------
Weighted average shares outstanding--
dilutive earnings per share ...................... 46,258 45,235 46,259 45,212
------- ------- ------- -------
Basic and diluted earnings per share .................. $0.31 $0.46 $0.49 $0.91
===== ===== ===== =====
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements set forth herein or incorporated by reference herein
from the Company's filings that are not historical facts are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act.
Actual results may differ materially from those included in the forward-looking
statements. These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: changes in general economic
conditions, including the performance of financial markets, and interest rates;
competitive, regulatory or tax changes that affect the cost of or demand for the
Company's products; health care reform, the ability to predict and effectively
manage claims related to health care costs; reliance on key management and
adequacy of claims liabilities. The Credit Card segment's future results also
could be adversely affected by the possibility of future economic downturns
causing an increase in credit losses. The Company has certain risks associated
with the Student Loan business. The changes in the Higher Education Act or other
relevant federal or state laws, rules and regulations and the programs
implemented thereunder may adversely impact the education credit market. In
addition, existing legislation and future measures by the federal government may
adversely affect the amount and nature of federal financial assistance available
with respect to loans made through the U.S. Department of Education. Finally the
level of competition currently in existence in the secondary market for loans
made under the Federal Loan Programs could be reduced, resulting in fewer
potential buyers of the Federal Loans and lower prices available in the
secondary market for those loans. Investors are also directed to other risks and
uncertainties discussed in documents filed by the Company with the Securities
and Exchange Commission.
8
PART I. FINANCIAL INFORMATION
ITEM 2 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations
UICI and its subsidiaries (the "Company") reported net income of $0.31 per share
for the three month period ended June 30, 1998 compared to net income of $0.46
per share for the comparable period in 1997. Included in net income are gains
from the sale of investments of $0.03 per share for the three month period ended
June 30, 1998. For the six month period ended June 30, 1998, net income was
$0.49 per share compared to $0.91 per share in 1997. Included in net income were
gains from the sale of investments of $0.05 per share for the six month period
ended June 30, 1998 and $0.01 per share for 1997.
The Company's business segments are: (1) Insurance, which includes the
businesses of the Self Employed Agency Division, the Student Insurance Division,
the OKC Division, the Special Risk Division and the National Motor Club
Division; (ii) Financial Services, which includes the businesses of the Credit
Services Division, the Educational Finance Group Division, the Insurdata
Division and Other Business Units and (iii) Other Key Factors. Other Key Factors
include investment income not allocated to the other segments, interest and
general expenses relating to corporate operations, amortization of goodwill and
realized gains or losses on sale of investments. Allocation of investment income
is based on a number of assumptions and estimates and the segments reported
operating results would change if different methods were applied. Segment
revenues include premiums and other policy changes and considerations, net
investment income, and fees and other income. Financial information by segment
for revenues and income before federal income taxes is summarized as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands)
Revenues
Insurance:
Self Employed Agency.......................... $155,571 $132,895 $304,772 $255,111
Student Insurance............................. 27,765 23,432 53,619 45,497
OKC Division.................................. 24,074 21,789 46,509 43,852
Special Risk.................................. 17,998 3,846 35,529 5,694
National Motor Club........................... 7,792 -- 14,845 --
-------- -------- -------- --------
233,200 181,962 455,274 350,154
Financial Services:
Credit Services............................... 23,476 12,539 41,375 22,680
Educational Finance Group..................... 12,780 -- 20,261 --
Insurdata..................................... 10,538 7,228 20,406 10,889
Other Business Units.......................... 21,419 19,465 40,249 30,819
-------- -------- -------- --------
68,213 39,232 122,291 64,388
Other Key Factors............................. 7,076 6,716 15,475 13,621
-------- -------- -------- --------
308,489 227,910 593,040 428,613
Inter Segment Eliminations.................... (6,087) (3,728) (12,827) (3,728)
-------- -------- -------- --------
Total Revenues ...................................... $302,402 $224,182 $580,213 $424,435
======== ======== ======== ========
9
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands)
Income (loss) before federal income taxes Insurance:
Self Employed Agency ............................. $ 243 $13,831 $(6,049) $28,171
Student Insurance ................................ 2,237 4,251 4,629 7,996
OKC Division ..................................... 4,766 4,343 9,108 9,583
Special Risk ..................................... 2,042 518 3,216 726
National Motor Club .............................. 1,714 -- 2,728 --
------- ------- ------- -------
11,002 22,943 13,632 46,476
Financial Services:
Credit Services .................................. 8,342 5,175 13,747 9,696
Educational Finance Group ........................ (2,544) -- (2,382) --
Insurdata ........................................ 905 792 1,876 1,067
Other Business Units ............................. 799 (338) 2,298 (1,685)
------- ------- ------- -------
7,502 5,629 15,539 9,078
Other Key Factors ................................... 4,172 4,247 9,088 8,864
------- ------- ------- -------
$22,676 $32,819 $38,259 $64,418
======= ======= ======= =======
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1998 COMPARED TO 1997
SELF EMPLOYED AGENCY DIVISION ("SEA"). The SEA Division reported income of
$243,000 for the three month period in 1998 compared to $13.8 million for the
three month period in 1997, and a loss of $6.0 million for the six month period
in 1998 compared to income of $28.2 million in 1997.
