SOURCE: American Physicians Service Group, Inc.

American Physicians Service Group, Inc.

August 04, 2009 16:00 ET

American Physicians Service Group, Inc. Reports Excellent Second Quarter Earnings

AUSTIN, TX--(Marketwire - August 4, 2009) - American Physicians Service Group, Inc. ("APS") (NASDAQ: AMPH) today announced results for the quarter and six months ended June 30, 2009. For the three months ended June 30, 2009, revenues were $20.1 million compared to $17.8 million for the same period last year. For the six months ended June 30, 2009, revenues were $39.4 million compared to $37.5 million in the same period last year. Net earnings for the first six months were $9.7 million or $1.36 per diluted share, compared to $9.5 million or $1.30 per diluted share in the same period last year. Net earnings for the second quarter were $4.9 million or $.70 per diluted share, compared to $6.1 million or $.84 per diluted share, in the same period last year.

Ken Shifrin, APS Chairman of the Board, stated, "We continue to deliver excellent performance results. Revenue was up 13% quarter-over-quarter, underwriting profits were solid, our Financial Services subsidiary had its first profitable quarter since the economic downturn began toward the end of 2007 and our book value per share increased to a record $20.88, even while paying our sixth consecutive annual dividend during the quarter. It was also gratifying to have some outside recognition of our performance with inclusion in the Russell 3000 index and a sixth place ranking on Fortune's Small Business 100 list."

Tim LaFrey, President of APS, added, "Favorable trends continued in our insurance operations. Net earned premium was up 15% compared to the second quarter of 2008, a result of a strong 92% retention rate, new business growth and lower ceding under our 2009 reinsurance treaty. Likewise, claims frequency continues to be favorable and outstanding claims continue to fall. We remain conservatively reserved at the upper end of the actuarial range and our reserve per open claim has increased over 18% since June 30, 2008, though we have not seen an adverse trend in claims frequency or severity. We have still experienced no defaults of principal or interest in our investment portfolio, but have continued to take a defensive position regarding non-agency CMOs and have reduced our holdings from $25 million at year-end to $8 million at the end of June. We believe that benefits from safeguarding our capital outweigh the sacrifice in short-term yield."

Mr. LaFrey continued, "Our Financial Services business had been in a loss situation since the economic crisis began in late 2007, but our cost cutting efforts and a modest uptick in activity generated a small profit this quarter. We will continue to monitor costs closely and work to restore this segment's contribution to our success."

Mr. Shifrin concluded, "We continue to strengthen our balance sheet, which permits us to reward shareholders with dividends and make share repurchases without limiting our ability to take advantage of business opportunities. We look forward to reporting our progress as we move into the second half of 2009."

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)

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

Investments                                       $    213,770 $    209,709
Cash and cash equivalents                               28,831       22,060
Premium and maintenance fees receivables                17,416       17,186
Reinsurance recoverables                                10,498       15,293
Deferred policy acquisition costs                        2,417        2,500
Deferred tax assets                                      9,089        9,488
Property and equipment, net                                491          590
Intangible assets                                        2,268        2,264
Federal income tax receivable                              838          738
Prepaid and other assets                                 3,230        3,726
                                                  ------------ ------------
Total assets                                      $    288,848 $    283,554
                                                  ============ ============
Liabilities

Reserve for loss and loss adjustment expense      $     90,403 $     92,141
Unearned premiums and maintenance fees                  36,389       36,785
Funds held under reinsurance treaties                    4,264        3,978
Trade accounts payable                                     699          290
Accrued expenses and other liabilities                   6,316        6,327
Federal income tax payable                                   -            -
Mandatorily redeemable preferred stock                   6,531        7,568
                                                  ------------ ------------
Total liabilities                                      144,602      147,089

Total shareholders' equity                             144,246      136,465
                                                  ------------ ------------
Total liabilities and shareholders’ equity        $    288,848 $    283,554
                                                  ============ ============

Shares outstanding                                       6,909        7,014

Book value per share                              $      20.88 $      19.46




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

(in thousands, except per share data)

                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
REVENUES

  Gross premiums and maintenance
   fees written                     $ 14,682  $ 15,124  $ 32,222  $ 29,860
  Premiums ceded                         335    (1,019)      663       376
  Change in unearned premiums &
   maintenance fees                    1,808       489       397     1,712
                                    --------  --------  --------  --------
     Net premiums and maintenance
      fees earned                     16,825    14,594    33,282    31,948

  Investment income, net of
   investment expense                  2,666     2,959     5,217     6,015
  Realized capital gains (losses),
   net                                  (142)      (35)     (517)       14
  Other-than-temporary impairments    (1,100)   (1,208)   (2,007)   (3,852)
  Financial services                   1,827     1,477     3,275     3,277
  Other revenue                           45        36       102        53
                                    --------  --------  --------  --------
     Total revenues                   20,121    17,823    39,352    37,455

EXPENSES

  Losses and loss adjustment
   expenses                            6,797     1,579    12,918     9,088
  Other underwriting expenses          2,510     2,498     5,731     5,102
  Change in deferred policy
   acquisition costs                     264       104        83       197
  Financial services expenses          1,747     3,316     3,375     5,886
  General and administrative
   expenses                            1,164     1,161     2,388     2,719
                                    --------  --------  --------  --------
     Total expenses                   12,482     8,658    24,495    22,992
                                    --------  --------  --------  --------

     Income from operations            7,639     9,165    14,857    14,463

  Income tax expense                   2,718     3,019     5,206     4,937
                                    --------  --------  --------  --------
     Net income                     $  4,921  $  6,146  $  9,651  $  9,526
                                    ========  ========  ========  ========

  Diluted income per share          $   0.70  $   0.84  $   1.36  $   1.30
                                    ========  ========  ========  ========

  Diluted weighted average shares
   outstanding                         7,007     7,284     7,089     7,305
                                    ========  ========  ========  ========

  Operating Income                  $  5,728  $  6,954  $ 11,292  $ 12,021
                                    ========  ========  ========  ========

  Diluted operating income per
   share                            $   0.82  $   0.95  $   1.59  $   1.65
                                    ========  ========  ========  ========

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  Six Months Ended
                                             June 30,          June 30,
                                        ----------------- -----------------
                                          2009     2008     2009     2008
                                        -------- -------- -------- --------

Net Income                              $  4,921 $  6,146 $  9,651 $  9,526
   Adjustments, net of tax effects:
      Add:
         Realized capital loss, net          807      808    1,641    2,495
                                        -------- -------- -------- --------
Operating Income                        $  5,728 $  6,954 $ 11,292 $ 12,021
                                        ======== ======== ======== ========
Per diluted share:
   Net Income                           $   0.70 $   0.84 $   1.36 $   1.30
   Effect of adjustments                $   0.12 $   0.11 $   0.23 $   0.35
                                        -------- -------- -------- --------
Diluted operating income per share      $   0.82 $   0.95 $   1.59 $   1.65
                                        ======== ======== ======== ========




SELECTED INSURANCE DATA FOR API, pre and post merger

Claims History

                         Claims Reported     Open Claims
Date                      in the Quarter    at Quarter End
                          --------------    --------------
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
September 30, 2006                   160               770

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