Exhibit 99
FPIC INSURANCE GROUP, INC.
REPORTS SECOND QUARTER 2003 RESULTS
JACKSONVILLE, Fla. (Business Wire) - August 13, 2003 - FPIC Insurance Group,
Inc. ("FPIC") (Nasdaq Symbol: FPIC) today reported net income of $3.5 million,
or $0.37 per diluted share, for the second quarter 2003, compared to net income
of $2.6 million, or $0.27 per diluted share, for the second quarter 2002.
Net income was $6.3 million, or $0.66 per diluted share, for the six months
ended June 30, 2003, an increase of $30.4 million, or $3.20 per diluted share,
when compared with a net loss of ($24.1) million, or ($2.54) per diluted share,
for the six months ended June 30, 2002. During the first six months of 2002, the
adoption of Financial Accounting Standard No. ("FAS") 142 "Goodwill and Other
Intangible Assets" resulted in a one-time, non-cash charge that reduced the
carrying value of goodwill by $29.6 million, net of income tax benefit. Net
income before cumulative effect of accounting change was $5.5 million, or $0.57
per diluted share, for the six months ended June 30, 2002.
"Continued positive earnings and a strengthened capital position highlight our
second quarter," stated John R. Byers, President and Chief Executive Officer.
"As demonstrated by our financial results and operational performance in the
second quarter, FPIC is making significant progress towards achieving our
current operational goals and building the Company for the long-term."
Operating earnings were $3.2 million, or $0.34 per diluted share, for the second
quarter 2003, up from operating earnings of $2.8 million, or $0.30 per diluted
share, for the second quarter 2002. For the six months ended June 30, 2003,
operating earnings were $5.9 million, or $0.62 per diluted share, up from
operating earnings of $5.4 million, or $0.57 per diluted share, for the six
months ended June 30, 2002.
Operating earnings is a non-GAAP financial measure widely used in the insurance
industry to evaluate underwriting performance over time. Operating earnings is
also an often-used tool of investors and analysts in our sector to facilitate
understanding of results by excluding the net effects of realized capital gains
and losses that are tied to the financial markets, and the cumulative effects of
accounting changes and other infrequent or non-recurring items, which can affect
comparability across reporting periods. The table below reconciles net income
(loss) to operating earnings.
Three Months Ended Six Months Ended
--------------------------------- -------------------------------
Reconciliation of Net Income (Loss)
to Operating Earnings June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
- ------------------------------------------------ ---------------- --------------- -------------- ---------------
Net income (loss) $ 3,498 2,609 6,258 (24,104)
---------------- --------------- -------------- ---------------
Adjustments to reconcile net income (loss) to
operating earnings:
Less: Net realized investment gains (losses),
net of income taxes 257 (199) 403 88
Less: Cumulative effect of accounting change,
net of income taxes -- -- -- (29,578)
---------------- --------------- -------------- ---------------
Total adjustments 257 (199) 403 (29,490)
---------------- --------------- -------------- ---------------
Operating earnings $ 3,241 2,808 5,855 5,386
================ =============== ============== ===============
Second Quarter and First Half 2003 Financial Highlights
-------------------------------------------------------
|X| Net income of $0.37 per diluted share and operating earnings of $0.34
per diluted share for the second quarter 2003
|X| Increased revenues and profits from reciprocal management and third-
party administration segments
|X| Increases in assets, reserves, tangible book value and consolidated
statutory surplus
|X| Full repayment of term loan and partial repayment of revolving credit
facility from the net proceeds of $30 million in private offerings
|X| 9.6% return on average equity for the trailing four quarters
Second Quarter 2003 Operational Review
--------------------------------------
|X| Continued hard market conditions and high policyholder retention levels
|X| Continued focus on core markets and products
|X| Overall claims results consistent with expectations
|X| Continued selective underwriting and strong claims management
|X| Continued consolidation of insurance operations
|X| Amendment to Hannover Re finite reinsurance agreement to extend through
2004 and provide flexibility in the amount of ceded premium
|X| Continued active participation in Florida tort reform initiatives
|X| Reaffirmation of A.M. Best rating
Commenting on second quarter 2003 operations, Mr. Byers, said, "Our operations
continue to be favorably impacted by significant pricing improvements and our
selective underwriting and strong claims management. We continue to focus on
consolidating our insurance operations and are working diligently to achieve
operating efficiencies in each of our business segments. These efforts have
improved our consolidated results and have helped to offset the downward
pressure we continue to see on investment yields."
