-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IyPnT3oeusFLt60l/aGnfTZk+Dvi3O+1uaDlthI0Wy8suvjzV0D5OKr3DtsnUgJn kus8BK32Q2zYjO6Krzm5gQ== 0000897069-02-000968.txt : 20021216 0000897069-02-000968.hdr.sgml : 20021216 20021216101018 ACCESSION NUMBER: 0000897069-02-000968 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20021216 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MEDICAL SECURITY GROUP INC CENTRAL INDEX KEY: 0000878897 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 391431799 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41965 FILM NUMBER: 02857972 BUSINESS ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 BUSINESS PHONE: 9206611111 MAIL ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 FORMER COMPANY: FORMER CONFORMED NAME: UNITED WISCONSIN SERVICES INC /WI DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COBALT CORP CENTRAL INDEX KEY: 0001062780 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 391931212 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 401 WEST MICHIGAN STREET CITY: MILWAUKEE STATE: WI ZIP: 53203-2896 BUSINESS PHONE: 4142266900 MAIL ADDRESS: STREET 1: 401 WEST MICHIGAN STREET CITY: MILWAUKEE STATE: WI ZIP: 52030-2896 FORMER COMPANY: FORMER CONFORMED NAME: UNITED WISCONSIN SERVICES INC DATE OF NAME CHANGE: 19981112 SC 13D/A 1 irm20.txt SCHEDULE 13D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 7) American Medical Security Group, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, no par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 027 44P 101 - -------------------------------------------------------------------------------- (CUSIP Number) Stephen E. Bablitch Chairman and Chief Executive Officer Cobalt Corporation 401 West Michigan Street Milwaukee, Wisconsin 53203 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) November 22, 2002 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13(g), check the following box |_|. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.240.13d-7(b) for other parties to whom copies are to be sent. 1 SCHEDULE 13D CUSIP No. 027 44P 101 - ---------- --------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Wisconsin United for Health Foundation, Inc. Cobalt Corporation Blue Cross & Blue Shield United of Wisconsin - ---------- --------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) |X| (b) |_| - ---------- --------------------------------------------------------------------- 3 SEC USE ONLY - ---------- --------------------------------------------------------------------- 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) Not applicable - ---------- --------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - ---------- --------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Wisconsin United for Health Foundation, Inc. - Wisconsin Cobalt Corporation - Wisconsin Blue Cross & Blue Shield United of Wisconsin - Wisconsin - ------------------ --- --------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF Wisconsin United for Health Foundation, Inc. - 0 SHARES Cobalt Corporation - 0 Blue Cross & Blue Shield United of Wisconsin - 1,531,175 --- --------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY Wisconsin United for Health Foundation, Inc. - 0 Cobalt Corporation - 0 Blue Cross & Blue Shield United of Wisconsin - 0 --- --------------------------------------------------------- 9 SOLE DISPOSITIVE POWER EACH Wisconsin United for Health Foundation, Inc. - 0 REPORTING Cobalt Corporation - 0 Blue Cross & Blue Shield United of Wisconsin - 1,531,175 --- --------------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH Wisconsin United for Health Foundation, Inc. - 0 Cobalt Corporation - 0 Blue Cross & Blue Shield United of Wisconsin - 0 - ---------- --------------------------------------------------------------------- 2 - ---------- --------------------------------------------------------------------- 11 AGGREGATE AMOUNT OF BENEFICIALLY OWNED BY EACH REPORTING PERSON Wisconsin United for Health Foundation, Inc. - 1,531,175 Cobalt Corporation - 1,531,175 Blue Cross & Blue Shield United of Wisconsin - 1,531,175 - ---------- --------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) |_| - ---------- --------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.9% - ---------- --------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) Wisconsin United for Health Foundation, Inc. - CO Cobalt Corporation - CO Blue Cross & Blue Shield United of Wisconsin - CO - ---------- --------------------------------------------------------------------- ITEM 1. Security and Issuer. -------------------- This statement on Schedule 13D (this "Schedule 13D") relates to the shares of common stock, no par value per share ("Common Stock"), of American Medical Security Group, Inc., a Wisconsin corporation (the "Issuer"). The principal executive offices of the Issuer are located at 3100 AMS Boulevard, Green Bay, WI 54313. ITEM 2. Identity and Background. ------------------------ (a)-(c) This statement is being filed by (i) Wisconsin United for Health Foundation, Inc. (the "Foundation") 10 E. Doty Street, Madison, WI 53703 The Foundation is a Wisconsin social welfare organization and a Wisconsin non-stock corporation. (ii) Cobalt Corporation ("Cobalt") 401 West Michigan Street, Milwaukee, WI 53203 Cobalt is a publicly traded managed care company and a Wisconsin corporation. (iii) Blue Cross & Blue Shield United of Wisconsin ("BCBSUW") 401 West Michigan Street, Milwaukee, WI 53203 BCBSUW is an insurance company and a Wisconsin corporation. 3 (d) During the past five years, none of the reporting persons has been convicted in a criminal proceeding. (e) During the past five years, none of the reporting persons has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. Source and Amount of Funds or Other Consideration. -------------------------------------------------- The Foundation and Cobalt became beneficial owners of the Common Stock in connection with the conversion of BCBSUW from a Wisconsin service insurance corporation to a Wisconsin stock insurance corporation. BCBSUW currently owns 1,531,175 shares of Common Stock, or approximately 11.9% of the issued and outstanding shares of Common Stock. In connection with the conversion, Cobalt became the owner of 100% of the issued and outstanding common stock of BCBSUW and the Foundation became the owner of 77.5% of the issued and outstanding common stock of Cobalt. Consequently, both the Foundation and Cobalt are deemed to be beneficial owners of the 1,531,175 shares of Common Stock now owned by BCBSUW. ITEM 4. Purpose of Transaction. ----------------------- The information set forth in Item 5(c) hereof is incorporated by reference in response to this Item 4. On November 22, 2002, Cobalt filed with the Office of the Commissioner of Insurance, State of Wisconsin, a Notice of Disclaimer of Affiliation setting forth the reasons why Cobalt and its affiliates should not, at any time after March 19, 2002, be deemed as "controlling" (or controlled by, or under common control with) the Issuer. A copy of this Notice is filed as an exhibit hereto under Item 7. As a result of this determination, Cobalt will not use Rule 144 under the Securities Act of 1933, as amended, for purposes of effecting such dispositions of securities of the Issuer as may occur in the future. Such transactions will be reported after the fact, as necessary, on Forms 4 and/or appropriate amendments to this Schedule 13D. Depending on market conditions and other factors that Cobalt and/or BCBSUW may deem material to its investment decision, Cobalt and/or BCBSUW may sell additional shares of Common Stock in the open market or in private transactions or may otherwise dispose of all or a portion of the shares of Common Stock now owned by them. Except as otherwise set forth herein, none of the reporting persons has any plans that would result in the occurrence of any of the events set forth in Item 4 of Schedule 13D. The Foundation received no proceeds from the sale of shares of Common Stock by BCBSUW described herein. The Foundation is not responsible for the completeness or accuracy 4 of the information contained herein regarding Cobalt or BCBSUW, and has no reason to believe that such information is inaccurate. ITEM 5. Interests in Securities of the Company. (a) Each member of the Group is deemed to be the beneficial owner of the 1,531,175 shares of Common Stock owned by BCBSUW which represents 11.9% of the issued and outstanding Common Stock. (b) (i) Number of shares as to which the Foundation has: sole voting power - 0 shared voting power - 0 sole dispositive power - 0 shared dispositive power - 0 (ii) Number of shares as to which Cobalt has: sole voting power - 0 shared voting power - 0 sole dispositive power - 0 shared dispositive power - 0 (iii) Number of shares as to which BCBSUW has: sole voting power - 1,531,175 shared voting power - 0 sole dispositive power - 1,531,175 shared dispositive