EXHIBIT 99
[AMERICAN MEDICAL SECURITY GROUP, INC. LOGO.]
P.O. Box 19032
Green Bay, WI 54307-9032
FOR MORE INFORMATION CONTACT:
Cliff Bowers
Vice President
Corporate Communications
(920) 661-2766
- -------------------------------
NEWS RELEASE
for Immediate Release
- -------------------------------
AMERICAN MEDICAL SECURITY GROUP
REPORTS FIRST QUARTER 2004 FINANCIAL RESULTS
o 1Q 2004 EARNINGS OF $0.75 PER DILUTED SHARE,
INCLUDING PBM SETTLEMENT
o ADJUSTED 1Q EARNINGS PER DILUTED SHARE OF $0.52 MEETS GUIDANCE
o 2004 ANNUAL EPS GUIDANCE REAFFIRMED
o MEDONE NEW-MEMBER ENROLLMENT CONTINUES TO STRENGTHEN
GREEN BAY, Wis. - May 4, 2004 - American Medical Security Group, Inc.
(NYSE: AMZ) (AMS), today reported GAAP net income for the first quarter of 2004
of $11.0 million or $0.75 per diluted share, including a gain of $3.4 million or
$0.23 per diluted share (net of tax) received from a settlement of a dispute
with the company's former pharmacy benefits manager (PBM).
Adjusted net income(1) in the quarter was $7.6 million or $0.52 per
diluted share. That compares to adjusted net income of $6.4 million or $0.47 per
diluted share for the first quarter of 2003 and net income of $7.3 million or
$0.50 per diluted share for the fourth quarter of 2003. Adjusted net income
excludes realized investment gains, loss from discontinued operations in 2003
and the impact of the PBM settlement recognized during the first quarter of
2004.
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Ad One
The following table reconciles GAAP net income and GAAP net income per
diluted share to adjusted net income and adjusted net income per diluted share:
For the three months
ended March 31,
2004 2003
--------------------------
INCOME (millions)
GAAP Net Income $ 11.0 $ 6.5
Less: Loss from Discontinued Operations - (0.1)
- --------------------------------------------------------------------------------
Income From Continuing Operations 11.0 6.6
Less: Realized Investment Gains - 0.2
Less: PBM Settlement 3.4 -
- --------------------------------------------------------------------------------
Adjusted Net Income (1) $ 7.6 $ 6.4
================================================================================
INCOME PER DILUTED SHARE
GAAP Net income Per Diluted Share $ 0.75 $ 0.48
Less: Loss from Discontinued Operations - (0.01)
- --------------------------------------------------------------------------------
Income From Continuing Operations 0.75 0.49
Less: Realized Investment Gains - 0.02
Less: PBM Settlement 0.23 -
- --------------------------------------------------------------------------------
Adjusted Net Income Per Diluted Share (1) $ 0.52 $ 0.47
================================================================================
"We remain pleased with our strong and consistent bottom-line
performance," said Samuel V. Miller, AMS Chairman, President and Chief Executive
Officer. "Looking ahead, we believe our top-line and membership results will
benefit in subsequent quarters of 2004 from investments and upgrades we've made
in our field sales force, as well as the continued introduction of new
products."
AMS is aggressively marketing its health savings account (HSA)
products, as well as other high-deductible, consumer-directed products for
individuals. The company also expects to launch HSA products for small groups
later in 2004.
REVENUES
Total revenues for the first quarter of 2004 were $185.6 million,
essentially flat with the $185.5 million reported for the fourth quarter of
2003. Revenues for the first quarter of 2003 were $186.9 million.
MEMBERSHIP
Total health membership at the end of the first quarter was 536,215.
That compares to 546,766 at the end of the fourth quarter of 2003 and 552,303 at
the end of first quarter of 2003.
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Ad Two
"A drop in dental and self-funded membership accounted for about
two-thirds of the company's overall membership decline in the first quarter,"
said John R. Lombardi, Executive Vice President and Chief Financial Officer. "In
addition, our small group market remains soft due in part to job attrition among
existing small group customers.
"While we aren't satisfied with our overall membership results for the
quarter, we're pleased that new-member enrollment for our MedOne individual
business has now improved over several quarters. That has led to MedOne in-force
membership growth for two consecutive quarters."
