Ceres Group Reports First Quarter 2005 Results and Announces Stock Repurchase Program.CLEVELAND Cleveland, former county, England Cleveland, former county, NE England, created under the Local Government Act of 1972 (effective 1974). It was composed of the county boroughs of Hartlepool and Teeside and parts of the former counties of Durham and -- Ceres Group, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CERG CERG Competitive Earmarked Research Grant CERG Commander Emergency Recovery Group ) For the quarter: --Net income of $4.8 million ($0.14 per share) --Senior Segment pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta income of $3.3 million --Medical Segment pre-tax income of $3.1 million Ceres Group, Inc. (NASDAQ:CERG) today reported net income of $4.8 million ($0.14 per share) for the first quarter of 2005. Net income includes $0.2 million ($0.01 per share) from net realized investment gains; $0.8 million ($0.02 per share) from net unrealized investment losses related to securities classified as trading with respect to investments in convertible securities; and a $1.0 million ($0.03 per share) federal income tax benefit related to the reduction of federal income tax reserves associated with the elimination of the company's untaxed Adj. 1. untaxed - (of goods or funds) not taxed; "tax-exempt bonds"; "an untaxed expense account" tax-exempt, tax-free nontaxable, exempt - (of goods or funds) not subject to taxation; "the funds of nonprofit organizations are nontaxable"; "income exempt policyholder Policyholder An individual who owns an insurance policy. surplus account exposure. This compares to net income of $6.2 million ($0.18 per share) for the first quarter of 2004, including $0.1 million from net realized investment gains and a $1.9 million ($0.05 per share) benefit related to a decrease in the valuation allowance for deferred taxes. Ceres also announced that its board of directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of up to $10 million of its outstanding common stock. The company expects to purchase the shares from time to time in the open market or in private transactions. The program is effective immediately and may be discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time. As of March 31, 2005, Ceres had approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 34.6 million shares of common stock outstanding. "The approval of this repurchase program reflects our ongoing confidence in Ceres' future," said Tom Kilian, president and chief executive officer of Ceres. "It is consistent with our goal of maximizing max·i·mize tr.v. max·i·mized, max·i·miz·ing, max·i·miz·es 1. To increase or make as great as possible: shareholder value and prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. managing our capital, which includes maintaining appropriate capital levels to support future growth and current financial strength ratings. We also believe that at current prices our stock is a compelling value and represents an attractive investment for the company." Segment Results Ceres reports its financial results in two primary business segments: Senior and Medical. Senior Segment (Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. supplement, long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. , dental dental /den·tal/ (den´t'l) pertaining to a tooth or teeth. den·tal adj. 1. Of, relating to, or for the teeth. 2. Of, relating to, or intended for dentistry. , life insurance, and annuities) Pre-tax income for the quarter was $3.3 million, including $0.2 million from net realized investment gains and $1.0 million from net unrealized investment losses related to trading securities. This compares to pre-tax income of $2.5 million in the first quarter of 2004. Benefits, claims, losses and settlement expenses in the Senior Segment were $38.5 million, compared to $33.8 million in the first quarter of 2004. The Senior Segment benefit and claims loss ratio was 76.9%, compared to 77.4% in the first quarter of 2004. The improvement in the Senior Segment loss ratio in the first quarter of 2005 was due primarily to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. long-term care experience, partially offset by an expected increase in the Medicare supplement loss ratio from 69.1% in the first quarter of 2004 to 71.9% in the first quarter of 2005. The Medicare supplement loss ratio is expected to be approximately 70% for the full year 2005 compared to 71.9% for 2004. "We are pleased that premiums in our Senior Segment increased 15% compared with the first quarter of last year," Kilian said. "Obviously, the rate increases we filed for in 2004 and implemented this quarter, as well as the new premium we wrote in 2004 had a positive impact. New senior sales were not as strong in the first quarter as we would have liked. This was caused by the entry of some new competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. into the market and by the impact of the rate increases we implemented. We expect to respond to this sales challenge by adding senior products to our Provident prov·i·dent adj. 1. Providing for future needs or events. 