SOURCE: American Physicians Service Group, Inc.

American Physicians Service Group, Inc.

November 02, 2009 16:01 ET

American Physicians Service Group, Inc. Reports Continued Strong Earnings in the Third Quarter

AUSTIN, TX--(Marketwire - November 2, 2009) - American Physicians Service Group, Inc. ("APS") (NASDAQ: AMPH) today announced results for the quarter and nine months ended September 30, 2009. For the three months ended September 30, 2009, revenues were $22.4 million compared to $19.9 million for the same period last year. For the nine months ended September 30, 2009, revenues were $61.7 million compared to $57.3 million in the same period last year. Net income for the third quarter was $6.4 million or $.92 per diluted share, compared to $7.2 million or $.99 per diluted share, in the same period last year. Net income for the first nine months was $16.1 million or $2.28 per diluted share, compared to $16.7 million or $2.29 per diluted share in the same period last year.

Ken Shifrin, APS Chairman of the Board, stated, "We continue to perform at a high level. Revenue was up 12% quarter-over-quarter, underwriting profits remained solid, our Financial Services subsidiary was again profitable and our book value per share increased to a record $22.20. Rating agency A.M. Best recently affirmed our A- rating, saying the rating 'reflects API's excellent risk-adjusted capital position, solid history of operating profitability and strong policyholder retention levels.'"

Tim LaFrey, President of APS, added, "Our core insurance operations continue to grow. Net earned premium was up 12% compared to the third quarter of 2008, a result of moderating rate decreases, increasing policyholder count and ceding less premium under our 2009 reinsurance treaty. Claims data remained favorable, with pending claims dropping by 15% from a year ago. On the investment side, we held to our belief that benefits from safeguarding our capital outweigh the sacrifice in short-term yield and thus further reduced our exposure in non-agency CMOs to $5.6 million from $25.4 million at the beginning of the year. We also continue to shorten the duration of the portfolio to manage for interest rate risk."

Mr. LaFrey continued, "Our Financial Services business turned in another small profit this quarter, a significant improvement over its results during the peak of the economic crisis last year. We continue to explore ways to return this segment to meaningful and sustained profitability."

Mr. Shifrin concluded, "We are gratified that our long-practiced conservative business philosophy has been the cornerstone for excellent performance during a difficult economic period and that our shareholders have benefitted from new stock highs as a result."

APS is an insurance and financial services firm with subsidiaries and affiliates which provide medical malpractice insurance for physicians and other healthcare providers and brokerage and investment services to institutions and high net worth individuals. APS is headquartered in Austin, Texas.

This press release includes forward-looking statements related to APS that involve risks and uncertainties that could cause actual results to differ materially. These forward-looking statements are made in reliance on the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. For further information about these factors that could affect the future results of APS, please see the recent filings with the Securities and Exchange Commission. Prospective investors are cautioned that forward-looking statements are not guarantees of future performance. Actual results may differ materially from management expectations. Copies of the filings are available upon request to APS.

                  AMERICAN PHYSICIANS SERVICE GROUP, INC.
                          SELECTED FINANCIAL DATA

(in thousands, except per share data)

                                                September 30, December 31,
                                                    2009          2008
                                                ------------- -------------
                                                 (unaudited)
Assets

Investments                                     $     237,134 $     209,709
Cash and cash equivalents                              16,680        22,060
Premium and maintenance fees receivables               19,435        17,186
Reinsurance recoverables                               10,016        15,293
Deferred policy acquisition costs                       2,748         2,500
Deferred tax assets                                     5,853         9,488
Property and equipment, net                               448           590
Intangible assets                                       2,264         2,264
Federal income tax receivable                           2,997           738
Prepaid and other assets                                3,325         3,726
                                                ------------- -------------
Total assets                                    $     300,900 $     283,554
                                                ============= =============
Liabilities

Reserve for loss and loss adjustment expense    $      91,393 $      92,141
Unearned premiums and maintenance fees                 40,916        36,785
Funds held under reinsurance treaties                   3,255         3,978
Trade accounts payable                                    190           290
Accrued expenses and other liabilities                  5,512         6,327
Mandatorily redeemable preferred stock                  6,617         7,568
                                                ------------- -------------
Total liabilities                                     147,883       147,089
Total shareholders' equity                            153,017       136,465
                                                ------------- -------------
Total liabilities and shareholders' equity      $     300,900 $     283,554
                                                ============= =============

Shares outstanding                                      6,893         7,014

Book value per share                            $       22.20 $       19.46




                  AMERICAN PHYSICIANS SERVICE GROUP, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)

(in thousands, except  per share
 data)                              Three Months Ended  Nine Months Ended
                                       September 30,       September 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
REVENUES