HEALTH SEGMENT RATIOS
The first quarter 2004 health segment combined ratio (loss ratio plus
expense ratio) was 92.1%, including an impact of 300 basis points from the PBM
settlement. On an adjusted basis, the first quarter health segment combined
ratio was 95.1%. That compares to 95.9% in the first quarter of 2003 and 95.3%
in the fourth quarter of 2003.
The health segment loss ratio was 64.4% in the first quarter of 2004,
including the 300-basis-point effect of the PBM settlement. The adjusted loss
ratio in the quarter was 67.4%. That compares to 68.1% in the first quarter of
2003 and 67.9% in the fourth quarter.
AMS' health segment expense ratio of 27.7% for the first quarter of
2004 is down from the 27.8% reported for the first quarter of 2003 and up
compared to 27.4% for the fourth quarter of 2003.
CASH FLOW & BALANCE SHEET
Cash flow provided by operations in the quarter was $10.4 million, an
improvement of $14.0 million from the first quarter of 2003. The improvement is
in part due to the $5.9 million PBM settlement. In the first quarter of 2003,
cash used in operations was $3.6 million.
AMS had a book value per share of $17.11 at March 31, 2004. That
compares to $14.68 at the end of the first quarter of 2003 and $16.12 at the end
of the fourth quarter of last year.
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Ad Three
OTHER MATTER
The company previously announced that it has reached an agreement to
certify and settle a class-action lawsuit in Alabama relating to the rating
methodology formerly used by the company. The company believes that current
reserves for the Alabama settlement are adequate for the expected cost of the
settlement.
EARNINGS GUIDANCE
The company anticipates earnings per diluted share will be
approximately $0.53 for the second quarter of 2004. The company also reaffirmed
its earnings guidance of between $2.13 and $2.18 per diluted share for the
full-year 2004, excluding the gain from the PBM settlement. The company's GAAP
earnings for the full year are expected to be between $2.36 and $2.41 per
diluted share, including the $0.23 per diluted share impact of the PBM
settlement discussed earlier.
# # # # #
NOTES
(1) AMS management believes that this measure of profitability provides a
meaningful presentation of the underlying earnings of the Company's
continuing operations. Adjusted financial measures exclude: (a) loss from
discontinued operations in 2003; (b) the impact of the PBM settlement net
of tax in 2004; and (c) realized investment gains from the sale of
securities net of tax.
AMS WILL HOST A CONFERENCE CALL TO DISCUSS ITS FINANCIAL RESULTS ON
WEDNESDAY MAY 5, 2004, 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 913-981-5546. FOLLOWING THE LIVE CALL, A REPLAY WILL BE
AVAILABLE UNTIL MIDNIGHT, FRIDAY, MAY 7, 2004, BY DIALING 719-457-0820 (CODE
558874). THIS PRESS RELEASE, ACCOMPANYING FINANCIAL INFORMATION 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;
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 proceedings; publicity about the company; development of and changes in
claims and litigation 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. LOGO]
FINANCIAL
SUPPLEMENT
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
INCOME DATA
==================================================================================================================================
(in thousands, except earnings per share)
---------------------------------------------------------------------------
2003 2004
---------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
---------------------------------------------------------------------------
REVENUES
Premiums $ 179,055 $ 178,776 $ 176,735 $ 177,852 $ 712,418 $ 177,722
Investment income 3,402 3,345 3,211 3,573 13,531 3,538
Realized investment gain 375 91 1,416 28 1,910 65
Fees & other 4,040 3,845 3,899 4,073 15,857 4,249
---------- ---------- ---------- ---------- ---------- ---------
Total revenues 186,872 186,057 185,261 185,526 743,716 185,574
