EXHIBIT 99.1
Contact: Mark Hauptman
Vice President and CFO
UICI
NEWS RELEASE 9151 Grapevine Highway
North Richland Hills, Texas 76180
Phone: (817) 255-5200
(For Immediate Release)
UICI ANNOUNCES SIGNING OF DEFINITIVE AGREEMENT TO SELL ITS ACADEMIC MANAGEMENT
SERVICES CORP. UNIT TO SLM CORPORATION
COMPANY ANTICIPATES REPORTING THIRD QUARTER AND FIRST NINE MONTHS OPERATING LOSS
AT ITS GROUP INSURANCE SEGMENT
NORTH RICHLAND HILLS, TX, October 30, 2003----UICI (the "Company" NYSE: UCI)
today announced that it had signed a definitive agreement to sell its Academic
Management Services Corp. unit to SLM Corporation (NYSE: SLM), commonly known as
Sallie Mae(R), the nation's leading provider of education funding. Separately,
UICI announced that it anticipates reporting an operating loss at its Group
Insurance business segment in the three and nine months ended September 30,
2003.
Sale of Academic Management Services Corp.
On October 29, 2003, UICI executed a definitive agreement with SLM
Corporation ("Sallie Mae"), pursuant to which UICI will sell for cash its entire
equity interest in Academic Management Services Corp., its wholly owned
subsidiary based in Swansea, MA that markets, originates, funds and services
primarily federally guaranteed student loans and provides student tuition
installment payment plans. As part of the transaction, Sallie Mae has agreed to
assume responsibility for liquidating and terminating the remaining special
purpose financing facilities through which AMS previously securitized student
loans.
The Company has estimated that the sale of AMS to Sallie Mae, when
completed, will generate net cash proceeds to UICI of approximately $25.3
million. At closing, UICI will also receive uninsured student loan assets
currently held by AMS' special purpose financing subsidiaries with a face amount
of approximately $44.7 million (including accrued interest). The fair value of
the uninsured loans is expected to be significantly less than the face amount of
the loans.
Closing of the transaction is anticipated to occur in November and is
subject to satisfaction of several closing conditions, including expiration or
earlier termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. While the Company believes that it will be
able to satisfy all conditions to closing, there can be no assurance that the
conditions to closing will be satisfied or that the transaction contemplated by
the definitive agreement will in fact be completed.
Reflecting the fair market value of AMS implied by the proposed
transaction with Sallie Mae, UICI expects to record in the three and nine months
ended September 30, 2003 an estimated pre-tax loss (inclusive of AMS' operating
results in the periods) in the amount of $77.5 million and $75.3 million,
respectively. The Company will classify AMS as a discontinued operation for
financial reporting purposes at the end of the third quarter and reflect the
estimated loss in discontinued operations. Upon closing of the Sallie Mae
transaction, the Company does not expect to record any additional gain or loss
from the transaction. During the fourth quarter, the Company will continue to
record the results of operations of AMS until sold, which results will be
reflected in discontinued operations.
Anticipated Operating Loss at Group Insurance Segment
UICI also announced that, due to unfavorable claims experience at its
Group Insurance business segment (consisting of the Company's Student Insurance
and Star HRG business units), it will increase loss reserves and record a charge
in the third quarter in the amount of $13.1 million ($8.5 million net of tax, or
($0.18) per diluted share). Reflecting this increase in loss reserves, the
Company's Group Insurance business segment expects to report an operating loss
in the three and nine months ended September 30, 2003 in the amount of
approximately $12.1 million ($7.8 million net of tax, or $(0.16) per diluted
share) and $4.0 million ($2.6 million net of tax, or $(0.05) per diluted
share), respectively.
Substantially all of the operating losses at the Group Insurance
segment are attributable to results at the Company's Student Insurance Division,
which offers tailored health insurance programs that generally provide single
school year coverage to individual students at colleges and universities.
Results at the Company's Student Insurance Division also reflect a significant
amount of seasonal marketing and administrative costs incurred in the third
quarter related to policies written covering the full 2003 - 2004 school year.
For the full 2003 year, the Company currently anticipates that its Group
Insurance business segment will report an operating loss in the amount of
approximately $4.0 million ($2.6 million net of tax, or $(0.05) per diluted
share). Because Student Insurance policies are issued on a school year basis and
the 2003-2004 school year has just begun, the Student Insurance Division will be
limited in its ability to reprice its overall book of business until August
2004. As a result, the Company currently anticipates that results at Student
Insurance for calendar year 2004 will be at or near breakeven.
The Company currently anticipates reporting full consolidated results
of operations for the three and nine months ended September 30, 2003 on or about
November 5, 2003.
CORPORATE PROFILE:
UICI (headquartered in North Richland Hills, 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. 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 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 ability to resolve all of the collateral and
reporting issues associated with AMS' securitized student loan financings,
including compliance with waivers obtained from third parties with respect to
such student loan financings; AMS' ability to prevent similar future
occurrences; AMS' ability to meet future student loan funding obligations; the
Company's ability to maintain adequate liquidity to satisfy its obligations;
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 endorse
the products and 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 field service representatives
on behalf of the associations, in which capacity the agents act as enrollers of
new members for the associations and provide field support services, for which
the agents receive compensation. Specialized Association Services, Inc. (a
company controlled by the adult children of 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 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 that
have endorsed the insurance companies' 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.