Exhibit 99.1
AMERICAN PHYSICIANS SERVICE GROUP, INC. REPORTS
CONTINUED STRONG EARNINGS IN THE THIRD QUARTER
AUSTIN, TX – (MARKET WIRE) – 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.
For further information, visit the APS website atwww.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
AMERICAN PHYSICIANS SERVICE GROUP, INC. SELECTED FINANCIAL DATA | |||||
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(in thousands, except per share data) | September 30, |
| December 31, | ||
| 2009 |
| 2008 | ||
| (unaudited) |
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Assets |
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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 |
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Total assets | $ | 300,900 |
| $ | 283,554 |
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Liabilities |
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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 |
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| 7,568 |
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Total liabilities |
| 147,883 |
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| 147,089 |
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Total shareholders’ equity |
| 153,017 |
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| 136,465 |
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Total liabilities and shareholders’ equity | $ | 300,900 |
| $ | 283,554 |
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Shares outstanding |
| 6,893 |
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| 7,014 |
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Book value per share | $ | 22.20 |
| $ | 19.46 |
AMERICAN PHYSICIANS SERVICE GROUP, INC. | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
(Unaudited) | |||||||||||
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(in thousands, except per share data) | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
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| 2009 |
| 2008 |
| 2009 |
| 2008 | ||||
REVENUES |
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Gross premiums and maintenance fees written | $ | 21,446 |
| $ | 21,246 |
| $ | 53,668 |
| $ | 51,106 |
Premiums ceded |
| 676 |
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| 711 |
|
| 1,339 |
|
| 1,087 |
Change in unearned premiums & maintenance fees |
| (4,527) |
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| (6,248) |
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| (4,130) |
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| (4,536) |
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Net premiums and maintenance fees earned |
| 17,595 |
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| 15,709 |
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| 50,877 |
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| 47,657 |
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Investment income, net of investment expense |
| 2,460 |
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| 2,996 |
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| 7,677 |
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| 9,011 |
Realized capital gains (losses), net |
| 159 |
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| 743 |
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| (357) |
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| 757 |
Other-than-temporary impairments |
| (237) |
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| (1,217) |
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| (2,245) |
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| (5,069) |
Financial services |
| 2,320 |
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| 1,558 |
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| 5,595 |
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| 4,835 |
Other revenue |
| 71 |
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| 97 |
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| 173 |
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| 150 |
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Total revenues |
| 22,368 |
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| 19,886 |
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| 61,720 |
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| 57,341 |
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EXPENSES |
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Losses and loss adjustment expenses: |
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Current accident year losses |
| 11,183 |
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| 9,949 |
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| 33,699 |
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| 28,862 |
Prior year losses |
| (4,762) |
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| (7,690) |
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| (14,360) |
|
| (17,515) |
Total losses and loss adjustment expenses |
| 6,421 |
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| 2,259 |
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| 19,339 |
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| 11,347 |
Other underwriting expenses |
| 3,053 |
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| 3,220 |
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| 8,784 |
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| 8,322 |
Change in deferred policy acquisition costs |
| (331) |
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| (403) |
|
| (248) |
|
| (206) |
Financial services expenses |
| 2,207 |
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| 2,127 |
|
| 5,582 |
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| 8,013 |
General and administrative expenses |
| 1,335 |
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| 1,502 |
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| 3,723 |
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| 4,221 |
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Total expenses |
| 12,685 |
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| 8,705 |
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| 37,180 |
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| 31,697 |
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Income from operations |
| 9,683 |
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| 11,181 |
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| 24,540 |
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| 25,644 |
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Income tax expense |
| 3,241 |
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| 3,998 |
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| 8,447 |
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| 8,935 |
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Net income | $ | 6,442 |
| $ | 7,183 |
| $ | 16,093 |
| $ | 16,709 |
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Diluted income per share | $ | 0.92 |
| $ | 0.99 |
| $ | 2.28 |
| $ | 2.29 |
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Diluted weighted average shares outstanding |
| 6,989 |
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| 7,244 |
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| 7,073 |
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| 7,286 |
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Operating Income | $ | 6,493 |
| $ | 7,491 |
| $ | 17,784 |
| $ | 19,512 |
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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 September 30, |
| Nine Months Ended September 30, | ||||||||
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| 2009 |
| 2008 |
| 2009 |
| 2008 | ||||
Net Income | $ | 6,442 |
| $ | 7,183 |
| $ | 16,093 |
| $ | 16,709 |
Adjustments, net of tax effects: |
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Realized capital (gains) losses, net |
| (103) |
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| (483) |
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| 232 |
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| (492) |
Other-than-temporary impairments |
| 154 |
|
| 791 |
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| 1,459 |
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| 3,295 |
Operating Income | $ | 6,493 |
| $ | 7,491 |
| $ | 17,784 |
| $ | 19,512 |
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Per diluted share: |
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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 | ||||
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Claims History |
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| 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 |