EXPENSES
Benefits 120,598 119,315 119,218 119,366 478,497 118,505
General and administrative 29,284 29,244 26,908 27,989 113,425 28,187
Commissions and selling 24,042 24,294 24,292 24,455 97,083 24,749
Interest expense 339 324 309 283 1,255 221
Depreciation 1,777 1,664 1,673 1,660 6,774 1,591
Amortization 238 239 238 188 903 163
---------- ---------- ---------- ---------- ---------- ---------
Total expenses 176,278 175,080 172,638 173,941 697,937 173,416
---------- ---------- ---------- ---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 10,594 10,977 12,623 11,585 45,779 12,158
Income taxes 3,997 4,151 4,735 4,318 17,201 4,515
---------- ---------- ---------- ---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS 6,597 6,826 7,888 7,267 28,578 7,643
PBM settlement, net of tax - - - - - 3,356
Income (loss) from discontinued operations (134) (57) 923 - 732 -
---------- ---------- ---------- ---------- ---------- ---------
NET INCOME $ 6,463 $ 6,769 $ 8,811 $ 7,267 $ 29,310 $ 10,999
========== ========== ========== ========== ========== =========
PER SHARE DATA
Adjusted net income - diluted (1) $ 0.47 $ 0.48 $ 0.49 $ 0.50 $ 1.94 $ 0.52
Income from continuing operations - diluted $ 0.49 $ 0.49 $ 0.55 $ 0.50 $ 2.03 $ 0.52
Income (loss) from discontinued operations - diluted $ (0.01) $ - $ 0.06 $ - $ 0.05 $ -
Net income - basic $ 0.50 $ 0.51 $ 0.66 $ 0.54 $ 2.21 $ 0.81
Net income - diluted $ 0.48 $ 0.48 $ 0.61 $ 0.50 $ 2.08 $ 0.75
Weighted average common shares - basic 12,981 13,160 13,392 13,542 13,270 13,627
Weighted average common shares - diluted 13,575 14,015 14,340 14,464 14,100 14,585
MARGIN ANALYSIS
Income before income taxes 5.7% 5.9% 6.8% 6.2% 6.2% 6.6%
Net income 3.5% 3.6% 4.8% 3.9% 3.9% 5.9%
(1) - See page 8 for reconciliation of GAAP net income to adjusted net income.
2
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
FINANCIAL DATA
==================================================================================================================================
(in thousands, except membership)
-----------------------------------------------------------------------------
2003 2004
-----------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
-----------------------------------------------------------------------------
REVENUE MIX
Health premiums $ 175,924 $ 175,703 $ 173,744 $ 174,871 $ 700,242 $ 174,810
Life premiums 3,131 3,073 2,991 2,981 12,176 2,912
Investment income 3,777 3,436 4,627 3,601 15,441 3,603
Service fees 4,040 3,845 3,899 4,073 15,857 4,249
---------- ---------- ---------- ---------- ---------- ---------
Total revenues $ 186,872 $ 186,057 $ 185,261 $ 185,526 $ 743,716 $ 185,574
========== ========== ========== ========== ========== =========
MEMBERSHIP ANALYSIS
Fully insured medical 278,091 275,323 270,401 273,252 273,252 269,697
Self funded medical 42,704 42,568 43,858 46,012 46,012 44,400
Dental 231,508 228,610 226,734 227,502 227,502 222,118
---------- ---------- ---------- ---------- ---------- ---------
Total Health 552,303 546,501 540,993 546,766 546,766 536,215
Life 144,207 141,930 137,395 136,423 136,423 132,437
FINANCIAL STATISTICS
Book value per share $ 14.68 $ 15.27 $ 15.71 $ 16.12 $ 16.12 $ 17.11
Cash flow from operations $ (3,575) $ 1,978 $ 9,092 $ 12,630 $ 20,125 $ 10,422
Return on equity, annualized 14.2% 13.9% 15.3% 13.6% 14.3% 13.6%
Debt to total capital 15.0% 14.1% 13.5% 12.2% 12.2% 11.5%
Common shares outstanding, net of treasury 12,936 13,254 13,434 13,511 13,511 13,549
3
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
BALANCE SHEETS
(in thousands)
------------------------------------------------------------
2003 2004
------------------------------------------------------------
3/31 6/30 9/30 12/31 3/31
------------------------------------------------------------
ASSETS
Investments:
Fixed maturity securities available for sale, at fair value $ 283,595 $ 286,044 $ 286,324 $ 302,277 $ 313,813
Fixed maturity securities held to maturity, at amortized cost 3,175 3,168 3,483 3,377 3,170
