11-K 1 0001.txt AMS RETIREMENT SAVINGS PLAN, YEAR 1999 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] Transition Report Pursuant To Section 13 Or 15(d) Of The SecuritieS Exchange Act Of 1934 For the transition period from __________ to __________ Commission File Number 1-13154 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: AMERICAN MEDICAL SECURITY RETIREMENT SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: AMERICAN MEDICAL SECURITY GROUP, INC. 3100 AMS Boulevard Green Bay, WI 54313 American Medical Security Retirement Savings Plan Annual Report on Form 11-K For the Fiscal Year Ended December 31, 1999 TABLE OF CONTENTS PAGE Financial Statements and Supplemental Schedule Years ended December 31, 1999 and 1998 Report of Independent Auditors............................................3 Financial Statements Statements of Net Assets Available for Benefits...........................4 Statements of Changes in Net Assets Available for Benefits................5 Notes to Financial Statements.............................................6 Supplemental Schedule Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year.........................................................11 Signatures....................................................................12 Exhibit 23 - Consent of Independent Auditors..................................13 2 Report of Independent Auditors The Administrative Committee American Medical Security Retirement Savings Plan We have audited the accompanying statements of net assets available for benefits of American Medical Security Retirement Savings Plan as of December 31, 1999 and 1998, and the related statement of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1999 and 1998, and the changes in its net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes as of December 31, 1999, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ERNST & YOUNG LLP Milwaukee, WI March 10, 2000 3 American Medical Security Retirement Savings Plan Statements of Net Assets Available for Benefits
DECEMBER 31 1999 1998 ---------------------------------- ASSETS Investments, at fair value (NOTE 3): Mutual funds $45,444,071 $36,567,444 Common stock of American Medical Security Group, Inc. 148,412 - Participant loans receivable 694,086 393,035 ---------------------------------- Net assets available for benefits $46,286,569 $36,960,479 ==================================
SEE ACCOMPANYING NOTES 4 American Medical Security Retirement Savings Plan Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31 1999 1998 ----------------------------------- Investment income: Net realized and unrealized appreciation in fair value of investments (NOTE 3) $ 2,819,876 $ 5,665,799 Interest and dividends 3,359,109 576,145 ----------------------------------- 6,178,985 6,241,944 Less investment expense 130,128 169,024 ----------------------------------- 6,048,857 6,072,920 Contributions: Employers' 2,498,761 1,146,371 Employees' 6,684,527 3,485,104 ----------------------------------- 9,183,288 4,631,475 ----------------------------------- Total additions 15,232,145 10,704,395 Benefits paid 5,906,055 4,108,599 ----------------------------------- Net increase 9,326,090 6,595,796 Net assets available for benefits at beginning of year 36,960,479 30,364,683 ----------------------------------- Net assets available for benefits at end of year $46,286,569 $36,960,479 ===================================
SEE ACCOMPANYING NOTES 5 American Medical Security Retirement Savings Plan Notes to Financial Statements December 31, 1999 1. DESCRIPTION OF THE PLAN The following description of the American Medical Security Retirement Savings Plan (the Plan) provides only general information. Participants should refer to the Plan document for a complete description of the Plan's provisions. GENERAL The Plan is a contributory defined contribution plan covering all full-time and part-time employees of American Medical Security Group, Inc. (AMSG) and its subsidiaries, American Medical Security, Inc. and Nurse Healthline, Inc. (collectively AMSG, the Company or Employer). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). PLAN CHANGES On May 1, 1999, the Plan introduced an option to allow participants to invest in the common stock of AMSG. PARTICIPATION AND VESTING Employees are eligible to become contributing participants in the Plan and receive matching contributions after reaching the age of eighteen and after completing 0.08 years of eligible service. Employees are eligible to become participants in the Plan for purposes of receiving an allocation of any Employer profit sharing contribution after completing 0.5 years of service. Participants are immediately vested in their contributions plus actual earnings thereon. Participants vest in Company contributions according to the following schedule; (1,000 hours of service are required to constitute a year of vesting service). Years of Vesting Service Vesting Percentage ---------------------------------- ----------------------------- 1 0% 2 30 3 40 4 50 5 60 6 80 7 100 6 American Medical Security Retirement Savings Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) CONTRIBUTIONS, WITHDRAWALS AND LOANS Plan participants are permitted to make contributions on a before-tax basis each payroll period up to a maximum of 18% of base compensation and subject to a maximum amount allowed by the Internal Revenue Code (IRC). Participants can change their before-tax contribution percentage effective January 1 and July 1 of each year. The Company contributes 50% of the first 6% of compensation that a participant contributes to the Plan. Additional amounts may be contributed at the option of the Company. Distributions due to retirement, death, permanent disability and termination of employment are provided for as defined within the Plan. Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of the lesser of one-half of their vested account balance or $50,000. The loan is secured by the balance in the participant's account and bears interest at a rate commensurate with prevailing rates as determined by the Plan administrator. Principal and interest are paid through payroll deductions. INVESTMENT OF PLAN ASSETS Prior to January 1, 1998, all of the participants' Company contributions were held in a non-participant directed money market account. On January 1, 1998, $15,822,164 of non-participant directed funds were transferred to other investment funds based on each participant's fund allocation. The Plan was administered by Emjay Corporation through September 30, 1998. As of October 1, 1998, Smith Barney Corporate Trust Company became the new Plan trustee and its affiliate Smith Barney Plan Services began providing administrative services. On October 1, 1998, all of the Plan's assets were transferred to new investment fund choices. Participants made investment allocation decisions from among ten mutual fund choices offered by the Plan as of October 1, 1998. 