The lower earnings of SEA for the three month period in 1998 are primarily
the result of the continuing losses from a specific PPO insurance product, which
is a managed care product, for which marketing of new policies was discontinued
in the first quarter of 1998. The operating losses for the managed care products
were a continuation of the problems recognized in the fourth quarter of 1997 and
first quarter of 1998, while the traditional indemnity products continued to
produce acceptable profits. The losses are due to higher loss ratios on those
managed care products and a slower than anticipated implementation of rate
increases on the managed care products. The Company is continuing to encourage
current inforce policyholders to raise their deductibles and co-payment amounts
and implement approved rate increases. The Company is also working with CMA and
UGA to increase the percentage of the traditional indemnity business sold versus
managed care products. The results of these actions will be reflected in the
reported financial results during the remainder of 1998, as each succeeding
quarter should experience improving results due to the implementation of these
actions.
The PPO insurance product discussed above was discontinued in the first
quarter of 1998. A newly designed PPO product which is currently being sold does
not include the lower deductibles and co-payments which contributed to the
losses recognized on the discontinued PPO product.
The lower earnings of SEA for the six month period in 1998 are the result
of conforming the method used to compute the claim reserves on SEA's business in
the first quarter of 1998 and
10
the losses from the PPO insurance product discussed above. The claim
reserving method employed by the previous administrator of a portion of SEA's
insurance business was not comparable to the traditional reserving methods
employed by the Company for its other self employed health insurance. While both
reserving methods are acceptable for statutory and GAAP reporting, the Company's
method is the more conservative of the two methods. Conforming the two methods
resulted in an increase in the claim reserves of $12.0 million in the first
quarter of 1998.
Revenue for the SEA Division increased to $155.6 million for the three
month period in 1998 from $132.9 million in 1997, an increase of 17%, and
increased to $304.8 for the six month period in 1998 from $255.1 for 1997, an
increase of 20%. The increase in revenues is primarily the result of the
continued increase in the direct business sold by CMA and UGA.
STUDENT INSURANCE. Operating income for the Student Insurance Division
decreased to $2.2 million for the three month period in 1998 from $4.3 million
in 1997 and decreased to $4.6 million for the six month period in 1998 from $8.0
million in 1997. The reduced earnings reflect lower margins resulting from
increased loss ratios. The increased loss ratio is due to more competition in
the university health insurance market which has resulted in price competition.
Revenue for Student Insurance increased to $27.8 million for the three month
period in 1998 from $23.4 million in 1997, an increase of 19% and increased to
$53.6 million for the six month period in 1998 from $45.5 million in 1997, an
increase of 18%. The increase is due primarily to the acquisition of a block of
business with annual premium of $12 million.
OKC DIVISION. Operating income for the OKC Division increased to $4.8
million for the three month period in 1998 from $4.3 million in 1997, an
increase of 12% and decreased to $9.1 million for the six month period in 1998
from $9.6 million in 1997, a 5% decrease. The decrease for the six month period
is due to higher than normal earnings in the first quarter of 1997. Revenues for
the OKC Division increased to $24.1 million for the three month period in 1998
from $21.8 million in 1997, an increase of 11%, and increased to $46.5 million
for the six month period in 1998 from $43.9 million in 1997, an increase of 6%.
SPECIAL RISK DIVISION. Operating income for the Special Risk Division
increased to $2.0 million for the three month period in 1998 from $518,000 in
1997, and increased to $3.2 million for the six month period in 1998 from
$726,000 in 1997. The Special Risk Division was formed during the second quarter
of 1997. Revenues for the Special Risk Division were $18.0 million for the three
month period and $35.5 million for the six month period in 1998.