Trading securities, at fair value 1,142 1,217 1,254 1,424 1,582
--------- --------- --------- --------- ---------
Total investments 287,912 290,429 291,061 307,078 318,565
Cash and cash equivalents 20,396 22,036 30,183 17,289 18,716
Other assets:
Property and equipment, net 34,112 35,118 34,445 37,446 37,441
Goodwill and other intangibles, net 35,468 35,229 34,283 34,095 33,932
Other assets 50,737 49,239 49,378 48,179 44,594
--------- --------- --------- --------- ---------
Total other assets 120,317 119,586 118,106 119,720 115,967
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 428,625 $ 432,051 $ 439,350 $ 444,087 $ 453,248
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Medical and other benefits payable $ 131,650 $ 131,023 $ 127,023 $ 129,809 $ 123,426
Advance premiums 17,300 16,453 16,150 15,865 16,902
Payables and accrued expenses 23,466 21,039 24,020 24,099 22,539
Notes payable 33,558 33,258 32,958 30,158 30,158
Other liabilities 32,736 27,860 28,162 26,332 28,436
---------- ---------- ---------- ---------- ----------
Total liabilities 238,710 229,633 228,313 226,263 221,461
Shareholders' equity:
Common stock 16,654 16,654 16,654 16,654 16,654
Paid-in capital 190,367 192,362 193,509 194,431 194,426
Retained earnings 9,321 16,090 24,901 32,168 43,167
Unrealized gain on investments 8,090 9,964 7,521 6,133 8,869
Treasury stock (34,517) (32,652) (31,548) (31,562) (31,329)
---------- ---------- ---------- ---------- ----------
Total shareholders' equity 189,915 202,418 211,037 217,824 231,787
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 428,625 $ 432,051 $ 439,350 $ 444,087 $ 453,248
========== ========== ========== ========== ==========
4
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
SEGMENT DATA - HEALTH
(in thousands, except financial statistics)
-----------------------------------------------------------------------------
2003 2004
-----------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
-----------------------------------------------------------------------------
OPERATING RESULTS
Revenues:
Premiums $ 175,924 $ 175,703 $ 173,744 $ 174,871 $ 700,242 $ 174,810
Investment income 1,715 1,683 1,596 1,675 6,669 1,568
Other revenue 3,965 3,772 3,828 4,008 15,573 4,193
--------- --------- --------- --------- --------- ----------
Total revenues 181,604 181,158 179,168 180,554 722,484 180,571
Expenses:
Benefits 119,783 118,637 118,518 118,708 475,646 117,904
PBM settlement (pre-tax) - - - - - (5,339)
General and administrative 29,352 29,189 27,090 28,004 113,635 28,345
Commissions and selling 23,472 23,724 23,727 23,901 94,824 24,200
--------- --------- --------- --------- --------- ----------
Total expenses 172,607 171,550 169,335 170,613 684,105 165,110
--------- --------- --------- --------- --------- ----------
Income before income taxes $ 8,997 $ 9,608 $ 9,833 $ 9,941 $ 38,379 $ 15,461
========= ========= ========= ========= ========= ==========
FINANCIAL STATISTICS
Loss ratio 68.1% 67.5% 68.2% 67.9% 67.9% 64.4%
Expense ratio:
General and administrative 14.4% 14.5% 13.4% 13.7% 14.0% 13.8%
Commissions and selling 13.3% 13.5% 13.7% 13.7% 13.5% 13.8%
--------- --------- --------- --------- --------- ----------
Total expense ratio 27.8% 28.0% 27.0% 27.4% 27.5% 27.7%
--------- --------- --------- --------- --------- ----------
Combined ratio 95.9% 95.5% 95.3% 95.3% 95.5% 92.1%
========= ========= ========= ========= ========= ==========
Premiums per member per month:
Fully insured medical $ 181 $ 184 $ 184 $ 185 $ 183 $ 186
Self funded 53 53 55 53 54 55
Dental 23 23 24 24 23 24
Short-term disability 22 22 23 23 22 23
Benefits cost per member per month:
Fully insured medical $ 125 $ 124 $ 127 $ 128 $ 126 $ 119
Self funded 27 36 40 29 33 39
Dental 15 16 15 15 15 15
Short-term disability 12 8 3 4 7 6
5
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
SEGMENT DATA - LIFE
(in thousands, except financial statistics)
-----------------------------------------------------------------------------
