FPIC INSURANCE GROUP, INC.
REPORTS THIRD QUARTER 2003 RESULTS
FPIC Fully Repays And Retires Early Its Commercial Bank Credit Facility
JACKSONVILLE, Fla. (Business Wire) - November 12, 2003 - FPIC Insurance Group,
Inc. ("FPIC") (Nasdaq: FPIC) today reported net income of $5.4 million,
or $0.55 per diluted share, for the third quarter 2003, compared to net income
of $4.4 million, or $0.47 per diluted share, for the third quarter 2002.
Net income was $11.6 million, or $1.22 per diluted share, for the nine months
ended September 30, 2003, an increase of $31.3 million, or $3.30 per diluted
share, when compared with a net loss of ($19.7) million, or ($2.08) per diluted
share, for the nine months ended September 30, 2002. During the first nine
months of 2002, the adoption of Financial Accounting Standard No. 142 "Goodwill
and Other Intangible Assets" resulted in a one-time, non-cash charge of $29.6
million, net of income taxes. Income before the cumulative effect of accounting
change was $9.9 million, or $1.04 per diluted share, for the nine months ended
September 30, 2002.
"The third quarter was another strong quarter for us," stated John R. Byers,
President and Chief Executive Officer, "as positive operating earnings continued
for the seventh consecutive quarter." Commenting on operational performance,
Byers said, "Operational momentum continues as we maintain our focus on pricing,
selective underwriting, strong claims management and streamlining the management
structure in our insurance segment." Further commenting on financial
performance, Byers added, "Along with the results from our insurance operations,
fee and commission income from our reciprocal management segment have been key
drivers of our financial performance throughout 2003." "We are pleased with our
progress," stated Byers.
Operating earnings were $4.6 million, or $0.47 per diluted share, for the third
quarter 2003, up from operating earnings of $3.2 million, or $0.34 per diluted
share, for the third quarter 2002. For the nine months ended September 30, 2003,
operating earnings were $10.4 million, or $1.09 per diluted share, up from
operating earnings of $8.6 million, or $0.91 per diluted share, for the nine
months ended September 30, 2002.
Operating earnings is a non-GAAP measure widely used in the insurance industry
to evaluate financial 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 Nine Months Ended
--------------------------------- -------------------------------
Reconciliation of Net Income (Loss) to Operating Earnings Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002
- ---------------------------------------------------------- ---------------- --------------- -------------- ---------------
Net income (loss) $ 5,381 4,415 11,639 (19,689)
---------------- --------------- -------------- ---------------
Adjustments to reconcile net income (loss)
to operating earnings:
Less: Net realized investment gains, net of
income taxes 789 1,210 1,192 1,298
Less: Cumulative effect of accounting change,
net of income taxes -- -- -- (29,578)
---------------- --------------- -------------- ---------------
Total adjustments 789 1,210 1,192 (28,280)
---------------- --------------- -------------- ---------------
Operating earnings $ 4,592 3,205 10,447 8,591
================ =============== ============== ===============
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Third Quarter and Nine Months 2003 Financial Highlights
-------------------------------------------------------
* Net income of $0.55 per diluted share and operating earnings of $0.47 per
diluted share for the third quarter 2003
* Income before cumulative effect of accounting change increased 22% quarter
over quarter and 18% for the first nine months of 2003 over the same period
in 2002
* Operating earnings up 43% quarter over quarter and 22% for the nine months
as compared to the same period last year
* Increases in assets, reserves, tangible book value and statutory surplus
since year-end
* 10% return on average equity for the trailing four quarters
Third Quarter 2003 Operational Review
-------------------------------------
* Favorable market conditions continued and overall policyholder retention
levels remain high
* Continued focus on core markets and products
* Overall claims results consistent with expectations
* Completion of mid-year reserve studies on core book of business confirming
reserve adequacy
* Continuation of selective underwriting and strong claims management
* Integration of management structure within insurance operations
Commenting on FPIC's capital initiatives, Byers stated, "As announced earlier,
we recently completed another $15 million private placement of trust preferred
securities. This private placement, together with two earlier $15 million
private placements, resulted in an aggregate of $45 million in proceeds, which
we have used to enhance our capital structure and to fully repay and retire
early our commercial bank credit facility. Our new debt structure, now
characterized by longer-term institutional debt, allows us more operational and
financial flexibility, enhances liquidity by significantly reducing our current
debt service requirements, and strengthens our balance sheet." For more
information regarding FPIC's most recent private placement, see FPIC's press
release dated October 29, 2003 and FPIC's Securities and Exchange Commission
("SEC") Form 8-K filed with the SEC on November 3, 2003. For more information
regarding FPIC's full payment and early retirement of its commercial bank credit
facility, see FPIC's press release dated November 12, 2003 and Form 8-K filed
with the SEC on November 12, 2003.