Mr. Byers, commenting on capital initiatives, stated, "The $30 million in
private offerings that we completed during the second quarter allowed us to
replace a significant portion of our commercial bank debt with longer-term
institutional debt that is much less restrictive on our operations. We used the
remaining net proceeds from these offerings to contribute additional capital to
our insurance operations. Our new debt structure also reduces current debt
service requirements, which contributes to our stronger capital position.
"Also during the second quarter, we amended and extended our Hannover Re finite
reinsurance agreement. This agreement allows us to build business during current
hard market growth conditions without straining our capital leverage levels. As
amended, the agreement now allows us to adjust the amount of ceded premium as
our internal capital structure changes. This agreement is an ideal bridge to new
business for the Company."
Mr. Byers, concluded, "Our overriding priority in 2003 is to create and maintain
a strong, stable and consistently profitable organization. We are confident that
the steps we have already taken are the right ones and have positioned us well
to move forward as a stronger, more focused organization for the long-term. That
said, we will continue to explore and aggressively pursue opportunities
available to us for additional capacity in order to best serve our customers and
build value for our shareholders."
For additional information regarding the Company's financial position and
results of operations, see the Company's Securities and Exchange Commission
("SEC") quarterly report on Form 10-Q for the second quarter 2003 filed with the
SEC on August 13, 2003.
Conference Call
---------------
FPIC will host a conference call at 11 a.m., Eastern Time, Thursday, August 14,
2003, to review second quarter 2003 results. Mr. Byers and Kim D. Thorpe,
FPIC's Executive Vice President and Chief Financial Officer, will host the call.
Messrs. Byers and Thorpe, together with Robert E. White, Jr., the President of
First Professionals Insurance Company, Inc., FPIC's largest insurance
subsidiary, will take questions on an interactive basis from FPIC's analysts and
investors. To access the conference call, please dial (888) 428-4479 (USA) or
(651) 291-0900 (International).
The conference call will also be broadcast live over the Internet in a
listen-only format via FPIC's corporate website at http://www.fpic.com. To
access the call from FPIC's home page, click on "Investor Relations" and a
conference call link will be provided to connect listeners to the broadcast.
Questions can be submitted either during the call or in advance of the call via
e-mail at ir@fpic.com or through FPIC's corporate website at
http://www.fpic.com, where a link on the "Investor Relations" page has been
provided.
2
For individuals unable to participate in the conference call, a telephone replay
will be available beginning at 4:15 p.m., Eastern Time, Thursday, August 14,
2003 and ending at 11:59 p.m., Eastern Time, Saturday, August 16, 2003. To
access the telephone replay, dial (800) 475-6701 (USA) or (320) 365-3844
(International) and use the access code 673248. A replay of the conference call
webcast will also be available beginning at 1 p.m., Eastern Time, Thursday,
August 14, 2003 on FPIC's website.
Corporate Profile
-----------------
FPIC Insurance Group, Inc., through its subsidiary companies, is a leading
provider of professional liability insurance for physicians, dentists and other
healthcare providers, primarily in Florida and Missouri. FPIC also provides
management and administration services to Physicians' Reciprocal Insurers, a New
York medical professional liability insurance reciprocal, and third-party
administration services both within and outside the healthcare industry.
Safe Harbor Disclosure
----------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Any written or oral statements made by or on
behalf of FPIC may include forward-looking statements, which reflect our current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors include, but are not limited
to:
i) Uncertainties relating to government and regulatory policies (such
as subjecting FPIC to insurance regulation or taxation in additional
jurisdictions or amending, revoking or enacting any laws,
regulations or treaties affecting our current operations);
ii) The occurrence of insured or reinsured events with a frequency or
severity exceeding our estimates;
iii) Legal developments, including claims for extra-contractual
obligations or in excess of policy limits in connection with the
administration of insurance claims;
iv) Developments in global financial markets that could affect our
investment portfolio and financing plans;
v) The impact of surplus constraints on growth;
vi) Developments in reinsurance markets that could affect our
reinsurance programs;
vii) The impact of mergers and acquisitions, including the ability to
successfully integrate acquired businesses and achieve cost savings,
competing demands for our capital and the risk of undisclosed
liabilities;
viii) The ability to integrate Anesthesiologists Professional Assurance
Company's ("APAC") operations into First Professionals Insurance
Company, Inc.'s ("First Professionals") and achieve associated cost
savings;
ix) Risk factors associated with financing and refinancing, including
the willingness of credit institutions to provide financing and the
availability of credit generally;
x) The competitive environment in which FPIC operates, including
reliance on agents to place insurance, physicians electing to
practice without insurance coverage, related trends and associated
pricing pressures and developments;
xi) The actual amount of new and renewal business;
xii) Rates, including rates on excess policies, being subject to or
mandated by legal requirements and regulatory approval, which could
affect our business or reinsurance arrangements;
xiii) The loss of the services of any of our executive officers;
xiv) The uncertainties of the loss reserving process;
xv) The ability to collect reinsurance recoverables;
xvi) Changes in our financial ratings resulting from one or more of
these uncertainties or other factors and the potential impact on our
agents' ability to place insurance business on behalf of FPIC;
xvii) The dependence of the reciprocal management segment upon a single
major customer, Physicians' Reciprocal Insurers ("PRI"), for the
preponderance of its revenue; and
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other risk factors discussed elsewhere within the Company's Form 10-Q for
the quarter ending June 30, 2003, filed with the SEC on August 13, 2003,
and in FPIC's Form 10-K for the year ended December 31, 2002, filed with
the SEC on March 28, 2003.
The words "believe," "anticipate," "foresee," "estimate," "project," "plan,"
"expect," "intend," "hope," "should," "will," "will likely result" or "will
continue" and variations thereof or similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. FPIC undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law.
Contact
-------
Roberta Goes Cown
Senior Vice President and Corporate Counsel
(904) 354-2482, Extension 3287
For all your investor needs, FPIC is on the Internet at
http://www.fpic.com
Got a Tough Question? E-mail us at ir@fpic.com
FPIC: Providing Answers in a Changing Market
4
FPIC Insurance Group, Inc.
Unaudited Selected Financial Data
(Dollars In Thousands, Except Share Data)
Three Months Ended Six Months Ended
---------------------------- ----------------------------
Consolidated Statements of Income (Loss) June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
- ----------------------------------------------------------------- ---------------------------- ----------------------------
Revenues
Net premiums earned $ 31,870 47,560 $ 60,779 86,902
Claims administration and management fees 9,098 8,291 17,762 15,921
Net investment income 4,719 5,813 9,221 10,701
Commission income 2,789 1,162 4,373 2,036
Net realized investment gains (losses) 418 (324) 656 144
Finance charge and other income 247 257 479 486
------------- ------------ -------------- -------------
Total revenues 49,141 62,759 93,270 116,190
------------- ------------ -------------- -------------
Expenses
Net losses and loss adjustment expenses ("LAE") 29,666 41,358 56,300 75,183
Other underwriting expenses 2,167 6,687 5,032 13,386
Claims administration and management expenses 8,171 7,947 16,513 15,357
Interest expense 3,530 1,254 5,571 2,470
Other expenses 71 106 141 177
------------- ------------ -------------- -------------
Total expenses 43,605 57,352 83,557 106,573
------------- ------------ -------------- -------------
Income before income taxes and cumulative effect of
accounting change 5,536 5,407 9,713 9,617
Less: Income tax expense 2,038 2,798 3,455 4,143
------------- ------------ -------------- -------------
Income before cumulative effect of accounting change 3,498 2,609 6,258 5,474
Less: Cumulative effect of accounting change (net of an
$18,784 income tax benefit) -- -- -- 29,578
------------- ------------ -------------- -------------
Net income (loss) $ 3,498 2,609 $ 6,258 (24,104)
============= ============ ============== =============
Basic earnings (loss) per common share $ 0.37 0.28 $ 0.66 (2.57)
============= ============ ============== =============
Diluted earnings (loss) per common share $ 0.37 0.27 $ 0.66 (2.54)
============= ============ ============== =============
Basic weighted average common shares outstanding 9,425 9,390 9,417 9,382
============= ============ ============== =============
Diluted weighted average common shares outstanding 9,533 9,516 9,474 9,507
============= ============ ============== =============
Selected Consolidated Statement of Financial Position Information June 30, 2003 Dec 31, 2002
- ----------------------------------------------------------------- -------------- -------------
Total cash and investments $ 572,744 538,720
Total assets $ 1,092,720 1,026,431
Liability for losses and LAE $ 495,306 440,166
Liability for losses and LAE, net of reinsurance $ 276,840 272,007
Revolving credit facility $ 19,500 37,000
Trust preferred securities $ 20,000 --
Senior notes $ 10,000 --
Term loan $ -- 10,208
Total shareholders' equity $ 176,033 165,913
Book value per common share $ 18.63 17.67
Tangible book value per common share* $ 16.54 15.55
Common shares outstanding 9,449 9,391
Consolidated statutory surplus $ 132,389 125,470
* Excludes goodwill of $18,870 and $18,870 and intangible assets of $893 and
$1,034 as stated in consolidated balance sheet at 6/30/03 and 12/31/02,
respectively
Three Months Ended Six Months Ended
---------------------------- ----------------------------
Selected Consolidated Cash Flow Information June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
- ----------------------------------------------------------------- ---------------------------- ----------------------------
Net cash provided by operating activities $ 3,682 9,575 $ 26,969 22,599
Net cash used in investing activities $ (12,653) (17,483) $ (33,818) (33,603)
Net cash provided by (used in) financing activities $ 1,823 (1,445) $ 510 (2,479)
FPIC Insurance Group, Inc.
Unaudited Selected Financial Data (Continued)
(Dollars In Thousands)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------------------------ ------------------------------
Segment Reconciliation of Total Revenues
- --------------------------------------------------------------
Insurance $ 37,628 53,914 $ 71,869 99,300
Reciprocal management 8,708 6,793 15,840 12,420
Third party administration 4,130 3,586 8,138 7,051
Intersegment eliminations (1,325) (1,534) (2,577) (2,581)
------------- ------------- -------------- -------------
Total revenues $ 49,141 62,759 $ 93,270 116,190
============= ============= ============== =============
Segment Reconciliation of Net Income (Loss)
- --------------------------------------------------------------
Insurance $ 983 1,582 $ 2,275 3,807
Reciprocal management 2,206 1,067 3,544 (22,555)
Third party administration 309 (40) 439 (5,356)
------------- ------------- -------------- -------------
Net income (loss) $ 3,498 2,609 $ 6,258 (24,104)
============= ============= ============== =============
Selected Insurance Segment Information
- --------------------------------------------------------------
GAAP combined ratio:
Loss ratio 93% 87% 93% 87%
Underwriting expense ratio 7% 14% 8% 15%
------------- ------------- -------------- -------------
Combined ratio 100% 101% 101% 102%
============= ============= ============== =============
Direct and assumed premiums written $ 84,395 90,426 $ 188,929 179,684
============= ============= ============== =============
Net premiums written $ 35,871 57,164 $ 74,867 113,359
============= ============= ============= =============
Net paid losses and LAE on professional liability claims $ 27,914 29,038 $ 50,740 49,038
============= ============= ============== =============
Average net paid loss per professional liability claim with
indemnity payment $ 226 213 $ 195 192
============= ============= ============== =============
Total professional liability claims and incidents reported
during the period 745 861 1,572 1,643
============= ============= ============== =============
Total professional liability claims with indemnity payment 66 91 131 162
============= ============= ============== =============
Total professional liability claims and incidents closed
without indemnity payment 567 560 910 932
============= ============= ============== =============
Professional liability policyholders (excludes policyholders
under fronting arrangements) 14,951 16,753
Professional liability policyholders under fronting arrangements 2,966 5,493
Selected Reciprocal Management Segment Information
- --------------------------------------------------------------
Reciprocal premiums written under management $ 50,165 49,147 $ 80,811 75,215
As of
------------------------------
June 30, 2003 June 30, 2002
------------------------------
Reciprocal statutory assets under management $ 798,068 811,145
Professional liability policyholders under management 10,840 10,364
Selected Third Party Administration Segment Information
- --------------------------------------------------------------
Covered lives under employee benefit programs 105,950 108,445
Covered lives under workers' compensation programs 38,300 37,700