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United Wisconsin Services, Inc. Announces 2nd Quarter Earnings of $0.37 Per Share

MILWAUKEE, July 23 /PRNewswire/ -- United Wisconsin Services, Inc. (NYSE: UWZ) today announced that net income for the second quarter ended June 30, 1998 increased 11.7 percent to $6.2 million, or $0.37 per share, excluding one-time spinoff transaction expenses.

As previously announced, the company expects to separate its HMO and Specialty Products business from its American Medical Security (AMS) small group products business in the third quarter. The spinoff involves the creation of a new corporation consisting of the HMO and Specialty Products business and distribution of the shares of that new corporation to UWZ shareholders. United Wisconsin Services has received a private letter ruling from the Internal Revenue Service that the distribution will be tax-free to UWZ shareholders.

Upon completion of the spinoff, AMS will operate under the name American Medical Security Group, Inc. and trade on the New York Stock Exchange under the ticker symbol "AMZ"; the HMO and Specialty Products business will operate under the name United Wisconsin Services, Inc. and trade on the New York Stock Exchange under the ticker symbol "UWZ." Accordingly, for the second quarter, the AMS business is being reported as continuing operations and the HMO and Specialty Products business is being reported as discontinued operations. Discontinued results include transaction expenses of $4.9 million.

American Medical Security Small Group Products

American Medical Security, which markets small group insurance products nationally, posted lower operating results and enrollment for the second quarter of 1998 compared with the same quarter in 1997. Health services revenue totaled $231.6 million for the second quarter, a 6.6 percent decrease from the $247.9 million in the second quarter of 1997.

Enrollment in the fully insured AMS medical business in the second quarter of 1998 increased slightly from the first quarter. Overall, medical enrollment decreased to 577,500, principally reflecting a decrease in self-funded business.

Sam Miller, Chairman, President and Chief Executive Officer of AMS, said AMS' plan for improving sales in the fully insured business line is meeting with success. "Since our low point in August 1997, our enrollment of new members has almost doubled," Miller said. "We are pleased that new members in our core business have surpassed terminations in the second quarter. With that turn, AMS is now experiencing incremental growth in our fully insured line."

The overall medical loss ratio for AMS products in the second quarter of 1998 was 78.8 percent, compared to 78.0 percent for the same period in 1997. As previously announced, the loss ratio was adversely affected by the runout of unprofitable individual dental business which was discontinued June 1 and the delay in regulatory approval of rate increases in the state of Florida.

The combined operating expense ratio for AMS medical products continued to decline to 21.4 percent for the second quarter of 1998, compared to 22.5 percent in the same period in 1997.

According to Miller, AMS continues to take action to improve its financial performance and enhance shareholder value. "We've made considerable progress improving our operating efficiencies, and having new, fully insured sales exceed cancellations for the first time since our turnaround plan was implemented," Miller said. "We will continue our efforts on these fronts while we pursue additional growth through acquisition."

HMO & Specialty Managed Care Products And Services

Health services revenue for HMO and Specialty Managed Care Products and Services increased 8.9 percent to $157.8 million in the second quarter of 1998, compared to $144.9 million in the same period in 1997.

Thomas R. Hefty, Chairman, President and Chief Executive Officer of United Wisconsin Services, Inc., said, "We are pleased with the solid growth and balanced performance of our HMO and Specialty Products units. Following completion of the spinoff, we anticipate gaining significant marketing leverage through the power of the Blue Cross & Blue Shield brand in Wisconsin and with Blue Cross plans in other states."

HMO products revenue increased 7.6 percent to $128.1 million in the second quarter of 1998, compared to $119.0 million in the same period in 1997. HMO enrollment at the end of the second period totaled 297,900, a 3.5 percent increase over the second quarter of 1997. The second quarter 1998 HMO loss ratio decreased to 88.3 percent from 90.7 percent in the second quarter of 1997.

Revenue in the Specialty Managed Care business was $33.7 million in the second quarter of 1998, compared to $29.8 million for the second quarter of 1997, a 13.1 percent increase. The Specialty Risk segment revenue, including workers' compensation, life, disability and dental insurance products, grew to $23.5 million in the second quarter of 1998, from $19.9 million in the same period of 1997. Revenue in the Specialty Services segment, including behavioral health, electronic claims, audit/subrogation, and managed care services, totaled $10.2 million for the second quarter of 1998, compared to $9.9 million in the second quarter of 1997.

