SOURCE: American Physicians Service Group, Inc.

American Physicians Service Group, Inc.

March 01, 2010 16:00 ET

American Physicians Service Group, Inc. Reports Record Annual Earnings From Operations

AUSTIN, TX--(Marketwire - March 1, 2010) - American Physicians Service Group, Inc. ("APS") (NASDAQ: AMPH) today announced results for the quarter and year ended December 31, 2009. For the year ended December 31, 2009, revenues were $84 million compared to $74.7 million in 2008. Net income for the year was $22.9 million or $3.26 per diluted share, compared to $19.2 million or $2.64 per diluted share in 2008. For the three months ended December 31, 2009, revenues were $22.3 million compared to $17.4 million in 2008. Net income for the fourth quarter was $6.8 million or $.97 per diluted share, compared to $2.5 million or $.34 per diluted share, in 2008.

Ken Shifrin, APS Chairman of the Board, stated, "Operating and market performance were both excellent in 2009. Revenue was up 12%, net income was up 19%, income per diluted share was up 23% and book value per share was up 19%. Our share price grew by over 7%, significantly outpacing our peer group, and continuing a trend of steady increases since 2000, a remarkable achievement given market volatility during that time period."

Tim LaFrey, President of APS, added, "Our core insurance operations did very well in 2009. In spite of an industry-wide soft market, we experienced an excellent 90% retention rate and policyholder growth of 19%. Though we maintained our rigorous underwriting standards, we were able to grow in all of our markets. Claims activity remained favorable and, consequently, we experienced $7 million of favorable development in the quarter, compared to $4.8 million in the same period last year. For the year, favorable development was $24.2 million compared to $27.4 million in 2008. We continue to accrue our current accident year at the high-end of the actuarial range. On the investment side, we mitigated portfolio risk by significantly reducing our exposure to corporate and agency mortgage obligations, believing that safeguarding capital was wiser than maximizing yields in uncertain economic times."

Mr. LaFrey continued, "Our Financial Services business showed strength, completing its best quarter of the year. For the year, revenues were up 30% over the difficult 2008 period and, together with aggressive cost cutting, contributed to a return to profitability. We will continue to seek ways to expand profitability in this segment."

Mr. LaFrey concluded, "We are proud of our record earnings from operations in 2009, but equally as proud of our balance sheet. Our cash and investments grew by over $27 million during the year and our reserves per open claim are stronger than ever. Our equity reached a new high at $159 million, even while paying our annual dividend and repurchasing almost 200,000 of our common shares. As mentioned previously, book value per share also grew, reaching $23.15 from $19.46 at the end of 2008. We look forward to continuing our growth in 2010."

APS is an insurance and financial services firm with subsidiaries and affiliates that 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)
                                                  December 31, December 31,
                                                      2009         2008
                                                  ------------ ------------
Assets

Investments                                       $    241,061 $    209,709
Cash and cash equivalents                               18,277       22,060
Premiums receivable                                     15,678       17,186
Reinsurance recoverables                                 9,682       15,293
Deferred policy acquisition costs                        2,335        2,500
Deferred tax assets                                      6,015        9,488
Property and equipment, net                                406          590
Intangible assets                                        2,563        2,264
Income tax receivable                                      623          738
Prepaid and other assets                                 3,132        3,726
                                                  ------------ ------------
Total assets                                      $    299,772 $    283,554
                                                  ============ ============
Liabilities

Reserve for loss and loss adjustment expense      $     88,668 $     92,141
Unearned premiums                                       36,341       36,785
Funds held under reinsurance treaties                    2,379        3,978
Accrued expenses and other liabilities                   6,495        6,617
Mandatorily redeemable preferred stock                   6,679        7,568
                                                  ------------ ------------
Total liabilities                                      140,562      147,089
Total shareholders' equity                             159,210      136,465
                                                  ------------ ------------
Total liabilities and shareholders' equity        $    299,772 $    283,554
                                                  ============ ============

Shares outstanding                                       6,876        7,014

Book value per share                              $      23.15 $      19.46





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

(in thousands, except  per share       Three Months           Year
 data)                                    Ended               Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
REVENUES
  Gross premiums written            $ 11,762  $ 13,011  $ 65,430  $ 64,117
  Premiums ceded                         970       456     2,309     1,543
  Change in unearned premiums          4,574     2,956       444    (1,579)
                                    --------  --------  --------  --------
      Net premiums earned             17,306    16,423    68,183    64,081
  Investment income, net of
   investment expense                  2,432     3,093    10,109    11,999
  Realized capital gains (losses),
   net                                   170    (1,023)     (187)     (162)
  Other-than-temporary impairments      (100)   (2,518)   (2,345)   (7,587)
  Financial services                   2,426     1,358     8,021     6,193
  Other revenue                           57        75       230       225
                                    --------  --------  --------  --------
      Total revenues                  22,291    17,408    84,011    74,749
EXPENSES
  Losses and loss adjustment
   expenses:
    Current accident year losses      11,128    10,272    44,827    39,134
    Prior year losses                 (5,489)   (3,050)  (19,849)  (20,565)
                                    --------  --------  --------  --------
      Total losses and loss
       adjustment expenses             5,639     7,222    24,978    18,569
  Other underwriting expenses          2,277     2,752    11,061    11,074
  Change in deferred policy
   acquisition costs                     413       220       165        14
  Financial services expenses          2,323     1,735     7,905     9,749
  General and administrative
   expenses                            1,479     1,531     5,202     5,752
      Total expenses                  12,131    13,460    49,311    45,158
                                    --------  --------  --------  --------
      Income from operations          10,160     3,948    34,700    29,591
  Income tax expense                   3,388     1,493    11,835    10,428
                                    --------  --------  --------  --------
      Net income                    $  6,772  $  2,455  $ 22,865  $ 19,163
                                    ========  ========  ========  ========

  Diluted income per share          $   0.97  $   0.34  $   3.26  $   2.64
                                    ========  ========  ========  ========

  Diluted weighted average shares
   outstanding                         6,975     7,134     7,020     7,248
                                    ========  ========  ========  ========

  Operating Income                  $  6,727  $  4,757  $ 24,511  $ 24,200
                                    ========  ========  ========  ========

  Diluted operating income per
   share                            $   0.96  $   0.67  $   3.49  $   3.34
                                    ========  ========  ========  ========

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. We present this information to facilitate industry peer comparisons by investors and by outside industry analysts. 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            Year
                                          Ended               Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------- --------- ---------
Net Income                          $  6,772  $   2,455 $  22,865 $  19,163
   Adjustments, net of tax effects:
      Realized capital (gains)
       losses, net                      (110)       665       121       105
      Other-than-temporary
       impairments                        65      1,637     1,525     4,932
                                    --------  --------- --------- ---------
Operating Income                    $  6,727  $   4,757 $  24,511 $  24,200
                                    ========  ========= ========= =========
Per diluted share:
   Net Income                       $   0.97  $    0.34 $    3.26 $    2.64
   Effect of adjustments            $  (0.01) $    0.33 $    0.23 $    0.70
                                    --------  --------- --------- ---------
Diluted operating income per share  $   0.96  $    0.67 $    3.49 $    3.34
                                    ========  ========= ========= =========




SELECTED INSURANCE DATA FOR API, pre and post merger


Claims History
                                            Claims Reported   Open Claims
Date                                        in the Quarter  at Quarter End
                                            --------------- ---------------
December 31, 2009                                        90             572
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

Contact Information

  • For further information, visit the APS website at www.amph.com or contact:

    Mr. Kenneth Shifrin
    Chairman of the Board
    Mr. Tim LaFrey
    President
    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