SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No. 1-14177
UWSI/BCBSUW 401(k) PLAN
(Full title of the plan)
UNITED WISCONSIN SERVICES, INC.
401 West Michigan Street
Milwaukee, WI 53203
(Name of the issuer of the securities held pursuant to the
plan and the address of its principal executive office)
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
UWSI/BCBSUW 401(k) Plan
Years ended December 31, 1999 and 1998
UWSI/BCBSUW 401(k) Plan
Financial Statements
and Supplemental Schedules
Years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors...........................................................................1
Financial Statements
Statements of Assets Available for Benefits..............................................................2
Statements of Changes in Assets Available for Benefits...................................................3
Notes to Financial Statements............................................................................4
Supplemental Schedules
Line 27(a) - Schedule of Assets Held for Investment Purposes.............................................9
Line 27(d) - Schedule of Reportable Transactions........................................................10
Report of Independent Auditors
Employee Benefits Committee
UWSI/BCBSUW 401(k) Plan
We have audited the accompanying statements of assets available for benefits
of UWSI/BCBSUW 401(k) Plan (the Plan) as of December 31, 1999 and 1998, and
the related statements of changes in assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1999, and reportable
transactions for the year then ended, are presented for the purpose of
additional analysis and are not a required part of the financial statements
but are supplementary information required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
Ernst & Young LLP
Milwaukee, Wisconsin
April 28, 2000
1
UWSI/BCBSUW 401(k) Plan
Statements of Assets Available for Benefits
DECEMBER 31
1999 1998
---------------------------------
ASSETS
Investments, at fair value (NOTE 3) $64,420,214 $52,897,051
Receivables -
Interest and dividends 23,907 23,282
---------------------------------
Assets available for benefits $64,444,121 $52,920,333
=================================
SEE ACCOMPANYING NOTES.
2
UWSI/BCBSUW 401(k) Plan
Statements of Changes in Assets Available for Benefits
YEAR ENDED DECEMBER 31
1999 1998
-----------------------------------
Additions:
Net investment income $ 1,673,410 $ 2,134,721
Net realized and unrealized appreciation in fair value of
investments (NOTE 3) 3,854,528 4,289,410
-----------------------------------
5,527,938 6,424,131
Contributions:
Participants 4,749,202 3,641,388
Employers 1,440,233 1,139,251
-----------------------------------
6,189,435 4,780,639
-----------------------------------
Total additions 11,717,373 11,204,770
Deductions:
Cash transfers and rollovers (to Plan) from Plan (4,363,690) (589,928)
Benefits, withdrawals and taxes 4,557,275 4,098,721
-----------------------------------
Total deductions 193,585 3,508,793
Net increase 11,523,788 7,695,977
Assets available for benefits at beginning of year 52,920,333 45,224,356
-----------------------------------
Assets available for benefits at end of year $64,444,121 $52,920,333
===================================
SEE ACCOMPANYING NOTES.
3
UWSI/BCBSUW 401(k) Plan
Notes to Financial Statements
Years ended December 31, 1999 and 1998
1. DESCRIPTION OF THE PLAN AND EMPLOYER SECURITIES
The UWSI/BCBSUW 401(k) Plan (the Plan) is a defined contribution plan which
covers eligible salaried and hourly employees not subject to collective
bargaining agreements of Blue Cross & Blue Shield United of Wisconsin
(BCBSUW), United Wisconsin Services, Inc. (UWSI), and any of their
subsidiaries to which participation has been extended (Employers).
Effective July 30, 1999, the Plan was amended to extend participation rights
under the Plan to employees of CNR Health, Inc., a wholly owned subsidiary of
UWSI. Immediately prior to this change, CNR Health, Inc. employees had been
eligible to participate in the CNR Health, Inc. Retirement Savings Plan (the
CNR Plan), a qualified defined contribution retirement plan. All participant
account balances in the CNR Plan, totaling $2,159,000, were transferred to the
Plan on the effective date and the CNR Plan was then terminated. The
transferred amount is included in the 1999 Statement of Changes in Assets
Available for Benefits as a cash transfer into the Plan.
