EXHIBIT 99.1
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Contact: Mr. Mark Hauptman
Vice President and Chief Financial Officer
9151 Grapevine Highway
4th Floor
North Richland Hills, TX 76180
Phone: 817-255-3331
NEWS RELEASE
(For Immediate Release)
UICI ANNOUNCES CLOSEDOWN OF SENIOR MARKET DIVISION
DALLAS, TX, May 30, 2003----UICI (the "Company" NYSE: UCI) today reported that
its Board of Directors, at a meeting held on May 29, 2003, adopted a plan to
close by sale or wind down its Senior Market Division, which it established in
2001 to develop long-term care and Medicare supplement insurance products for
the senior market. The Senior Market Division generated operating losses of $7.5
million and $2.1 million in 2002 and 2001, respectively, and the Company
anticipates that the Division will continue to generate operating losses in
2003.
The MEGA Life and Health Insurance Company and Mid-West National Life
Insurance Company of Tennessee (the Company's wholly owned subsidiaries and
issuers of all of the Company's long term care and Medicare supplement policies)
will continue to honor their commitments under and administer all insurance
contracts issued to date.
As a result of the adoption of the plan to close the Senior Market
Division, the Company's Senior Market Division currently anticipates recording
in the quarter ending June 30, 2003 a pre-tax loss in the amount of
approximately $12.0 million ($(0.16) per share net of tax), consisting of a
write off of impaired assets, operating losses to be incurred at the Senior
Market Division through the close-down date and costs to be incurred through
June 30 associated with the wind down and closing of the operations. The Company
currently anticipates incurring additional exit costs in an immaterial amount,
substantially all of which costs will be expensed as incurred in future periods
in accordance with Financial Accounting Standards Board Statement No. 146,
Accounting for Costs Associated with Exit or Disposal Activities.
The Company's decision with respect to its Senior Market Division
follows its earlier announcement that the Company has decided to concentrate its
time, effort and resources in the three niche health insurance markets in which
it plays a significant leadership role. Through six separate operating
divisions, the Company is the largest marketer and underwriter to the self
employed health market niche; is the largest marketer and underwriter of student
health insurance; and is the largest marketer and underwriter of limited benefit
insurance plans for entry level, high turnover, hourly employees. UICI will
continue to review all current activities that are not directly serving these
three niche markets.
CORPORATE PROFILE:
UICI (headquartered in North Richland Hills (Fort Worth), Texas) through its
subsidiaries offers insurance (primarily health and life) and selected financial
services to niche consumer and institutional markets. Through its Self Employed
Agency Division, UICI provides to the self-employed market health insurance and
related insurance products, which are distributed primarily through the
Company's dedicated agency field forces, UGA-Association Field Services and
Cornerstone America. Through its Group Insurance Division, UICI provides
tailored health insurance programs for students enrolled in universities,
colleges and kindergarten through grade twelve and markets, administers and
underwrites limited benefit insurance plans for entry level, high turnover,
hourly employees. Through its Life Insurance Division, UICI offers life
insurance products to selected markets, and the Company's Senior Market Division
provides long-term care insurance and Medicare supplement insurance products to
the senior age market. The Company's Academic Management Services Corp. unit
(headquartered in Swansea, Massachusetts) seeks to provide financing solutions
for college and graduate school students, their parents and the educational
institutions they attend by marketing, originating, funding and servicing
primarily federally guaranteed student loans and by providing student tuition
installment payment plans. In 2002, UICI was added to the Standard & Poor's
Small Cap 600 Index. For more information, visit www.uici.net.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements set forth in this press release 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; and reliance on key management and adequacy of claim liabilities.
The Company's future results will depend in large part on accurately
predicting health care costs incurred on existing business and upon the
Company's ability to control future health care costs through product and
benefit design, underwriting criteria, utilization management and negotiation of
favorable provider contracts. Changes in mandated benefits, utilization rates,
demographic characteristics, health care practices, provider consolidation,
inflation, new pharmaceuticals/technologies, clusters of high-cost cases, the
regulatory environment and numerous other factors are beyond the control of any
health plan provider and may adversely affect the Company's ability to predict
and control health care costs and claims, as well as the Company's financial
condition, results of operations or cash flows. Periodic renegotiations of
hospital and other provider contracts coupled with continued consolidation of
physician, hospital and other provider groups may result in increased health
care costs and limit the Company's ability to negotiate favorable rates. In
addition, the Company faces competitive and regulatory pressure to contain
premium prices. Fiscal concerns regarding the continued viability of
government-sponsored programs such as Medicare and Medicaid may cause decreasing
reimbursement rates for these programs. Any limitation on the Company's ability
to increase or maintain its premium levels, design products, implement
underwriting criteria or negotiate competitive provider contracts may adversely
affect the Company's financial condition or results of operations.
