Ceres Group Reports First Quarter 2006 Results.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 $5.5 million ($0.17 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 $5.7 million --Medical Segment pre-tax income of $3.2 million Ceres Group, Inc. (NASDAQ:CERG) today reported net income of $5.5 million ($0.17 per share) for the first quarter of 2006, including $0.1 million from net realized investment gains. This compares to net income of $4.8 million ($0.14 per share) for the first quarter of 2005, including $0.5 million ($0.02 per share) from net realized investment losses, and a $1.0 million ($0.03 per share) 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. "We are pleased with our strong first quarter results," said Tom Kilian, president and chief executive officer of Ceres. "Both of our segments had increased profits and overall new sales rose." In addition, as announced on Monday Monday: see week. , Ceres has entered into a definitive merger agreement with Great 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 Financial Resources, Inc. (GAFRI GAFRI Great American Financial Resources, Inc. ) (NYSE NYSE See: New York Stock Exchange :GFR GFR - Grim File Reaper ), whereby GAFRI will acquire all of the outstanding shares of common stock of Ceres through a cash merger. Under the terms of the merger agreement, GAFRI will pay $6.13 in cash for each outstanding share of Ceres common stock, for a total equity price of approximately $205 million on a fully 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. basis. "We believe that Ceres and GAFRI are an excellent strategic fit," Kilian added. "This merger will produce a much larger senior market presence and strengthened combined competitive position. We are committed to working with GAFRI on a smooth transition." 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, life insurance, and annuities) Pre-tax income for the quarter was $5.7 million. This compares to pre-tax income of $3.3 million in the first quarter of 2005, including $0.9 million from net realized investment losses. Benefits, claims, losses and settlement expenses in the Senior Segment were $41.4 million, compared to $38.5 million in the first quarter of 2005. The Senior Segment benefit and claims loss ratio was 74.8%, compared to 76.9% in the first quarter of 2005. The improvement in the Senior Segment loss ratio in the first quarter of 2006 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 increase in the Medicare supplement loss ratio from 71.9% in the first quarter of 2005 to 74.0% in the first quarter of 2006. The Medicare supplement loss ratio is still expected to be approximately 72% for the full year 2006. Based on current new sales trends and slightly higher-than-expected 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 the company's Medicare supplement business related to the 2006 rate increases, Senior Segment premiums are now expected to increase approximately 11% in 2006. "While new sales in our Senior Segment were not as strong as we had anticipated, we are pleased with the progress being made in our new career division, Ceres Senior Benefits, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (CSB CSB Kashubian (SIL code, Poland) CSB Chemical Safety and Hazard Investigation Board CSB Chemical Safety Board (Washington, DC) CSB Community Services Board CSB Computational Systems Bioinformatics )," Kilian said. "At the end of the first quarter, we had contracted 25 regional sales managers sales manager n → gerente m/f de ventas sales manager n → directeur commercial sales manager sale n → and 334 agents at CSB, and our 2006 sales results have been promising." Medical Segment (catastrophic and comprehensive medical plans) Pre-tax income for the quarter was $3.2 million. This compares to pre-tax income of $3.1 million in the first quarter of 2005, including $0.1 million from net realized investment losses. Benefits, claims, losses and settlement expenses in the Medical Segment were $40.1 million, compared to $38.9 million in the first quarter of 2005. The Medical Segment benefit and claims loss ratio was 71.8%, compared to 68.8% in the first quarter of 2005. The first quarter 2006 loss ratio was primarily impacted by a strengthening of claim reserves and an increase in January January: see month. in-patient in·pa·tient or in-pa·tient n. A patient who is admitted to a hospital or clinic for treatment that requires at least one overnight stay. hospital stays. Due to seasonality, the Medical Segment loss ratio is expected to increase through the balance of the year. Due to continued increased new sales, Medical Segment premiums are expected to increase approximately 5% in 2006. "Sales in our Medical Segment rose significantly compared to the same quarter last year, which resulted in improved expense coverage for this segment in 2006," Kilian said. "Currently, we are rolling out the new rates and additional benefit level options on our brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. Advantage Series, as well as offering these products through special marketing relationships. We are pleased with the popularity of these plans. They offer extensive options for customers and agents and are expected to produce attractive profit margins." Outlook "We will continue to execute our core strategy of growth in our Senior Segment and stability and targeted growth in our Medical Segment," Kilian said. "In addition, we will work with the GAFRI transition team to implement the merger transaction we announced on Monday." As previously announced, the company expects to achieve net income in a range of $0.50 per diluted share for 2006, 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 2006, projected net income per share excludes the impact of net realized investment gains or losses. A conference call with management regarding first quarter 2006 results and the contemplated merger is scheduled for 10:00 a.m. (Eastern) on Thursday Thursday: see week. , May 4, 2006. To listen to the live 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=1306704. 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,
-------------------
2006 2005
--------- ---------
REVENUES
Premiums, net
Medical $ 55,827 $ 56,566
Senior and other 55,367 50,070
-------- --------
Total premiums, net 111,194 106,636
Net investment income 6,974 6,083
Net realized gains (losses) 109 (840)
Fee and other income 4,627 4,588
-------- --------
122,904 116,467
-------- --------
BENEFITS, LOSSES AND EXPENSES
