SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 26, 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)
Explanatory Note: This Form 8-K/A amends and restates Item 4 of the Current
Report on Form 8-K filed by UICI ("UICI" or the "Company") with the Securities
and Exchange Commission on September 4, 2002.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING PUBLIC ACCOUNTANT
On August 26, 2002, UICI dismissed Ernst & Young LLP as its
independent accountants and selected KPMG LLP as its new independent
accountants effective August 26, 2002. The Company's Audit Committee
participated in and approved the decision to change independent
accountants.
The reports of Ernst & Young LLP on the financial statements for each
of the past two fiscal years ended December 31, 2001 and 2000 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principles.
In addition, in connection with its audits of the Company's financial
statements for each of the two most recent fiscal years and the subsequent
interim period through August 26, 2002, there have been no disagreements
with Ernst & Young LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young LLP,
would have caused Ernst & Young LLP to make reference thereto in their
report on the financial statements for such years.
Except as described in the next succeeding paragraphs, during the two
most recent fiscal years and the subsequent interim period through August
26, 2002, there were no reportable events (as defined in Regulation S-K
Item 304(a)(1)(v)).
In a letter dated April 4, 2000 to the Audit Committee of the
Company's Board of Directors, Ernst & Young LLP advised the Company that,
during the course of and in connection with Ernst & Young LLP's audit of
the Company's consolidated financial statements as of, and for the year
ended, December 31, 1999, Ernst & Young LLP had noted certain matters
involving the Company's internal controls and its operations that Ernst &
Young LLP considered to be "reportable conditions" and "material
weaknesses" under standards established by the American Institute of
Certified Public Accountants.
In particular, Ernst & Young LLP identified material weaknesses at the
Company's former United CreditServ, Inc. credit card operations and UICI's
Academic Management Services Corp. (formerly Educational Finance Group,
Inc.) subsidiary ("AMS") and a reportable condition with respect to UICI.
With respect to UICI's credit card operations, Ernst & Young LLP identified
as material weaknesses the failure to maintain credit card
account-by-account detail of a liability account and the failure to conduct
regular periodic reconciliations of that account, lack of segregation of
duties with respect to preparation and review of the calculation of the
credit card loan loss reserve, certain credit card aging matters, and
failure to maintain a proper review and approval process for general ledger
entries. With respect to UICI's Academic Management Services Corp.
operations, Ernst & Young LLP identified as material weaknesses AMS's
failure to maintain timely and accurate accounting records for the
purchasing and originating of student loans, the failure to reconcile on a
regular periodic basis its student loan receivables assets with the records
of the student loan servicers, certain inadequacies in AMS's systems
leading to delays in closing AMS's books on a timely basis, the lack of a
formal review and approval process on the part of UICI (the parent) with
respect to transactions entered into by AMS (the subsidiary), and certain
inadequacies in AMS's methodologies for accounting for deferred student
loan premiums and origination costs. With respect to UICI, Ernst & Young
LLP identified as a reportable condition that the likelihood was high that
related party transactions would not be properly recorded.
UICI's Audit Committee discussed the nature of these material
weaknesses and the reportable condition with Ernst & Young LLP and directed
that the recommendations contained in the April 4, 2000 letter be adopted
and that corrective action be taken. During the course of 2000, management
completed the corrective action. UICI's credit card operations (which had
been designated as a discontinued operation for financial reporting
purposes effective December 31, 1999) effectively ceased doing business in
February 2000, and with respect to AMS the Company undertook an extensive
reconciliation of its loan ledger with its servicing records and
implemented a procedure of regular and periodic reconciliations thereafter.
At the parent level, UICI's Board of Directors adopted enhanced procedures
designed to ensure the proper identification, approval and reporting of
related party transactions. As indicated above, Ernst & Young LLP
subsequently delivered an unqualified opinion with respect to the UICI
consolidated financial statements as of, and for the year ended December
31, 2000.
The Company has authorized Ernst & Young LLP to respond fully to
inquiries of the Company's new accountants concerning these matters.
The Company provided Ernst & Young LLP with a copy of the disclosure
made under this Item 4 of Form 8-K/A and has requested that Ernst & Young
LLP furnish it with a letter addressed to the Securities and Exchange
Commission stating whether or not it agrees with the above statements. A
copy of such letter, dated September 27, 2002, is filed as Exhibit 16 to
this Form 8-K/A.
During the two most recent fiscal years and the subsequent interim
period through August 26, 2002, neither the Company nor anyone on its
behalf has consulted with KPMG LLP regarding: (i) either the application of
accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the
Company's financial statements; or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304 of Regulation S-K,
or a reportable event, as that term is defined in Item 304(a)(1)(v) of
Regulation S-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 16 Letter, dated September 27, 2002, from Ernst & Young LLP to
the Securities and Exchange Commission regarding change in
certifying accountants.
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 September 27, 2002 By /s/ Mark D. Hauptman
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Mark D. Hauptman
Vice President and Chief
Financial Officer
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
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16 Letter dated September 27, 2002 from Ernst & Young LLP to the
Securities and Exchange Commission regarding change in
certifying accountants