SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 28, 2002
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UICI
(Exact name of registrant as specified in its charter)
Delaware 001-14953 75-2044750
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(State or other jurisdiction of incorporation (Commission File (IRS Employer
or organization) Number) Identification No.)
4001 McEwen Drive, Suite 200, Dallas, Texas 75244
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 392-6700
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Not Applicable
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(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS
In the wake of announced accounting irregularities at WorldCom
Inc., on June 28, 2002 UICI disclosed that its insurance company
subsidiaries hold an aggregate of $7.525 million principal amount of
WorldCom Inc. bonds (with a carrying value on the Company's books of
$7.3 million), of which $4.0 million principal amount matures in 2005
and $3.525 million principal amount matures in 2031. In accordance with
Financial Accounting Standards Board Statement No. 115, the Company is
currently in the process of evaluating the magnitude of the
other-than-temporary decline in fair value of the WorldCom bonds. The
amount of such decline will be reflected as a realized loss and charged
to income in the quarter ending June 30, 2002.
The Company confirmed that, effective June 15, 2002, UICI and
Healthaxis, Inc. terminated an Information Technology Services
Agreement, pursuant to which Healthaxis provided information systems
and software development services (including administration of the
Company's computer data center) to the Company and its insurance
company affiliates at Healthaxis's cost of such services (including
direct costs of Healthaxis's personnel dedicated to providing services
to the Company plus a portion of Healthaxis's overhead costs) plus a
10% mark-up. The Services Agreement was otherwise scheduled to expire
by its terms in January 2005. As part of the termination arrangement,
UICI made a one-time payment to Healthaxis in the amount of $6.5
million and tendered 500,000 shares of Healthaxis common stock to
Healthaxis. Substantially all of the Healthaxis technical personnel
formerly supporting UICI under the Services Agreement transferred to
UICI on June 17, 2002. Following the transaction, UICI continues to
hold approximately 45% of the issued and outstanding shares of
Healthaxis.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements in this report are "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results to 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. Recently, large
physician practice management companies have experienced extreme financial
difficulties, including bankruptcy, which may subject the Company to increased
credit risk related to provider groups and cause the Company to incur
duplicative claims expense. In addition, the Company faces competitive 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 Academic Management Services Corp. business could be adversely
affected by changes in the Higher Education Act or other relevant federal or
state laws, rules and regulations and the programs implemented thereunder may
adversely impact the education credit market. 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.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 99.1 Press release distributed on June 28, 2002 disclosing holdings
of WorldCom Inc. bonds and confirming termination, effective
June 15, 2002, of an Information Technology Services Agreement
with Healthaxis, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UICI
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(Registrant)
Date June 28, 2002 By /s/ Mark D. Hauptman
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Mark D. Hauptman
Vice President and Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99.1 Press release distributed on June 28, 2002 disclosing holdings
of WorldCom Inc. bonds and confirming termination, effective
June 15, 2002, of an Information Technology Services Agreement
with Healthaxis, Inc.