Benefits, claims, losses and settlement expenses
Medical 40,058 38,920
Senior and other 41,419 38,486
-------- --------
Total benefits, claims, losses and
settlement expenses 81,477 77,406
Selling, general and administrative expenses 35,323 32,512
Net (deferral) amortization and change in
acquisition costs and value of business acquired (2,593) 441
Interest expense and financing costs 159 175
-------- --------
114,366 110,534
-------- --------
Income before federal income taxes 8,538 5,933
Federal income tax expense 2,996 1,084
-------- --------
Net income $ 5,542 $ 4,849
======== ========
Net income per share
Basic $ 0.17 $ 0.14
Diluted 0.17 0.14
Weighted average shares outstanding
Basic 33,239 34,536
Diluted 33,375 34,671
CERES GROUP, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Investments $ 491,217 $ 488,906
Cash and cash equivalents 25,267 26,764
Reinsurance receivable 127,476 131,227
Deferred acquisition costs 77,803 73,955
Value of business acquired 10,752 11,126
Goodwill and licenses 14,097 14,097
Other assets 23,149 24,928
----------- -----------
Total assets $ 769,761 $ 771,003
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities and benefits accrued $ 506,788 $ 508,023
Deferred reinsurance gain 5,147 5,451
Other policyholders' funds 15,856 14,970
Debt 6,250 7,313
Other liabilities 30,570 31,873
----------- -----------
Total liabilities 564,611 567,630
Stockholders' equity 205,150 203,373
----------- -----------
Total liabilities and stockholders'
equity $ 769,761 $ 771,003
=========== ===========
Equity per common share:
After accumulated other comprehensive
income (1) $ 6.17 $ 6.12
Before accumulated other comprehensive
income (1) 6.28 6.12
Book value per share excluding goodwill and
licenses 5.74 5.70
-------------
(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,
---------------------
2006 2005
---------- ----------
Medical
Revenues
Net premiums $ 55,827 $ 56,566
Net investment income 878 971
Net realized gains (losses) 3 (81)
Fee and other income 4,075 3,961
--------- ---------
60,783 61,417
--------- ---------
Expenses
Benefits and claims 40,058 38,920
Other operating expenses 17,500 19,415
--------- ---------
57,558 58,335
--------- ---------
Segment profit before federal income taxes $ 3,225 $ 3,082
========= =========
Senior and Other
Revenues
Net premiums $ 55,367 $ 50,070
Net investment income 6,025 5,112
Net realized losses (9) (874)
Fee and other income 552 627
--------- ---------
61,935 54,935
--------- ---------
Expenses
Benefits and claims 41,419 38,486
Other operating expenses 14,797 13,167
--------- ---------
56,216 51,653
--------- ---------
Segment profit before federal income taxes $ 5,719 $ 3,282
========= =========
Corporate and Other
Revenues
Net investment income $ 71 $ -
Net realized gains 115 115
--------- ---------
186 115
--------- ---------
Expenses
Interest expense and financing costs 159 175
Other operating expenses 433 371
--------- ---------
592 546
--------- ---------
Segment loss before federal income taxes $ (406) $ (431)
========= =========
Income before federal income taxes $ 8,538 $ 5,933
========= =========
Medical loss ratio 71.8% 68.8%
Senior loss ratio 74.8% 76.9%
Overall loss ratio 73.3% 72.6%
In connection with Ceres' solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of proxies with respect to the meeting of stockholders to be called with respect to the proposed merger, Ceres will file with the Securities and Exchange Commission, and will furnish fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to stockholders of Ceres, a proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. . Stockholders are advised to read the proxy statement when it is finalized See finalization. and distributed to stockholders because it will contain important information. Stockholders will be able to obtain a free-of-charge copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's website at www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Stockholders will also be able to obtain a free-of-charge copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to Ceres Group, Inc., 17800 Royalton Royalton may refer to:
Ceres and certain of its directors, executive officers and other members of management and employees may, under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from stockholders of Ceres in favor of upon the side of; favorable to; for the advantage of. See also: favor the proposed merger. Information regarding the persons who may be considered "participants" in the solicitation of proxies will be set forth in Ceres' proxy statement when it is filed with the SEC. Information regarding certain of these persons and their beneficial ownership of Ceres' common stock as of March 27, 2006 is also set forth in the Schedule 14A filed by Ceres on April 3, 2006 with the SEC. 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 and career agents, as well as 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. It also contains certain forward-looking statements with respect to the effect of the proposed merger. 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. Although the company believes that the expectations are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Many factors could cause actual results to differ materially from those contemplated by such forward-looking statements, including, among others, failure to obtain stockholder approval or the failure to satisfy other closing conditions, including regulatory approval, with respect to the merger, expectations of the company's operating plans and strategies in general, our expectations of the performance of our lines of business, failure to accurately predict loss ratios, persistency and improvements in our business, business conditions and competition in the healthcare industry, the failure to successfully implement our 2006 business plan (including the company's growth strategy) for the company and its subsidiaries, failure to accurately predict claims liabilities, ability to institute necessary rate increases, ability to develop, market and administer new, profitable and competitive products, developments in healthcare reform and other regulatory 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, failure to comply with financial and other covenants in our loan agreement, and performance of our reinsurers. 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, 2005, 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. |
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