Corporate Profiles

AMERICAN MEDICAL SECURITY markets health care benefits and other insurance products to small businesses, families and individuals. AMS serves customers in 34 states through partnerships with professional, independent agents and high-quality health care providers. AMS provides coverage to 1.2 million lives. AMS' Internet address is http://www.amschoices.com

UNITED WISCONSIN SERVICES, INC. is a leading managed care company with the largest health maintenance organization membership in Wisconsin, and substantial operations in specialty managed care products and services, including a large dental HMO, as well as life, workers' compensation, managed behavioral health services, and health care information services. United Wisconsin Services' Internet address is http://www.uwz.com

The total number of lives served by United Wisconsin Services operations as of June 30, 1998 include:

AMS Small Group Products
 Medical 577,520
 Dental 411,364
 Life 228,832
 Other 25,539
 HMO Products 297,908


Specialty Managed Care Products
 Behavioral Health 913,479
 Dental HMO 168,044
 Life 154,033
 Disability 99,457
 Workers' Compensation 53,509


Cautionary Statement: This news release contains forward-looking statements with respect to the financial condition, results of operations and business of United Wisconsin Services, Inc. and the proposed spinoff. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results of events to differ materially from those contemplated by such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include rising health care costs, business conditions and competition in the managed care industry, developments in health care reform, inability to market products as described and other regulatory issues.

UNITED WISCONSIN SERVICES, INC. (UWZ)
 1998 1997


Quarter ending June 30:
 Health Services Revenues $231,631,000 $247,915,000
 Net Income Continuing Operations 392,000 1,471,000
 Net Income Discontinued Operations (a) 5,822,000 4,092,000
 Net Income 6,214,000 5,563,000


Share earnings (diluted):
 Net Income Continuing Operations 0.02 0.09
 Net Income (a) 0.37 0.33


Six months ending June 30:
 Health Services Revenues $471,390,000 $508,293,000
 Net Income Continuing Operations 1,943,000 640,000
 Net Income Discontinued Operations (a) 10,662,000 8,293,000
 Net Income 12,605,000 8,933,000


Share earnings (diluted):
 Net Income Continuing Operations 0.12 0.04
 Net Income (a) 0.75 0.54


(a) Excludes transaction costs of $4.9 million associated with the spin
 off of the HMO and Specialty business operations.
 UNITED WISCONSIN SERVICES, INC.
 CONSOLIDATED STATEMENTS OF INCOME
 (UNAUDITED)
 Three months ended Six months ended
 June 30, June 30,
 1998 1997 1998 1997
 (in thousands, except share and per share data)


Revenues:

Health services revenues:
 Premium revenue $226,956 $240,722 $461,915 $493,915
 Other revenue 4,675 7,193 9,475 14,378
 Investment results 5,723 5,461 11,804 10,538
 Total Revenues 237,354 253,376 483,194 518,831


Expenses:
 Medical and other benefits 174,325 183,279 353,610 378,062


Selling, general and
 administrative expenses 57,693 62,964 116,735 130,311
 Interest expense (a) 2,336 2,409 4,707 4,627


Amortization of goodwill
 and other intangibles 2,195 2,023 4,435 4,024
 Total Expenses 236,549 250,675 479,487 517,024


Income From Continuing

Operations, Before
 Income Taxes 805 2,701 3,707 1,807
 Income Tax Expense 413 1,230 1,764 1,167


Income From Continuing
 Operations (AMS) 392 1,471 1,943 640


Income From Discontinued Operations:

Income from HMO and Specialty
 Operations, Net of Tax 5,822 4,092 10,662 8,293


Transaction Costs Associated
 with Spin Off 4,948 0 4,948 0
 Net Income $1,266 $5,563 $7,657 $8,933


Basic Earnings Per Common Share:
 Income from AMS Operations $0.03 $0.09 $0.12 $0.04


Income from HMO and
 Specialty Operations 0.35 0.25 0.64 0.51


Income before Transaction
 Costs 0.38 0.34 0.76 0.55


Transaction Costs Associated
 with Spin Off 0.30 0.00 0.30 0.00
 Net Income Per Common Share $0.08 $0.34 $0.46 $0.55


Basic Weighted average common
 shares outstanding 16,546,176 16,422,332 16,531,108 16,380,208


Diluted Earnings Per Common Share:
 Income from AMS Operations $0.02 $0.09 $0.12 $0.04


Income from HMO and
 Specialty Operations 0.35 0.25 0.64 0.50


Income before Transaction
 Costs 0.37 0.33 0.75 0.54


Transaction Costs Associated
 with Spin Off 0.29 0.00 0.29 0.00


Diluted Net Income Per
 Common Share $0.08 $0.33 $0.46 $0.54


Diluted weighted average common
 shares outstanding 16,722,101 16,629,854 16,704,779 16,519,735
 Note (a): Interest expense in AMS operations includes amounts related to a note which will be transferred to the HMO and Specialty Product business effective with the distribution. The interest expense on this note approximates $1.2 million per quarter, or $0.05 per share.


SOURCE United Wisconsin Services, Inc.
 -0- 7/23/98


/CONTACT: Tom Lu1jak, Director, Corporate Communications of United Wisconsin Services, 414-226-5756/

/Company News On-Call: http://www.prnewswire.com or fax, 800-758-5804, ext. 914096/

(UWZ)

CO: United Wisconsin Services, Inc.; American Medical Security Group, Inc. ST: Wisconsin IN: INS HEA SU: ERN

KG-JW -- MNTH023 -- 4799 07/23/98 14:23 EDT http://www.prnewswire.com
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