The Plan allows participants to direct their contributions into one or a
combination of several investment options offered by the Plan. Participants
can make qualifying contributions of 2% to 20% of their eligible compensation,
which the Employers match on a 50% basis (generally excluding contributions in
excess of 5%). Employers' matching contributions are generally required to be
invested in United Wisconsin Services, Inc. common stock through the UWSI
Common Stock Fund.
Earnings of the Plan are allocated daily to individual participant accounts,
as defined in the Plan.
The participants' contributions and earnings thereon are 100% vested at all
times. Participants' contributions may be withdrawn, subject to certain
limitations, prior to termination of participation in the Plan. Earnings
thereon may be withdrawn only upon termination of employment. Employers'
contributions and earnings thereon generally become vested based on years of
service and may be withdrawn only upon termination of employment.
There is no minimum age requirement. Forfeited Employers' contributions are
used to offset subsequent Employer contributions. Effective July 1, 1999,
eligible employees may elect to participate in the Plan upon employment with
the Employer.
4
UWSI/BCBSUW 401(k) Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN AND EMPLOYER SECURITIES (CONTINUED)
Although they have not expressed any intent to do so, the Employers have the
right under the Plan to discontinue their contributions at any time and to
terminate the Plan subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). In the event of Plan termination, participants'
Employers' contribution accounts will become 100% vested.
A description of the Plan is summarized in the SUMMARY PLAN DESCRIPTION, which
can be obtained from the Plan Administrator.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis of accounting.
INVESTMENT VALUATION
Assets of the Plan are held by American Express Trust Company under a trust
agreement, under which the assets of the Plan are segregated and invested
separately. Investments are valued at fair value based on quoted market
prices, except for participant loans, which are valued at their current
outstanding balances, which approximate fair value.
CONTRIBUTIONS
Contributions from participants are recorded in the period the Employers make
corresponding payroll deductions. Contributions from the Employers are
recorded based upon amounts required to be contributed as determined by the
Plan.
ADMINISTRATIVE EXPENSES
With the exception of fees on personal loans, all administrative expenses in
1999 and 1998 were paid by the Employers. Forfeited Employers' contributions
are used to offset subsequent Employer contributions.
5
UWSI/BCBSUW 401(k) Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying
notes. Such estimates and assumptions could change in the future as more
information becomes known, which could impact the amounts reported and
disclosed herein.
RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
3. INVESTMENTS
Investments that represent 5% or more of the Plan's assets at either December
31, 1999 or 1998, are as follows:
1999 1998
------------------------------------
United Wisconsin Services, Inc. Common Stock* $ 2,401,506 $ 2,565,089
IDS Mutual Fund (Y) - 8,249,470
IDS New Dimensions Fund (Y) 6,025,084 3,430,059
PIMCO Total Return Fund 4,579,227 4,601,983
American Express Trust Income Fund II 7,363,182 5,586,069
American Express Trust Equity Index Fund II 24,485,328 19,542,595
AIM Constellation Fund 4,914,007 2,981,834
American Medical Security Group, Inc. Common Stock 1,271,541 3,508,587
Invesco Total Return Fund 7,889,995 -
Janus Overseas Fund 3,599,767 -
*Primarily nonparticipant-directed (see Note 4)
6
UWSI/BCBSUW 401(k) Plan
Notes to Financial Statements (continued)
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of changes in
net assets related to the nonparticipant-directed investments are as follows:
DECEMBER 31
1999 1998
------------------------------------
Investments, at fair value -
United Wisconsin Services, Inc. Pooled Stock Fund
Participant directed $ 514,315 $ 638,325
Nonparticipant directed 1,887,283 1,920,151
------------------------------------
$2,401,598 $2,558,476
====================================
YEAR ENDED DECEMBER 31 1999
-------------------------------------------------------
Participant- Nonparticipant
-
Directed Directed Total
-------------------------------------------------------
Change in net assets:
Contributions $ 218,268 $ 1,440,233 $ 1,658,501
Dividends 5,607 20,511 26,118
Net realized and unrealized appreciation
(depreciation) in fair value (321,047) (1,381,006) (1,702,053)
Distributions to participants (26,838) (112,606) (139,444)
-------------------------------------------------------
$ (124,010) $ (32,868) $ (156,878)
=======================================================
The United Wisconsin Services, Inc. Pooled stock fund includes the employer's
matching contributions and employee directed contributions, which are limited
to 30% of the employee's allowable contribution.