2003 2004
-----------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
-----------------------------------------------------------------------------
OPERATING RESULTS
Revenues:
Premiums $ 3,131 $ 3,073 $ 2,991 $ 2,981 $ 12,176 $ 2,912
Investment income 133 129 121 129 512 121
Other revenue 75 73 71 65 284 56
--------- --------- --------- --------- --------- --------
Total revenues 3,339 3,275 3,183 3,175 12,972 3,089
Expenses:
Benefits 837 679 700 658 2,874 601
General and administrative 510 487 383 415 1,795 402
Commissions and selling 589 585 582 575 2,331 564
--------- --------- --------- --------- --------- --------
Total expenses 1,936 1,751 1,665 1,648 7,000 1,567
--------- --------- --------- --------- --------- --------
Income before income taxes $ 1,403 $ 1,524 $ 1,518 $ 1,527 $ 5,972 $ 1,522
========= ========= ========= ========= ========= ========
FINANCIAL STATISTICS
Loss ratio 26.7% 22.1% 23.4% 22.1% 23.6% 20.6%
Expense ratio:
General and administrative 13.9% 13.5% 10.4% 11.7% 12.4% 11.9%
Commissions and selling 18.8% 19.0% 19.5% 19.3% 19.1% 19.4%
--------- --------- --------- --------- --------- --------
Total expense ratio 32.7% 32.5% 29.9% 31.0% 31.6% 31.3%
--------- --------- --------- --------- --------- --------
Combined ratio 59.4% 54.6% 53.3% 53.1% 55.2% 51.9%
========= ========= ========= ========= ========= ========
6
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
CORPORATE AND OTHER
(in thousands)
-----------------------------------------------------------------------------
2003 2004
-----------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
-----------------------------------------------------------------------------
OPERATING RESULTS
Revenues:
Investment income $ 1,554 $ 1,533 $ 1,494 $ 1,769 $ 6,350 $ 1,849
Realized investment gain 375 91 1,416 28 1,910 65
Total revenues 1,929 1,624 2,910 1,797 8,260 1,914
Expenses:
Benefits (22) (1) - - (23) -
General and administrative 1,199 1,232 1,108 1,230 4,769 1,031
Commissions and selling (19) (15) (17) (21) (72) (15)
Interest expense 339 324 309 283 1,255 221
Amortization of intangibles 238 239 238 188 903 163
--------- --------- --------- --------- --------- --------
Total expenses 1,735 1,779 1,638 1,680 6,832 1,400
--------- --------- --------- --------- --------- --------
Loss before income taxes $ 194 $ (155) $ 1,272 $ 117 $ 1,428 $ 514
========= ========= ========= ========= ========= ========
7
AMERICAN MEDICAL SECURITY GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
(in thousands, except earnings per share)
-----------------------------------------------------------------------------
2003 2004
-----------------------------------------------------------------------------
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr YTD 1st Qtr
-----------------------------------------------------------------------------
INCOME
GAAP Net income $ 6,463 $ 6,769 $ 8,811 $ 7,267 $ 29,310 $ 10,999
Less:
Income (loss) from discontinued operations (134) (57) 923 - 732 -
--------- --------- -------- -------- -------- --------
Income from continuing operations 6,597 6,826 7,888 7,267 28,578 10,999
Less:
PBM settlement, net of tax - - - - - 3,356
Realized investment gains, net of tax 234 57 885 18 1,192 41
--------- --------- -------- -------- -------- --------
Adjusted net income $ 6,363 $ 6,769 $ 7,003 $ 7,249 $ 27,386 $ 7,602
========= ========= ======== ======== ======== ========
INCOME PER SHARE - DILUTED
GAAP Net income per share $ 0.48 $ 0.48 $ 0.61 $ 0.50 $ 2.08 $ 0.75
Less:
Income (loss) from discontinued operations (0.01) - 0.06 - 0.05 -
--------- --------- -------- -------- -------- --------
Income from continuing operations 0.49 0.49 0.55 0.50 2.03 0.75
Less:
PBM settlement, net of tax - - - - - 0.23
Realized investment gains, net of tax 0.02 - 0.06 - 0.08 -
--------- --------- -------- -------- -------- --------
Adjusted net income per share $ 0.47 $ 0.48 $ 0.49 $ 0.50 $ 1.94 $ 0.52
========= ========= ======== ======== ======== ========
8