NATIONAL MOTOR CLUB ("NMC"). Operating income for NMC was $1.7 million for
the three month period in 1998 and $2.7 million for the six month period in 1998
on revenues of $7.8 million and $14.8 million, respectively. NMC was acquired by
the Company in the third quarter of 1997.
CREDIT SERVICES. Operating income for the Credit Services increased to $8.3
million for the three month period in 1998 from $5.1 million in 1997, an
increase of 63%, and increased to $13.7 million for the six month period in 1998
from $9.7 million in 1997, an increase of 41%. The increase is primarily due to
the continued growth in new sales which increases revenue and operating income
and the income from a new credit card program originated in 1997 which is now
contributing to the bottom line. Revenues for Credit Services increased to $23.4
million for the three month period in 1998 from $12.5 million in 1997 and
increased to $41.3 million for the six month period in 1998 from $22.7 million
in 1997.
EDUCATIONAL FINANCE GROUP ("EFG"). EFG had an operating loss of $2.5
million for the three month period in 1998. The loss was due to several factors.
First, there were increased marketing expenses in the direct marketing of
student loans, certain seasonal student health insurance and student loans
marketing expenses, and expenses incurred enabling EFG to fund loans directly
rather than through third parties while trying to anticipate the changes in the
federally guaranteed loan program. Second, the loan servicing division has
incurred certain
11
transitional costs. Third, student loans have not been moved to the warehouse
facility as quickly as anticipated which has reduced net interest income. EFG
was acquired during the second quarter of 1997. On March 31, 1998, EFG completed
a $300.0 million revolving line of credit of which $280.7 million was used to
acquire existing loans. The acquisition of these loans is the primary reason for
the increase in the total assets of the Company since December 31, 1997. The
credit facility is guaranteed by UICI and is secured by student loans originated
under the Federal Family Education Loan Program ("FFELP") which are guaranteed
by the federal government or alternative loans guaranteed by private guarantors.
The line of credit allows EFG to earn the spread between the interest rate
earned on the loans and the cost of the revolving line of credit on all loans
financed through this credit facility.
INSURDATA. Operating income was comparable for the three month period in 1998
compared to 1997. Operating income for the six month period in 1998 increased to
$1.9 million from $1.1 million in 1997. The increase for the six month period is
due to the providing of outsourcing data processing services for the health
insurance operations of UICI. Revenues for Insurdata were $10.5 million in the
three month period in 1998 compared to $7.2 million in 1997 and $20.4 million
for the six month period in 1998 compared to $10.9 million in 1997. The increase
in revenues is due to $10.2 million of revenue for providing the outsourcing of
data processing services for the health insurance operations of UICI in the six
month period in 1998. Insurdata did not start providing the outsourcing services
for UICI until the second quarter of 1997.
OTHER KEY FACTORS. Other Key Factors include investment income not allocated to
the other segments, interest and general expenses relating to corporate
operations, amortization of goodwill and realized gains or losses on sale of
investments. Operating income for the Other Key Factors was comparable for the
three and six month periods in 1998 compared to 1997. The amount of realized
gains or losses on the sale of investments is a function of interest rates,
market trends and the timing of sales. In addition, the net unrealized
investment gains on securities classified as "available for sale," reported as a
separate component of stockholders' equity and net of applicable income taxes
and minority interests was $16.0 million at June 30, 1998 compared to $14.3
million at December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's invested assets increased to $1,455.6 million at June 30, 1998
compared to $1,133.8 million at December 31, 1997. The primary sources for the
asset growth were the acquisition of student loans by EFG and cash provided by
current year operations. The sources were partially offset by withdrawals, net
of deposits, from investment products.
On June 1, 1998, as required by the agreement, the Company made its first
repayment of $4.0 million on its 8.75% Senior Notes.
On March 31, 1998 EFG completed a $300.0 million revolving line of credit of
which $280.7 million was used to acquire existing loans. UICI has guaranteed the
revolving
12
line of credit. The Company recorded interest expense of $4.4 million related to
this credit facility for the three month period in 1998.
ITEM 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K
(1.) A current report on Form 8-K dated May 4, 1998 announcing
earnings for the first quarter of 1998 would be less than
expected and would not meet analyst expectations.
13
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.
UICI
----
(Registrant)
Date: August 14, 1998 /s/Ronald L. Jensen
-------------------
Ronald L. Jensen, Chairman of
the Board, President and Director
Date: August 14, 1998 /s/Warren B. Idsal
------------------
Warren B. Idsal, Vice President
(Chief Financial Officer)
14