power - 0 (c) The following is a list of all transactions in the Common Stock by BCBSUW during the 60 days preceding the date of Amendment No. 7 to this Schedule 13D. Date of Transaction Number of Shares Price Per Share Type of Transaction ------------------- ---------------- --------------- ------------------- 10/10/02 2,400 $14.01 Sale 10/10/02 100 $14.03 Sale 10/10/02 1,900 $14.05 Sale 10/10/02 3,100 $14.09 Sale 10/10/02 600 $14.10 Sale 10/10/02 100 $14.15 Sale 10/10/02 2,500 $14.19 Sale 10/10/02 1,000 $14.20 Sale 10/10/02 100 $14.24 Sale 10/10/02 2,600 $14.25 Sale 5 Date of Transaction Number of Shares Price Per Share Type of Transaction ------------------- ---------------- --------------- ------------------- 10/10/02 100 $14.35 Sale 10/11/02 8,400 $14.00 Sale 10/11/02 700 $14.02 Sale 10/11/02 8,800 $14.03 Sale 10/11/02 7,100 $14.05 Sale 10/11/02 100 $14.16 Sale 10/11/02 400 $14.24 Sale 10/14/02 4,550 $14.00 Sale 10/14/02 2,000 $14.01 Sale 10/14/02 3,800 $14.03 Sale 10/14/02 1,500 $14.05 Sale 10/14/02 2,100 $14.10 Sale 10/15/02 10,000 $14.00 Sale 10/15/02 3,200 $14.10 Sale 10/16/02 1,100 $14.00 Sale 10/17/02 1,800 $14.00 Sale 10/17/02 2,500 $14.01 Sale 10/17/02 2,100 $14.03 Sale 10/18/02 7,900 $14.00 Sale 10/18/02 100 $14.01 Sale 10/18/02 200 $14.02 Sale 10/18/02 200 $14.10 Sale 10/24/02 9,900 $14.00 Sale 10/24/02 6,000 $14.01 Sale 10/24/02 5,100 $14.05 Sale 10/25/02 4,500 $14.00 Sale 10/25/02 500 $14.34 Sale 10/25/02 100 $14.55 Sale 10/25/02 2,200 $14.60 Sale Following these sales, BCBSUW beneficially owned approximately 11.9% of the issued and outstanding Common Stock. Except as reported in this Item 5(c), no member of the Group has made any transaction in the Common Stock during the past sixty days. (d) Not applicable. (e) Not applicable. 6 ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect --------------------------------------------------------------------- to Securities of the Company. ----------------------------- General. On March 22, 2002, BCBSUW sold 1,400,000 shares of Common Stock to the Issuer pursuant to the terms of a Stock Purchase Agreement, dated as of March 19, 2002, by and among Cobalt, BCBSUW and the Issuer (the "Purchase Agreement"). Board Representation. Pursuant to the Purchase Agreement, the Issuer appointed Thomas R. Hefty and Kenneth L. Evason to become directors of the Issuer, effective on March 22, 2002. Mr. Hefty was appointed to the class of directors whose terms expire at the Issuer's second annual meeting of shareholders following the Closing Date, and Mr. Evason was appointed to the class of directors whose terms expire at the Issuer's third annual meeting of shareholders following the Closing Date. Mr. Hefty resigned effective upon closing of the June 4, 2002 public offering by BCBSUW of 3,001,500 shares of Common Stock, and Mr. Evason (or his successor) will resign effective immediately upon the date that BCBSUW owns less than 10% of the then issued and outstanding shares of Common Stock. Mr. Evason is in no way affiliated with Cobalt, BCBSUW or the Foundation. The Purchase Agreement also provides that Cobalt and BCBSUW will be entitled to designate (i) two nominees to the Issuer's Board of Directors (the "Board") for so long as BCBSUW beneficially owns 20% or more of the then outstanding shares of Common Stock and (ii) one nominee to the Board for so long as BCBSUW beneficially owns 10% or more, but less than 20%, of the then issued and outstanding shares of Common Stock. In each case, such nominee(s) must be reasonably acceptable to the Issuer, and the Issuer will use its best efforts to take all action necessary so that such BCBSUW nominees will be nominated for election or re-election to the Board, as the case may be. If BCBSUW at any time beneficially owns less than 10% of the then issued and outstanding shares of Common Stock, then BCBSUW will not be entitled to designate any directors to the Board, and BCBSUW will cause each BCBSUW-nominated director to immediately resign from the Board. Certain Agreements. In addition to the Board representation rights described above, and subject to the right of BCBSUW and Cobalt to earlier terminate such covenants as described below under "Right to Terminate Certain Covenants," the Purchase Agreement provides that, for so long as BCBSUW shall have at least one BCBSUW-nominated director on the Board, Cobalt and BCBSUW will not, and will cause their respective directors, officers, affiliates and, on their behalf, representatives, agents