The Company's insurance subsidiaries are subject to extensive
regulation in their states of domicile and the other states in which they do
business under statutes that typically delegate broad
regulatory, supervisory and administrative powers to state insurance departments
and agencies. State insurance departments have also periodically conducted and
continue to conduct financial and market conduct examinations and other
inquiries of UICI's insurance subsidiaries. State insurance regulatory agencies
have authority to levy monetary fines and penalties resulting from findings made
during the course of such examinations and inquiries. Historically, the
Company's insurance subsidiaries have from time to time been subject to such
regulatory fines and penalties. While none of such fines or penalties
individually or in the aggregate have to date had a material adverse effect on
the results of operations or financial condition of the Company, the Company
could be adversely affected by increases in regulatory fines or penalties an/or
changes in the scope, nature and/or intensity of regulatory scrutiny and review.
The Company provides health insurance products to consumers in the
self-employed market in 44 states. A substantial portion of such products is
issued to members of various independent membership associations that act as the
master policyholder for such products. The two principal membership associations
in the self-employed market for which the Company underwrites insurance are the
National Association for the Self-Employed ("NASE") and the Alliance for
Affordable Services ("AAS"). The associations provide their membership with a
number of endorsed benefits and products, including health insurance
underwritten by the Company. Subject to applicable state law, individuals
generally may not obtain insurance under an association's master policy unless
they are also members of the associations. UGA agents and Cornerstone agents
also act as enrollers of new members for the associations, for which the agents
receive compensation. Specialized Association Services, Inc. (a company
controlled by the adult children of Ronald L. Jensen. the Chairman of the
Company) provides administrative and benefit procurement services to the
associations, and a subsidiary of the Company sells new membership sales leads
to the enrollers and video and print services to the associations and to
Specialized Association Services, Inc. In addition to health insurance premiums
derived from the sale of health insurance, the Company receives fee income from
the associations, including fees associated with the enrollment of new members,
fees for association membership marketing and administrative services and fees
for certain association member benefits. The agreements with these associations
requiring the associations to continue as the master policyholder and to endorse
the Company's insurance products to their respective members are terminable by
the Company and the associations upon not less than one year's advance notice to
the other party.
Recent articles in the popular press have been critical of association
group coverage. In December 2002, the National Association of Insurance
Commissioners (NAIC) convened a special task force to review association group
coverage, and the Company is aware that selected states are reviewing the laws
and regulations under which association group policies are issued. The Company
has also recently been named a party to several lawsuits challenging the nature
of the relationship between the Company's insurance companies and the
associations with which the Company has entered into joint marketing
arrangements with respect to its health insurance products. While the Company
believes it is providing association group coverage in full compliance with
applicable law, changes in the relationship between the Company and the
membership associations and/or changes in the laws and regulations governing
so-called "association group" insurance (particularly changes that would subject
the issuance of policies to prior premium rate approval and/or require the
issuance of policies on a "guaranteed issue" basis) could have a material
adverse impact on the financial condition, results of operations and/or business
of the Company.
The Company's Academic Management Services Corp. business could be
adversely affected by changes in the Federal Higher Education Act of 1965, which
authorizes and governs most federal student aid and student loan programs,
and/or changes in other relevant federal or state laws, rules and regulations.
The Higher Education Act is subject to review and reauthorization by the
recently convened 108th Congress. Congress last reauthorized the Higher
Education Act in 1998. While the Company believes that the Higher Education Act
of 1965 will in fact be reauthorized, there can be no assurance of
the form that reauthorization will take or the changes that the reauthorization
bill will bring to the law and regulations governing student finance.
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.
UICI press releases and other company information are available at UICI's
website located at www.uici.net.