2. Frugal; economical. [Middle English, from Latin pr American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Life and Health Insurance Company subsidiary this year and recruiting distribution to sell through this additional senior platform. We are also rolling out new senior life products and expect them to impact sales in the second half of the year." Medical Segment (catastrophic and comprehensive medical plans) Pre-tax income for the quarter was $3.1 million, including $0.1 million from net realized investment gains and $0.2 million from net unrealized investment losses related to trading securities. This compares to pre-tax income of $4.6 million in the first quarter of 2004. Benefits, claims, losses and settlement expenses in the Medical Segment were $38.9 million, compared to $42.8 million in the first quarter of 2004. The Medical Segment benefit and claims loss ratio was 68.8%, compared to 65.6% in the first quarter of 2004. The loss ratio was impacted by increased severity of large claims, unfavorable experience on our partially self-funded small group (Partnership) plan and a strengthening of claim reserves. The loss ratio in the Medical Segment is expected to be higher in the balance of 2005 consistent with historical quarterly seasonality patterns. In addition, results for the quarter were impacted by a higher-than-anticipated decline in deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) in the Medical Segment, due to higher lapse rates lapse rate n. The rate of decrease of atmospheric temperature with increase in altitude. lapse rate The rate of change of any meteorological phenomenon, especially atmospheric temperature with altitude. on both new and renewal business. The decline in DAC was $1.4 million, or nearly double the anticipated amount. The rate of decline is expected to moderate in subsequent quarters. "New sales in the Medical Segment increased compared with both the first and fourth quarters of 2004," Kilian said. "However, the premium decline in our Medical Segment was higher than we anticipated due to increased lapse rates on new and renewal business. We expect this decline to moderate throughout the balance of the year. In the second quarter, we plan to launch a new portfolio of higher margin major medical products designed to meet a variety of lifestyles and budgets." Outlook "We are continuing with our aggressive plan to manage both of our business segments for profitability, remaining committed to our goal of steady long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth," Kilian said. "To achieve this goal, we are focusing on new products, improving sales and strengthening relationships with our agents. Providing excellent service also remains a top priority." "For 2005, in our Senior Segment, we plan to continue to refine our rating process for both profitability and competitiveness," Kilian added. "We expect to achieve improved profits in the Medical Segment in 2005 through expense reductions and continued attention to improving our long-term profit margins." The company expects to achieve net income in a range of $0.50 to $0.53 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share for 2005, based on continued growth in the company's Senior Segment, and stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders of the revenue decline and improved claims trends in the company's Medical Segment. In the company's outlook for 2005, projected net income per share excludes the impact of net realized investment gains or losses. A conference call with management regarding first quarter 2005 results is scheduled for 10:00 a.m. (Eastern) on Thursday Thursday: see week. , May 5, 2005. To listen to the live conference call over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , go to www.ceresgp.com or http://phx.corporate-ir.net/playerlink.zhtml?c=71415&s=wm&e=1055944 . To listen to the webcast, please log onto this site at least 15 minutes prior to the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available after the call. FINANCIAL TABLES TO FOLLOW
CERES GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------
2005 2004
--------- ---------
REVENUES
Premiums, net
Medical $ 56,566 $ 65,227
Senior and other 50,070 43,602
-------- --------
Total premiums, net 106,636 108,829
Net investment income 6,083 6,263
Net realized/unrealized (losses) gains (840) 108
Fee and other income 4,588 5,217
-------- --------
116,467 120,417
-------- --------
BENEFITS, LOSSES AND EXPENSES
Benefits, claims, losses and settlement expenses
Medical 38,920 42,814
Senior and other 38,486 33,750
-------- --------
Total benefits, claims, losses and
settlement expenses 77,406 76,564
Selling, general and administrative expenses 32,512 33,611
Net amortization and change in acquisition costs
and value of business acquired 441 3,474
Interest expense and financing costs 175 172
-------- --------
110,534 113,821
-------- --------
Income before federal income taxes 5,933 6,596
Federal income tax expense 1,084 422
-------- --------
Net income $ 4,849 $ 6,174
======== ========
Net income per share
Basic $ 0.14 $ 0.18
Diluted 0.14 0.18
Weighted average shares outstanding
Basic 34,536 34,394
Diluted 34,671 35,038
CERES GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, December 31,
2005 2004
----------- ------------
(Unaudited)
ASSETS
Investments $479,656 $494,951
Cash and cash equivalents 38,614 22,635
Reinsurance receivable 131,657 130,345
Deferred acquisition costs 67,813 67,074
Value of business acquired 10,884 10,952
Goodwill and licenses 14,097 14,097
Other assets 23,527 25,939
-------- --------
Total assets $766,248 $765,993
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities and benefits accrued $494,776 $489,829
Deferred reinsurance gain 6,093 6,562
Other policyholders' funds 18,516 19,016
Debt 10,125 10,750
Other liabilities 31,212 35,018
-------- --------
Total liabilities 560,722 561,175
Stockholders' equity 205,526 204,818
-------- --------
Total liabilities and stockholders' equity $766,248 $765,993
======== ========
Equity per common share:
After accumulated other comprehensive
income (1) $ 5.95 $ 5.93
Before accumulated other comprehensive
income (1) 5.86 5.72
Book value per share excluding goodwill and
licenses 5.54 5.52
---------------
(1) Accumulated other comprehensive income relates primarily to the
net unrealized gain (loss) on available-for-sale securities.