  Gross premiums and maintenance
   fees written                     $ 21,446  $ 21,246  $ 53,668  $ 51,106
  Premiums ceded                         676       711     1,339     1,087
  Change in unearned premiums &
   maintenance fees                   (4,527)   (6,248)   (4,130)   (4,536)
                                    --------  --------  --------  --------
     Net premiums and maintenance
      fees earned                     17,595    15,709    50,877    47,657
  Investment income, net of
   investment expense                  2,460     2,996     7,677     9,011
  Realized capital gains (losses),
   net                                   159       743      (357)      757
  Other-than-temporary impairments      (237)   (1,217)   (2,245)   (5,069)
  Financial services                   2,320     1,558     5,595     4,835
  Other revenue                           71        97       173       150
                                    --------  --------  --------  --------
     Total revenues                   22,368    19,886    61,720    57,341

EXPENSES

  Losses and loss adjustment
   expenses:
     Current accident year losses     11,183     9,949    33,699    28,862
     Prior year losses                (4,762)   (7,690)  (14,360)  (17,515)
                                    --------  --------  --------  --------
     Total losses and loss
      adjustment expenses              6,421     2,259    19,339    11,347
  Other underwriting expenses          3,053     3,220     8,784     8,322
  Change in deferred policy
   acquisition costs                    (331)     (403)     (248)     (206)
  Financial services expenses          2,207     2,127     5,582     8,013
  General and administrative
   expenses                            1,335     1,502     3,723     4,221
                                    --------  --------  --------  --------
     Total expenses                   12,685     8,705    37,180    31,697
                                    --------  --------  --------  --------
     Income from operations            9,683    11,181    24,540    25,644
  Income tax expense                   3,241     3,998     8,447     8,935
                                    --------  --------  --------  --------
     Net income                     $  6,442  $  7,183  $ 16,093  $ 16,709
                                    ========  ========  ========  ========

  Diluted income per share          $   0.92  $   0.99  $   2.28  $   2.29
                                    ========  ========  ========  ========

  Diluted weighted average shares
   outstanding                         6,989     7,244     7,073     7,286
                                    ========  ========  ========  ========

  Operating Income                  $  6,493  $  7,491  $ 17,784  $ 19,512
                                    ========  ========  ========  ========

  Diluted operating income per
   share                            $   0.93  $   1.03  $   2.51  $   2.68
                                    ========  ========  ========  ========

Non-GAAP Financial Measures

Operating Income is a "Non-GAAP" financial measure which is widely used in the insurance industry to evaluate the performance of underwriting operations. Operating Income excludes the after-tax effects of realized investment gains or losses and infrequent items that are not considered core to the underwriting performance of our insurance segment or the operating performance of our financial services segment, and we believe presents a more appropriate view of the performance of our core operations. While we believe disclosure of certain non-GAAP information is appropriate, you should not consider this information without also considering the information we present in accordance with GAAP. The following table is a reconciliation of Net Income to Operating Income:

Reconciliation of Net Income to Operating Income (in thousands, except per
share data)

                                    Three Months Ended   Nine Months Ended
                                       September 30,       September 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------- --------

Net Income                          $  6,442  $  7,183  $  16,093 $ 16,709
   Adjustments, net of tax effects:
         Realized capital (gains)
          losses, net                   (103)     (483)       232     (492)
         Other-than-temporary
          impairments                    154       791      1,459    3,295
                                    --------  --------  --------- --------
Operating Income                    $  6,493  $  7,491  $  17,784 $ 19,512
                                    ========  ========  ========= ========
Per diluted share:
   Net Income                       $   0.92  $   0.99  $    2.28 $   2.29
   Effect of adjustments            $   0.01  $   0.04  $    0.23 $   0.39
                                    --------  --------  --------- --------
Diluted operating income per share  $   0.93  $   1.03  $    2.51 $   2.68
                                    ========  ========  ========= ========




SELECTED INSURANCE DATA FOR API, pre and post merger

Claims History

                          Claims Reported   Open Claims
Date                      in the Quarter  at Quarter End
                          --------------- ---------------
September 30, 2009                    100             578
June 30, 2009                         100             565
March 31, 2009                        104             583
December 31, 2008                      77             585
September 30, 2008                    114             681
June 30, 2008                          92             667
March 31, 2008                         98             688
December 31, 2007                     128             740
September 30, 2007                     89             746
June 30, 2007                          84             822
March 31, 2007                        113             848
December 31, 2006                     102             808

Contact Information

  • For further information, visit the APS website at www.amph.com or contact:
    Mr. Kenneth Shifrin, Chairman of the Board (or)
    Mr. Tim LaFrey, President (or)
    Mr. Marc Zimmermann, Chief Financial Officer
    American Physicians Service Group, Inc.
    1301 S. Capital of Texas Highway, C-300
    Austin, Texas 78746
    (512) 328-0888