Byers concluded, "We have made significant progress toward achieving our
business and capital goals this year. The steps we have taken have allowed us to
move forward as a stronger, more focused organization for the long-term. We
remain committed to our overriding goal to create and maintain a strong, stable
and consistently profitable organization. We will continue to explore and
aggressively pursue opportunities available to us to best serve our customers
and build value for our shareholders."
For additional information regarding FPIC's financial position and results of
operations, see FPIC's SEC quarterly report on Form 10-Q for the third quarter
ended September 30, 2003 filed with the SEC on November 12, 2003.
Conference Call
---------------
FPIC will host a conference call at 11 a.m., Eastern Time, Thursday, November
13, 2003, to review third 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., President of First
Professionals Insurance Company, Inc. ("First Professionals"), 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.
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Questions can be submitted in advance of the call until 10 a.m., Eastern Time,
Thursday, November 13, 2003 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.
For individuals unable to participate in the conference call, a telephone replay
will be available beginning at 4:15 p.m., Eastern Time, Thursday, November 13,
2003 and ending at 11:59 p.m., Eastern Time, Saturday, November 15, 2003. To
access the telephone replay, dial (800) 475-6701 (USA) or (320) 365-3844
(International) and use the access code 673249. A replay of the conference call
webcast will also be available beginning at 1 p.m., Eastern Time, Thursday,
November 13, 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. FPIC also provides management and administration services
to Physicians' Reciprocal Insurers ("PRI"), 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 operations into First Professionals operations 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, PRI, for the preponderance of its revenue; and
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other risk factors discussed elsewhere within FPIC's Form 10-Q for the
quarter ended September 30, 2003, filed with the SEC on November 12,
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 Nine Months Ended
--------------------------- ----------------------------
Consolidated Statements of Income (Loss) Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002
- ----------------------------------------------------------------- --------------------------- ----------------------------
Revenues
Net premiums earned $ 40,895 30,435 $ 101,674 117,337
Claims administration and management fees 10,760 9,640 28,523 25,561
Net investment income 4,672 5,688 13,893 16,389
Commission income 2,192 2,391 6,565 4,426
Net realized investment gains 1,286 1,969 1,942 2,113
Finance charge and other income 279 284 757 770
------------- ------------ -------------- -------------
Total revenues 60,084 50,407 153,354 166,596
------------- ------------ -------------- -------------
Expenses
Net losses and loss adjustment expenses ("LAE") 36,985 30,549 93,285 105,733
Other underwriting expenses 3,489 2,226 8,521 15,612
Claims administration and management expenses 8,668 7,987 25,182 23,344
Interest expense 899 1,211 4,498 3,647
Other expenses 1,383 849 3,496 1,059
------------- ------------ -------------- -------------
Total expenses 51,424 42,822 134,982 149,395
------------- ------------ -------------- -------------
Income before income taxes and cumulative effect of
accounting change 8,660 7,585 18,372 17,201
Less: Income tax expense 3,279 3,170 6,733 7,312
------------- ------------ -------------- -------------
Income before cumulative effect of accounting change 5,381 4,415 11,639 9,889
Less: Cumulative effect of accounting change (net of an
$18,784 income tax benefit) -- -- -- 29,578
------------- ------------ -------------- -------------
Net income (loss) $ 5,381 4,415 $ 11,639 (19,689)
============= ============ ============== =============
Basic earnings (loss) per common share $ 0.57 0.47 $ 1.23 (2.10)
============= ============ ============== =============
Diluted earnings (loss) per common share $ 0.55 0.47 $ 1.22 (2.08)
============= ============ ============== =============
Basic weighted average common shares outstanding 9,493 9,391 9,443 9,385
============= ============ ============== =============
Diluted weighted average common shares outstanding 9,831 9,404 9,578 9,476
============= ============ ============== =============
Selected Consolidated Statement of Financial Position Information Sept 30, 2003 Dec 31, 2002
- ----------------------------------------------------------------- -------------- -------------
Total cash and investments $ 593,707 538,720
Total assets $ 1,139,647 1,026,431
Liability for losses and LAE $ 527,634 440,166
Liability for losses and LAE, net of reinsurance $ 288,581 272,007
Revolving credit facility $ 19,500 37,000
Trust preferred securities $ 20,000 --
Senior notes $ 10,000 --
Term loan $ -- 10,208
Total shareholders' equity $ 179,642 165,913
Book value per common share $ 18.83 17.67
Tangible book value per common share* $ 16.77 15.55
Common shares outstanding 9,539 9,391
Statutory surplus of insurance subsidiaries $ 131,121 125,470
* Excludes goodwill of $18,870 and $18,870 and intangible assets
of $838 and $1,034 as stated in consolidated balance sheet at
9/30/03 and 12/31/02, respectively
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
Selected Consolidated Cash Flow Information Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002
- ----------------------------------------------------------------- ---------------------------- ----------------------------
Net cash provided by operating activities $ 22,321 29,446 $ 49,290 52,045
Net cash provided by (used in) investing activities $ 1,096 (13,307) $ (32,722) (46,910)
Net cash provided by (used in) financing activities $ 928 (1,458) $ 1,438 (3,937)
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FPIC Insurance Group, Inc.
Unaudited Selected Financial Data (Continued)
(Dollars In Thousands)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
Sept 30, 2003 Sept 30, 2002 Sept 30, 2003 Sept 30, 2002
---------------------------- ----------------------------
Segment Reconciliation of Total Revenues
- --------------------------------------------------------------
Insurance $ 47,589 38,933 $ 119,457 138,232
Reciprocal management 10,620 9,432 26,460 21,852
Third party administration 4,210 4,157 12,349 11,208
Intersegment eliminations (2,335) (2,115) (4,912) (4,696)
------------- ------------- -------------- -------------
Total revenues $ 60,084 50,407 $ 153,354 166,596
============= ============= ============== =============
Segment Reconciliation of Net Income (Loss)
- --------------------------------------------------------------
Insurance $ 2,001 1,373 $ 4,276 5,180
Reciprocal management 3,032 2,635 6,576 (19,920)
Third party administration 348 407 787 (4,949)
------------- ------------- -------------- -------------
Net income (loss) $ 5,381 4,415 $ 11,639 (19,689)
============= ============= ============== =============
Selected Insurance Segment Information
- --------------------------------------------------------------
GAAP combined ratio:
- -------------------
Loss ratio 90% 100% 92% 90%
Underwriting expense ratio 9% 7% 8% 13%
------------- ------------- -------------- -------------
Combined ratio 99% 107% 100% 103%
============= ============= ============== =============
Direct and assumed premiums written $ 87,808 90,856 $ 276,738 270,540
============= ============= ============== =============
Net premiums written $ 46,624 (6,448)$ 121,491 106,912
============= ============= ============== =============
Net paid losses and LAE on professional liability claims $ 26,786 22,745 $ 77,527 71,784
============= ============= ============== =============
Average net paid loss per professional liability claim with
indemnity payment $ 196 192 $ 195 192
============= ============= ============== =============
Total professional liability claims and incidents reported
during the period 834 813 2,406 2,456
============= ============= ============== =============
Total professional liability claims with indemnity payment 71 67 202 229
============= ============= ============== =============
Total professional liability claims and incidents closed
without indemnity payment 358 366 1,268 1,298
============= ============= ============== =============
Professional liability policyholders (excludes fronting
arrangements):
Medical professional liability policyholders 14,169 15,368
Legal professional liability policyholders 166 2,079
-------------- -------------
Total professional liability policyholders 14,335 17,447
============== =============
Professional liability policyholders under fronting arrangements 2,444 5,104
- ---------------------------------------------------------------- ============== =============
Selected Reciprocal Management Segment Information
- --------------------------------------------------------------
Reciprocal premiums written under management $ 77,831 79,828 $ 158,642 155,043
As of
----------------------------
Sept 30, 2003 Sept 30, 2002
----------------------------
Reciprocal statutory assets under management $ 859,368 831,218
Professional liability policyholders under management 11,094 10,474
Selected Third Party Administration Segment Information
- --------------------------------------------------------------
Covered lives under employee benefit programs 106,925 106,411
Covered lives under workers' compensation programs 38,400 38,100
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