and advisors not to, directly or indirectly: o purchase, offer to purchase or otherwise acquire or offer or agree to acquire any shares of Common Stock or other securities of the Issuer which are entitled to vote generally for the election of directors, or any securities which are convertible or exchangeable into or exercisable for any securities of the Issuer which are entitled to vote generally for the election of directors (the Common Stock, together with such other securities, are referred to herein as "Voting Securities"); 7 o (i) (a) make, or in any way participate, directly or indirectly, in any solicitation of proxies or consents, (b) seek to advise, encourage or influence any person with respect to the voting of any Voting Securities, or (c) initiate, propose or otherwise solicit shareholders of the Issuer, in each case for (1) the election of persons to the Board or (2) the approval of shareholder proposals; or (ii) induce or attempt to induce any other person to initiate any such solicitation or otherwise communicate with the Issuer's shareholders pursuant to Rule 14a-2(a) or (b) under the Securities Exchange Act of 1934, as amended; o without the prior consent of the Issuer, seek, propose, or make any statement that is critical of management of the Issuer or reasonably likely to be publicly disclosed with respect to, certain extraordinary corporate transactions involving the Issuer; o call or seek to have called any meeting of the shareholders of the Issuer; o otherwise act to control or seek to control or influence or seek to influence the management, Board or policies of the Issuer (other than with respect to their Board representation rights under the Purchase Agreement), or make any statement that is critical of any of the persons nominated by the Board for election as directors of the Issuer; o seek representation on the Board, or seek the removal of any member of the Board or a change in the composition or size of the Board (other than with respect to their Board representation rights under the Purchase Agreement); o make any publicly disclosed proposal, comment, statement or communication, or make any proposal, comment, statement or communication in a manner that would require any public disclosure by the Issuer, BCBSUW, Cobalt or any other person, or enter into any discussion with any person, regarding any of the foregoing; or o have any discussions or communications, or enter into any arrangements, understandings or agreements (whether written or oral) with, or advise, finance, assist, encourage or act in concert with, any other person in connection with any of the foregoing or make any investment in any person for the purpose of engaging in any of the foregoing, or take any action inconsistent with the foregoing. Voting. BCBSUW and Cobalt also agreed that, until the date on which BCBSUW beneficially owns less than 10% of the then issued and outstanding shares of Common Stock and each BCBSUW-nominated director shall have resigned from the Board, all of the additional shares of Common Stock beneficially owned by BCBSUW ("Additional Shares") will be present, in person or by proxy, at all meetings of shareholders of the Issuer at which directors will be elected in order to participate in a quorum at such meetings, and will be voted on the election of directors at any such meeting in favor of each of the nominees recommended by the Board. Notwithstanding the foregoing, (i) BCBSUW may vote Additional Shares as it determines, in its sole discretion, on any matter other than the election of directors, and (ii) BCBSUW may vote Additional Shares as it determines, in its sole discretion, on the election of directors in the event that the Issuer shall then be in material breach of its obligations under Section 6.01 of the Purchase Agreement. 8 Right to Terminate Certain Covenants. Notwithstanding anything to the contrary contained in the Purchase Agreement, BCBSUW has the right, effective at any time after December 31, 2002, upon thirty (30) days' prior written notice to the Issuer, to terminate the covenants and agreements set forth in Sections 4.01 and 4.02 of the Purchase Agreement and described above under "Certain Agreements" (other than certain covenants and agreements with respect to the election of directors, which may not be terminated in any case until after December 31, 2003). However, if the Issuer is at any time in material breach of the Purchase Agreement, BCBSUW has the right at any time after the date of the Purchase Agreement, upon thirty (30) days' prior written notice to the Issuer, to terminate the covenants and agreements set forth in Sections 4.01 and 4.02 of the Purchase Agreement and described above under "Certain Agreements" (other than those covenants which may not be terminated in any case until after December 31, 2003). Additionally, in the event of any termination of such covenants under the provisions described in this paragraph, each BCBSUW-nominated director then serving as a director on the Board will resign from the Board, effective immediately on the date on which such notice of termination is given, and BCBSUW's rights to continued Board representation under the Purchase Agreement will terminate. The Foundation is not a party to and did not participate in the negotiation of the Purchase Agreement. The Foundation is not responsible for the completeness or accuracy of the information contained herein regarding Cobalt or BCBSUW, and has no reason to believe that such information is inaccurate. ITEM 7. Material to be Filed as Exhibits. -------------------------------- Exhibit 1 - Notice of Disclaimer of Affiliation, filed with the Office of the Commissioner of Insurance, State of Wisconsin, on November 22, 2002. 9 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. WISCONSIN UNITED FOR HEALTH FOUNDATION, INC. By: /s/ Ben Brancel ----------------------------- Ben Brancel President COBALT CORPORATION By: /s/ Gail L. Hanson ----------------------------- Gail L. Hanson Chief Financial Officer BLUE CROSS & BLUE SHIELD UNITED OF WISCONSIN By: /s/ Gail L. Hanson ----------------------------- Gail L. Hanson Chief Financial Officer Dated: December 16, 2002 10 EX-99.1 3 irm20a.txt EXHIBIT 1 NOTICE OF DISCLAIMER EXHIBIT 1 INSURANCE HOLDING COMPANY SYSTEM REPORTING NOTICE OF DISCLAIMER OF AFFILIATION Filed with the Office of the Commissioner of Insurance, State of Wisconsin By Cobalt Corporation ------------------ On behalf of: Name Address - ---- ------- Cobalt Corporation and 401 West Michigan Street Blue Cross & Blue Shield United of Wisconsin Milwaukee, WI 53203 Date: November 22, 2002 Name, title, address and telephone number of individual to whom notices and correspondence concerning this statement should be addressed: Gail L. Hanson Cobalt Corporation 401 West Michigan Street Milwaukee, WI 53203 Phone: (414) 226-6201 Fax: (414) 226-6229 With a copy to: Joseph C. Branch Foley & Lardner 777 East Wisconsin Avenue Milwaukee, WI 53203 Phone: (414) 297-5837 Fax: (414) 297-4900 ITEM 1. IDENTITY OF PARTIES Information for each of the parties: (a) Entities Disclaiming Presumed Control: Blue Cross & Blue Shield United of Wisconsin, a Wisconsin domiciled stock insurance company ("BCBSUW") Cobalt Corporation, a Wisconsin business corporation which is publicly traded on the New York Stock Exchange ("Cobalt") /1 (b) The home office and principal executive office address for each of BCBSUW and Cobalt is: 401 West Michigan Street Milwaukee, WI 53203 (c) Entities Subject to the Presumed Control: American Medical Security Group, Inc., a Wisconsin business corporation which is publicly traded on the New York Stock Exchange ("AMS") United Wisconsin Life Insurance Company, a Wisconsin domiciled stock insurance company ("UWLIC") (d) The home office and principal executive office address for each of AMS and UWLIC is: 3100 AMS Boulevard Green Bay, WI 54313 - --------------------------- 1 Wisconsin United for Health Foundation, Inc., a Wisconsin non-stock corporation ("Foundation"), beneficially owns 31,313,390 shares of Cobalt common stock, which comprises over 75% of the issued and outstanding shares of Cobalt common stock. However, the Cobalt shares beneficially owned by the Foundation are held subject to the terms of a Voting Trust and Divestiture Agreement ("Voting Trust"), which restricts the rights of the Foundation to vote its shares or otherwise exercise control over the operations of Cobalt or any of its subsidiaries. Under the Voting Trust, the Foundation Board is granted the authority to direct the vote of its holdings only if Cobalt is subject to a change of control transaction (i.e., an acquisition involving over 50% of the outstanding capital stock of Cobalt). In all other circumstances, the Foundation's shares are required to be voted as directed by the Cobalt Board of Directors. Other than in connection with a proposed change of control of Cobalt, the Foundation does not have the right to direct Cobalt's management or otherwise control the operations of Cobalt or its subsidiaries. As such, the Foundation has not been included in this filing as an entity disclaiming affiliation with AMS. 2 (e) Organizational relationships: BCBSUW is a wholly owned subsidiary of Cobalt. As of October 31, 2002, BCBSUW owns approximately 11.9% of all of the issued and outstanding common stock of AMS. UWLIC is a wholly owned, downstream subsidiary of AMS. An organizational chart reflecting the Cobalt insurance holding company system and its ownership relationship to the AMS insurance holding company system is attached. ITEM 2. RATIONALE FOR DISCLAIMER OF AFFILIATION This filing provides notice on behalf of Cobalt and BCBSUW (together, referred to hereinafter as "Cobalt") to formally disclaim their affiliation with AMS, and to rebut Cobalt's presumed indirect control over certain downstream operating insurance subsidiaries of AMS including United Wisconsin Life Insurance Company, a Wisconsin domiciled life and health insurer ("UWLIC"). Under Wisconsin's Insurance Code, "control" is defined to mean: "the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a person, whether through the ownership of voting securities, by contract, by common management or otherwise. . . . There is a rebuttable presumption of control if a person directly or indirectly owns, holds with the power to vote or holds proxies to vote more than 10% of the voting securities of another person . . . ." Wis. Stat. s. 600.03(13). Because Cobalt owns in excess of 10% of the voting securities of AMS, Cobalt is presumed to indirectly control AMS and UWLIC for purposes of insurance holding company act regulation. However, the facts and circumstances involving Cobalt's ownership of AMS common stock demonstrate that Cobalt does not possess the power to direct or cause the direction of management and policies of AMS or UWLIC, and therefore the presumption of control is rebutted. While Wisconsin laws and regulations do not set forth a formal procedure for disclaiming affiliation or rebutting the presumption of control, the definition of "control" specifically contemplates an entity taking affirmative action to rebut its presumed control. In the absence of specific guidance under Wisconsin law, Cobalt has adopted the form and required substance of the disclaimer of affiliation notice contemplated under the NAIC Model Insurance Holding Company Act and related Regulation. Accordingly, the following rationale is hereby submitted by Cobalt in support of its notice of disclaimer of affiliation from AMS and UWLIC: 3 (1) The number of authorized, issued and outstanding voting securities of AMS: As of October 31, 2002, AMS reported that 12,889,898 shares of its common stock, no par value ("AMS stock"), were issued and outstanding. (2) With respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of AMS' voting securities which are held of record or known to be beneficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly: As of October 31, 2002, Cobalt owned 1,531,175 shares of AMS stock, comprising approximately 11.9% of the issued and outstanding AMS shares. Cobalt has expressly agreed not to acquire any further shares of AMS stock. (3) All material relationships and bases for affiliation between AMS and the person whose control is denied and all affiliates of such person: A copy of the organizational chart for the Cobalt Corporation holding company system is attached as of October 31, 2002. (4) A statement explaining why Cobalt should not be considered to control AMS and indirectly UWLIC. Numerous factors demonstrate Cobalt's lack of control over AMS and indirectly UWLIC: o AMS is a publicly held corporation with approximately 88% of its issued and outstanding shares held by public shareholders other than Cobalt or its affiliates. o AMS does not seek or accept input from Cobalt on the management of its day to day operations or strategic direction. o AMS does not typically divulge material, non-public information to Cobalt or seek its input on shareholder matters beyond that sought of all shareholders. o There are no common officers or directors of AMS and Cobalt. o AMS and UWLIC maintain totally separate offices, personnel, information systems and other assets used in their operations from those used by Cobalt and BCBSUW. 4 o Pursuant to a Stock Purchase Agreement among Cobalt, BCBSUW and AMS, dated March 19, 2002 ("Purchase Agreement"), Cobalt and BCBSUW contractually agreed not to influence any control over AMS even though Cobalt owned in excess of 10% of AMS' issued and outstanding common stock. As such, any relationship of affiliation between Cobalt and AMS was effectively severed at least as early as March 19, 2002. An overview of the restrictive terms of the Purchase Agreement, a copy of which is attached, follows. AMS Board Representation and Standstill As consideration for its agreement on certain negative covenants, Cobalt was accorded limited rights to marginal representation on the 14 person AMS board of directors. For so long as Cobalt owns 20% or more of the issued and outstanding AMS shares, it will have the continuing right to appoint two nominees for the AMS Board. For so long as Cobalt owns 10% or more of the issued and outstanding AMS shares, it will have the continuing right to appoint one nominee for the AMS Board. Since Cobalt currently owns approximately 11.9% of the issued and outstanding AMS shares, it presently only has the right to appoint one nominee on the 14 person AMS Board. Although Cobalt initially was able to appoint two directors to serve on the AMS Board as a result of the Purchase Agreement, the resignation of one director was given effect automatically upon Cobalt owning less than 20% of the issued and outstanding AMS shares. The remaining director, which is not in any way affiliated with or responsible to Cobalt, will also be subject to automatic resignation upon Cobalt owning less than 10% of the issued and outstanding AMS shares. For so long as Cobalt has representation on the AMS Board, Cobalt, BCBSUW and their respective directors, officers and affiliates are required to refrain from taking certain actions relative to AMS. Those prohibited actions include, among other things, (i) purchasing or acquiring more AMS shares; (ii) directly or indirectly participating in a solicitation, or encouraging other shareholders to vote, for the election of directors to the AMS Board in opposition to the AMS nominees, or in favor of any shareholder proposals; (iii) making certain statements critical of AMS management regarding extraordinary AMS transactions; (iv) otherwise acting to influence or control AMS; and (v) seeking representation on the AMS Board other than in accordance with the Purchase Agreement. Additionally, for so long as Cobalt has representation on the AMS Board, Cobalt is required to vote its remaining AMS shares in favor of the AMS Board nominees. 5 Except for the restrictions on seeking Board representation (which in any case survive until at least December 31, 2003), the foregoing restrictions may be terminated by Cobalt at any time upon thirty days' prior notice after December 31, 2002; however, immediately upon giving such notice, any Cobalt-appointed directors serving on the AMS Board will be forced to resign. Further, while the standstill provisions may be terminated, Cobalt does not have any plans to acquire any further shares of AMS stock. Rather, Cobalt has publicly announced that it is not holding its investment in AMS as a long term investment and intends to continue to divest its holdings in AMS opportunistically as it has throughout calendar year 2002 (during which time Cobalt has reduced its holdings in AMS stock from approximately 6.3 million shares to its current holdings of approximately 1.5 million shares). 6 SIGNATURE AND CERTIFICATION Pursuant to the requirements of Ch. Ins 40, Wis. Adm. Code, Cobalt Corporation has caused this notice to be duly signed on its behalf in the City of Milwaukee and State of Wisconsin on the 22nd day of November, 2002. Cobalt Corporation By: /s/ Stephen E. Bablitch ----------------------- Name: Stephen E. Bablitch Title: President Attest: /s/ Gail L. Hanson - ------------------------------------- Name: Gail L. Hanson Title: Chief Financial Officer The undersigned deposes and says that he has duly executed the attached notice dated November __, 2002, for and on behalf of Cobalt Corporation; and that he is the President and that he is authorized to execute and file such instrument. Deponent further says that he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his knowledge, information and belief. /s/ Stephen E. Bablitch --------------------------- Name: Stephen E. Bablitch Subscribed and sworn to this 22nd day of November, 2002. /s/ Lana K. Hertel - ------------------------------------- Notary Public My commission expires May 4, 2003 ----------- 7 -----END PRIVACY-ENHANCED MESSAGE-----