7
UWSI/BCBSUW 401(k) Plan
Notes to Financial Statements (continued)
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated May 1, 1995, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (IRC) and, therefore, the
related trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the IRC to maintain its qualification. The Plan
Administrator believes the Plan is being operated in compliance with the
applicable requirements of the IRC and, therefore, believes that the Plan is
qualified and the related trust is tax exempt.
8
Supplemental Schedules
UWSI/BCBSUW 401(k) Plan
Employer Identification Number 39-0138065
Plan Number 336
Line 27(a) - Schedule of Assets Held for Investment Purposes
December 31, 1999
DESCRIPTION OF INVESTMENT,
INCLUDING MATURITY DATE,
RATE OF INTEREST,
IDENTITY OF ISSUE, BORROWER, COLLATERAL, UNITS, PAR OR CURRENT
LESSOR OR SIMILAR PARTY MATURITY VALUE COST VALUE
- ------------------------------------------------------------------------------------------------------------------------
American Express Trust Income Fund II* 377,367 $ 7,363,182
American Express Trust Small Cap Equity
Index Fund* 11,354 164,349
American Express Trust Equity Index Fund II* 613,375 24,485,328
PIMCO Total Return Fund 462,548 4,579,227
Invesco Total Return Fund 272,445 7,889,995
AIM Constellation Fund 121,304 4,914,007
AXP New Dimensions Fund (Y) 166,251 6,025,084
Janus Overseas Fund 96,768 3,599,767
United Wisconsin Services, Inc. Common
Stock * 724,655 $5,284,719 2,401,506
American Medical Security Group, Inc. Common Stock* 266,962 1,271,541
Participant loans* Interest rates are 1% over
the prime rate at the
time of loan
application; maturity
dates vary with
terms of 5 years or less 1,726,228
-------------------
$64,420,214
===================
*Party in interest
9
UWSI/BCBSUW 401(k) Plan
Employer Identification Number 39-0138065
Plan Number 336
Line 27(d) - Schedule of Reportable Transactions
Year ended December 31, 1999
CURRENT
VALUE OF
ASSET ON NET
PURCHASE SELLING COST OF TRANSACTION GAIN
DESCRIPTION OF ASSETS PRICE PRICE ASSET DATE (LOSS)
- --------------------------------------------------------------------------------------------------------------
There were no category (i), (ii), (iii) or (iv) transactions during 1999 with
nonparticipant-directed funds.
Lease Rental and "Expense Incurred with Transaction" are not applicable.
10
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-67917) pertaining to the UWSI/BCBSUW 401(k) Plan of our
report dated April 28, 2000, with respect to the financial statements and
schedules of the UWSI/BCBSUW 401(k) Plan included in this Annual Report (Form
11-K) for the year ended December 31, 1999.
Ernst & Young LLP
Milwaukee, Wisconsin
June 28, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned member of the Blue Cross & Blue Shield United of Wisconsin
Employee Benefits Committee has duly caused this annual report to be signed as
of the date set forth below.
UWSI/BCBSUW 401(k) PLAN
June 28, 2000 By: /s/ Gail L. Hanson
-------------------------------------
Gail L. Hanson, a member of the
Blue Cross & Blue Shield United of
Wisconsin Employee Benefits Committee