7 American Medical Security Retirement Savings Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) Effective January 1, 1999, participants may change their investment options at any time directly through Smith Barney Plan Service. TERMINATION OF THE PLAN The Company has established the Plan with the intention and expectation that the Employer will be able to make contributions indefinitely, but the Employer neither is nor shall be under any obligation or liability whatsoever to maintain the Plan for any given length of time. The Company retains the right to modify or terminate the Plan at any time, but may not retroactively reduce the share of any participant or cause the Plan's assets to revert to the Company unless required by law. In the event of termination, the balance of each participant's account would become fully vested, and all assets would be distributed to the participants and beneficiaries. RECLASSIFICATIONS Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENT VALUATION AND ACCOUNTING METHOD The Plan's financial statements are prepared on the accrual basis of accounting. The Plan's investments are stated at fair value. The fair value of mutual fund shares and AMSG common stock are based on the quoted market values on the last business day of the Plan year. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates that affect the amounts reported in the Plan's financial statements and accompanying notes. Actual results could differ from these estimates. 8 American Medical Security Retirement Savings Plan Notes to Financial Statements (continued) 3. INVESTMENTS The following individual investments represent more than 5% of the Plan's net assets available for benefits:
DECEMBER 31 1999 1998 -------------------------------- Investments at fair value as determined by quoted market price: Dreyfus Appreciation Fund $ - $13,548,286 Hotchkis & Wiley International Fund 3,130,074 3,858,121 MCM Stable Value Fund 5,029,845 3,993,443 Scudder Growth & Income Fund 9,103,267 9,518,806 Warburg Pincus Emerging Growth Fund 7,680,510 5,642,366 Lazard Small Cap Fund 2,442,640 - Lexington Worldwide Emerging Markets Fund 2,534,491 - Montag & Caldwell Growth Fund 12,582,088 -
The Plan's investments, including gains and losses on investments bought, sold and held during the year, appreciated (depreciated) in fair value as follows:
DECEMBER 31 1999 1998 -------------------------------- Mutual funds $ 2,866,445 $ 5,665,799 Common stock of American Medical Security Group, Inc. (46,569) - -------------------------------- $ 2,819,876 $ 5,665,799 ================================
4. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated October 15, 1991 stating that the Plan is qualified under Section 401(a) of the IRC and, therefore, the related trust is not subject to tax under present income tax law. The Plan administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. Subsequent amendments to the Plan have been structured to, and are intended to maintain the Plan's qualified status. 9 American Medical Security Retirement Savings Plan Notes to Financial Statements (continued) 5. DIFFERENCES BETWEEN FINANCIAL STATEMENTS AND FORM 5500 The following is a reconciliation of net assets available for benefits reflected in the 1998 financial statements to the Form 5500:
DECEMBER 31 1998 -------------------------------- Net assets available for benefits - Financial Statements $ 36,960,479 Contributions receivable 2,048,020 -------------------------------- Net assets available for benefits - Form 5500 $39,008,499 ================================
There were no differences as of December 31, 1999 in net assets available for benefits. 6. TRANSACTIONS WITH PARTIES IN INTEREST Investment fees incurred are paid by participants. In addition, certain services are provided by the Plan sponsor at no cost to the Plan. 7. SUBSEQUENT EVENTS Effective January 1, 2000, the vesting schedule for Company contributions to the Plan was changed to 100% vesting after three years of service. In addition, the Company increased its matching contribution to 60% of the first 6% of compensation that a participant contributes to the Plan. Further, beginning April 1, 2000 participants can change their before-tax contribution percentage on a quarterly basis. Prior to that time changes were allowed twice per year. 10 American Medical Security Retirement Savings Plan Employer Identification Number 39-1431799 Plan Number 001 Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes at End of Year December 31, 1999
IDENTITY OF ISSUER, BORROWER/ UNITS/ CURRENT DESCRIPTION OF INVESTMENT SHARES VALUE -------------------------------------------------------------------------------------------------------- Dreyfus Appreciation 10.4585 $ 478 Dreyfus GNMA Fund 55,946.7396 774,863 Dreyfus S&P 500 1,502.7958 64,485 Hotchkis & Wiley International 118,563.4199 3,130,074 Loomis Sayles Bond Fund Institutional 115,848.1755 1,334,571 Lazard Small Cap Fund 147,949.1177 2,442,640 Montag & Caldwell Growth (N Share) 363,224.2426 12,582,088 Montgomery Emerging Markets 8.3926 109 MCM Stable Value Advisory 458,106.5721 5,029,845 Scudder Growth & Income 341,074.0624 9,103,267 Warburg Pincus Emerging Growth 154,041.5008 7,680,509 Warburg Pincus Global Fixed Income 76,895.7762 766,651 Lexington Worldwide Emerging Markets 167,847.0993 2,534,491 American Medical Security Group, Inc. common stock* 24,735.3153 148,412 Participant loans receivable - 694,086 ------------- $46,286,569 =============
*Represents a party in interest to the Plan. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee of the American Medical Security Retirement Savings Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. DATE: June 21, 2000 AMERICAN MEDICAL SECURITY RETIREMENT SAVINGS PLAN /s/ Gary D. Guengerich Gary D. Guengerich American Medical Security Retirement Savings Plan Administrative Committee Member 12 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-75477) pertaining to the American Medical Security Retirement Savings Plan (the Plan) of American Medical Security Group, Inc. of our report dated March 10, 2000, with respect to the financial statements and schedules of the Plan included in the Annual Report (Form 11-K) for the year ended December 31, 1999. /s/ ERNST & YOUNG LLP Milwaukee, WI June 20, 2000 13