CERES GROUP, INC. and SUBSIDIARIES
INDUSTRY SEGMENT DATA
Unaudited
(in thousands)
Three Months Ended
March 31,
-----------------
2005 2004
-------- --------
Medical
Revenues
Net premiums $56,566 $65,227
Net investment income 971 1,246
Net realized/unrealized (losses) gains (81) 34
Fee and other income 3,961 4,725
------- -------
61,417 71,232
------- -------
Expenses
Benefits and claims 38,920 42,814
Other operating expenses 19,415 23,851
------- -------
58,335 66,665
------- -------
Segment profit before federal income taxes $ 3,082 $ 4,567
======= =======
Senior and Other
Revenues
Net premiums $50,070 $43,602
Net investment income 5,112 5,017
Net realized/unrealized (losses) gains (874) (36)
Fee and other income 627 492
------- -------
54,935 49,075
------- -------
Expenses
Benefits and claims 38,486 33,750
Other operating expenses 13,167 12,796
------- -------
51,653 46,546
------- -------
Segment profit before federal income taxes $ 3,282 $ 2,529
======= =======
Corporate and Other
Revenues
Net investment income $ - $ -
Net realized gains 115 110
------- -------
115 110
------- -------
Expenses
Interest expense and financing costs 175 172
Other operating expenses 371 438
------- -------
546 610
------- -------
Segment loss before federal income taxes $ (431) $ (500)
======= =======
Income before federal income taxes $ 5,933 $ 6,596
======= =======
Medical loss ratio 68.8% 65.6%
Senior loss ratio 76.9% 77.4%
Overall loss ratio 72.6% 70.4%
About Ceres Group Ceres Group, Inc., through its insurance subsidiaries, provides a wide array of health and life insurance products through two primary business segments. Ceres' Medical Segment includes major medical health insurance for individuals, families, associations and small businesses. The Senior Segment includes senior health, life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. products for Americans age 55 and over. To help control medical costs, Ceres also provides medical cost management services to its insureds. Ceres' nationwide distribution channels include independent agents and electronic distribution systems. Ceres is included in the Russell Russell, English noble family. It first appeared prominently in the reign of Henry VIII when John Russell, 1st earl of Bedford, 1486?–1555, rose to military and diplomatic importance. 3000(R) Index. For more information, visit www.ceresgp.com. This news release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. with respect to the financial condition, results of operations and business of the company. Forward-looking statements are statements other than historical information or statements of current condition. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements herein should not be regarded as representation by the company or any other person that the objectives or plans of the company will be achieved. Many factors could cause actual results to differ materially from those contemplated by such forward-looking statements, including, among others, failure to accurately predict claims liabilities, ability to develop, market and administer To give an oath, as to administer the oath of office to the president at the inauguration. To direct the transactions of business or government. Immigration laws are administered largely by the Immigration and Naturalization Service. new and competitive products, the failure to successfully implement the business plans (including the company's growth strategy) for the company and its subsidiaries, business conditions and competition in the healthcare industry, developments in healthcare reform and other regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. issues (including failure to meet statutory capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. ), rising healthcare costs, adverse outcomes in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and related matters, performance of our reinsurers, and failure to comply with financial and other covenants in our loan agreements. This review of important factors should not be construed as exhaustive. Investors and others should refer to Ceres' filings with the Securities and Exchange Commission, including its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2004, and its quarterly reports on Form 10-Q Form 10-Q See 10-Q. and other periodic filings, for a description of the foregoing and other factors. Ceres undertakes no obligation to update forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion