SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number: 000-32057
AMERICAN PHYSICIANS ASSURANCE CORPORATION 401(k) PLAN AND TRUST
(FULL TITLE OF PLAN)
AMERICAN PHYSICIANS CAPITAL, INC.
1301 N. HAGADORN ROAD
EAST LANSING, MI 48826-1471
(Name of Issuer of the Securities Held Pursuant to the Plan and the Address of
its Principal Executive Office)
Audited Financial Statements
and Supplemental Schedules
American Physicians Assurance Corporation
401(k) Plan and Trust
Years ended December 31, 2001 and 2000
with Reports of Independent Accountants
American Physicians Assurance Corporation
401(k) Plan and Trust
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 2001 and 2000
CONTENTS
Reports of Independent Accountants...........................................1
Financial Statements
Statements of Net Assets Available for Benefits..............................3
Statements of Changes in Net Assets Available for Benefits...................4
Notes to Financial Statements................................................5
Supplemental Schedules*
Schedule of Assets Held for Investment Purposes at End of Year..............11
* Other schedules required by Section 2520.103.10 of the Department of Labor and
Regulations and Disclosure Under ERISA have been omitted because they are not
applicable.
Report of Independent Accountants
To the Participants and Administrator of
American Physicians Assurance Corporation 401(k) Plan and Trust:
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of American Physicians Assurance Corporation 401(k) Plan and Trust (the "Plan")
at December 31, 2001, and the changes in net assets available for benefits for
the year ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at the end of year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Grand Rapids, Michigan
June 18, 2002
1
Report of Independent Accountants
To the Board of Directors
American Physicians Assurance Corporation 401(k) Plan and Trust:
We have audited the accompanying statements of assets available for benefits of
American Physicians Assurance Corporation 401(k) Plan and Trust as of December
31, 2000 and 1999, and the related statements of changes in assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of American Physicians
Assurance Corporation 401(k) Plan and Trust as of December 31, 2000 and 1999,
and the changes in its assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes at end of year and reportable transactions together
referred to as "supplemental information", are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental information is the
responsibility of the Plan's management. The supplemental information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Andrews Hooper & Pavlik P.L.C.
Okemos, Michigan
December 14, 2001
2
American Physicians Assurance Corporation
401(k) Plan and Trust
Statements of Net Assets Available for Benefits
December 31
2001 2000
----------- -----------
Investments:
Participant directed investment accounts $ 8,522,570 $ 9,977,568
Participant loans 74,753 129,321
----------- -----------
Total investments 8,597,323 10,106,889
Receivables:
Contributions from participating employers - 97,020
Other 3,816 6,407
----------- -----------
Total receivables 3,816 103,427
Cash surrender value of life insurance 2,486 8,227
Cash 4,076 9,406
----------- -----------
Net assets available for benefits $ 8,607,701 $10,227,949
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
AMERICAN PHYSICIANS ASSURANCE CORPORATION
401(k) Plan and Trust
Statements of Changes in Net Assets Available for Benefits
Year ended December 31
2001 2000
------------ ------------
ADDITIONS:
Participants' contributions $ 1,133,742 $ 1,118,554
Participating employers' contributions 549,903 150,384
Roll-over contributions - 130,094
Interest income 11,768 17,771
Other 2,994 1,091
------------ ------------
Total additions 1,698,407 1,417,894
DEDUCTIONS:
Benefits payments 2,381,787 1,095,182
Net realized and unrealized depreciation
in fair value of investments 934,568 748,897
Investment expenses 2,300 1,200
------------ ------------
Total deductions 3,318,655 1,845,279
------------ ------------
Net decrease in net assets available for benefits (1,620,248) (427,385)
Net assets available for benefits at beginning of year 10,227,949 10,655,334
------------ ------------
Net assets available for benefits at end of year $ 8,607,701 $ 10,227,949
============ ============
The accompanying notes are an integral part of the financial statements.
4
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements
December 31, 2001 and 2000
1. DESCRIPTION OF THE PLAN
The following is a description of the American Physicians Assurance Corporation
401(k) Plan and Trust ("the Plan") and provides only general information. Plan
participants should refer to the Plan agreement for a more complete description
of the Plan's provisions. The Plan was previously referred to as MICOA
Management Company, Inc. 401(k) Plan and Trust.
GENERAL
The Plan is a defined contribution plan covering employees of American
Physicians Assurance Corporation, Alpha Advisors, Inc., SCW Agency Group, Inc.
and KMA Insurance Agency, Inc. ("Participating Employers") who meet the
eligibility requirements under the Plan and who are employed on the first day of
the Plan year, or the first day of the seventh month of the Plan year coinciding
with the next following date such employee meets the eligibility requirements.
The Plan's operations are subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS
In 2000, participants could elect to defer and contribute up to 10 percent of
their pretax annual compensation, as defined in the Plan, not to exceed
limitations contained in Internal Revenue Code ("IRC") Section 402 (g), to the
Plan. In 2000, the Participating Employers had elected to make a matching
contribution of 25 percent of the participant's deferred compensation. Effective
January 1, 2001, the Plan was amended so that participants could elect to defer
and contribute up to 15 percent of their pretax annual compensation, as defined
in the Plan, subject to the IRC limitations discussed above, to the Plan. Also,
as a result of the amendment effective January 1, 2001, the Participating
Employers elected to make a contribution equal to 100 percent of the
participant's deferred compensation, up to three percent of the participant's
eligible compensation, and 50 percent of the participant's deferred compensation
which exceeds three percent but does not exceed five percent of the
participant's eligible compensation. Participants may also contribute amounts
representing distributions from other qualified defined benefit plans.
5
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PARTICIPANTS' ACCOUNTS
Each participant's account is credited with the Participating Employer's
contribution and an allocation of net Plan earnings. Allocations of Plan
earnings are based on the relative account balances of all participants as
defined in the Plan agreement. The benefit to which a participant is entitled in
the event of death, disability or separation from service, is the vested total
of the participant's account balance.
VESTING
Participants are immediately vested in both voluntary employee deferrals and
Participating Employers' contributions, plus earnings thereon.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may self-direct employee and employer
contributions in any of the investment options that are available under the
Plan.
PAYMENT OF BENEFITS
On termination of service, a participant may elect to receive a lump-sum amount
equal to the value of his or her account balance, or periodic installments over
the participant's life expectancy. If a participant's account balance is less
than $5,000, a single lump sum payment is required. Benefits are recorded when
paid. At December 31, 2001 and 2000 there were no unpaid benefits.
PARTICIPANT LOANS
A participant may borrow from the Plan an amount not in excess of 50% of the
participant's vested account balance. In no event can the participant borrow
more than $50,000. Loans are for a period not exceeding five years except, in
the case of loan proceeds used to acquire a principal residence. Loans bear
interest at an agreed-upon percentage based on prevailing market rates existing
at the time a participant loan is made and the loan must be adequately secured.
6
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan have been presented on the accrual basis.
INVESTMENT VALUATION
The current value of the units owned by the Plan in the investment accounts is
based on quoted redemption values on the last business day of the plan year.
The difference between the selling price, and cost of investments is reported as
net realized and unrealized appreciation or depreciation in the statement of
changes in net assets. The difference between fair market value and cost, or
previously stated fair market value of investments, is also reported as net
realized and unrealized appreciation or depreciation in the statements of
changes in net assets.
As of the valuation date, all income, as well as all investment gains and losses
shall be allocated to each participant's account in the proportion that each
participant's account balance bears to the total of all account balances for
each particular fund.
ADMINISTRATIVE EXPENSES
Administrative expenses, with the exception of certain investments expenses of
the Plan, were paid by the participating employers.
RISKS AND UNCERTAINTIES
The Plan's investments ultimately consist of stocks, bonds, fixed income
securities, and other investment securities. Investment securities are exposed
to various risks, such as interest rate, market and credit risks. Due to the
level of risk associated with certain investment securities, it is at least
reasonably possible that changes in values of investment securities will occur
in the near term and that such changes could materially affect participant
account balances and the amounts reported in the statement of net assets
available for benefits.
7
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported amounts of net assets
available for benefits and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of changes in net
assets available for benefits during the reporting period. Actual results could
differ from those estimates.
3. INVESTMENTS
Participants direct their entire account balance between 14 investment funds
through the service provider under contract with the trustee of the Plan.
Effective December 28, 2001, participant account balances were transferred to
new investment funds.
The Plan administrator has obtained certification from the service provider
under contract with the trustee of the Plan that such information is complete
and accurate. The Plan does not have any non-participant directed investments.
The Plan's investments are held by their respective investment manager.
8
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
At December 31, 2001, the following investments, at fair value, exceed five
percent of the value of Plan assets at January 1, 2001:
Small Cap Growth/Times Square Fund $1,507,281
Balanced/Dresdner RCM Fund 1,305,378
Janus Adviser Worldwide Account 1,289,797
Mid Cap Value/Wellington Management Fund 1,226,003
Alliance Growth & Income Fund 1,177,386
Guaranteed Income Fund 700,517
At December 31, 2000, the following investments, at fair value, exceed 5% of the
value of Plan assets at January 1, 2000:
Janus Worldwide Fund $ 1,945,673
Alliance Common Stock 1,381,230
Janus Balanced Fund 1,253,340
Neuberger & Berman Genesis Trust 1,082,842
Alliance Money Market 998,613
Neuberger & Berman Partners Trust 691,356
Scudder Growth and Income Fund 675,938
4. RELATED-PARTY TRANSACTIONS
During the years ended December 31, 2001 and 2000, there were no reportable
party-in-interest transactions. The Plan does not consider participating
employers' contributions to the Plan to be party-in-interest transactions.
9
American Physicians Assurance Corporation
401(k) Plan and Trust
Notes to Financial Statements (continued)
5. PLAN AMENDMENTS
The Plan was amended twice during 2001. The first of these two amendments,
effective January 1, 2001, allowed participants to increase the maximum
percentage that a participant can elect to defer from 10 percent to 15 percent
of the participant's compensation, and changed the methodology for determining
the matching contribution of the Participating Employers. Prior to January 1,
2001, the Participating Employer's made a matching contribution of 25 percent of
the Participant's deferred compensation. Effective January 1, 2001, the
participating Employers elected to make a matching contribution equal to 100
percent of the participant's deferred compensation, up to three percent of the
participant's eligible compensation, and 50 percent of the participant's
deferred compensation which exceeds three percent but does not exceed five
percent of the participant's eligible compensation.
The second amendment was effective March 15, 2001 and changed the name of the
Plan from MICOA 401(k) Plan and Trust to American Physicians Assurance
Corporation 401(k) Plan and Trust.
6. INCOME TAX STATUS
The Plan obtained its latest determination letter on June 24, 1998, in which the
Internal Revenue Service stated that the plan and related trust as then designed
were in accordance with applicable requirements of the IRC. Although the Plan
has been amended since receiving the determination letter, the Plan
administrator and the Plan's tax counsel believe that the Plan is designed, and
is currently being operated, in compliance with the applicable requirements of
the IRC.
7. PLAN TERMINATION
Although they have not expressed any intent to do so, the Participating
Employers have the right under the Plan to discontinue contributions at any time
and terminate the Plan subject to the provisions of ERISA.
10
American Physicians Assurance Corporation
401(k) Plan and Trust
Schedule H, line 4i
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2001
(b) Identity of Issue, Borrower, (c) Description of Investment Including Maturity Date, (e) Current
(a) Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value (d) Cost + Value
- ------------------------------------------------------------------------------------------------------------------------------------
* Connecticut General Life Insurance Company Guaranteed Income Fund $ 700,517
* Connecticut General Life Insurance Company Balanced/Dresdner RCM Fund 1,305,378
* Connecticut General Life Insurance Company Alliance Growth & Income Fund 1,177,386
* Connecticut General Life Insurance Company Large Cap Growth/Dresdner RCM Fund 451,837
* Connecticut General Life Insurance Company S&P 500 Index Fund 206,846
* Connecticut General Life Insurance Company Waddell & Reed Accumulative A Fund 372,272
* Connecticut General Life Insurance Company Mid Cap Value/Wellington Management Fund 1,226,003
* Connecticut General Life Insurance Company Small Cap Growth/Times Square Fund 1,507,281
* Connecticut General Life Insurance Company Janus Adviser Worldwide Account 1,289,797
* Connecticut General Life Insurance Company Templeton Foreign Account 285,253
-------------
8,522,570
Participant Loans Interest rates of 7.50% to 11.50% maturing between 74,753
2002 and 2008. -------------
Total Investments $ 8,597,323
=============
There were no assets reportable as both acquired and disposed of within
the plan year.
* Denotes a party-in-interest.
+ Information not required per Department of Labor reporting
requirements.
Employer identification number: 38-2102867
Three digit plan number: 002
11
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN PHYSICIANS ASSURANCE CORPORATION
401(k) PLAN AND TRUST
DATE: JUNE 28, 2002 /S/ MARGO RUNKLE
-----------------------------
MARGO RUNKLE, VICE PRESIDENT
OF HUMAN RESOURCES AND LEGAL
Exhibit Index
-------------
Exhibit 23.1 Consent of PricewaterhouseCoopers LLP (1)
Exhibit 23.2 Consent of Andrews, Hooper, & Pavlik P.L.C. (1)
(1) Filed herewith