Exhibit 99
AMERICAN PHYSICIANS CAPITAL, INC. REPORTS FIRST QUARTER 2006 RESULTS
PR Newswire -- April 27, 2006
EAST LANSING, Mich., April 27 /PRNewswire-FirstCall/ -- American Physicians
Capital, Inc. (APCapital) (Nasdaq: ACAP) today announced net income of $8.9
million or $1.05 per diluted common share for the first quarter of 2006. This
compares to net income of $7.3 million, or $.82 per diluted common share for the
2005 first quarter.
"We have successfully implemented our business strategy and remain committed to
maximizing shareholder value," said President and Chief Executive Officer R.
Kevin Clinton. "Even though we are beginning to experience increased competition
in the market place, our innovative underwriting approach should allow us to
identify and select lower risk accounts and maintain our underwriting margins."
In the first quarter of 2006, the Company made four important changes to its
financial reporting and operating practices.
1. Due to the insignificance of the run-off on non-medical professional
liability business, we are now reporting all operating results as one segment.
Previously, we had reported these run-off results as the "Other Insurance"
segment.
2. As a result of a change in the ownership status of PIC Florida, we are no
longer consolidating the results of PIC Florida into the accounts of APCapital.
Our investment in PIC Florida is now reported utilizing the "equity method" of
accounting.
3. Effective January 1, 2006, we began expensing the remaining unvested options.
In the first quarter of 2006 we recognized an incremental option expense of
$147,800.
4. We modified our reinsurance agreement effective January 1, 2006, whereby we
retain 50% of any loss over $500,000 up to our highest policy limit of $2.0
million. However, the majority of policies have limits of $1.0 million or less.
In addition, our reinsurance treaty is no longer swing- rated.
Consolidated Income Statement
(Dollars in thousands)
Three Months Ended
March 31,
------------------------
2006 2005
---------- ----------
Direct Premiums Written:
APCapital $ 41,521 $ 48,124
PIC Florida - 1,818
$ 41,521 $ 49,942
Net Premiums Written $ 38,965 $ 42,231
Net Premiums Earned $ 37,443 $ 43,893
Incurred Loss and Loss Adjustment Expenses:
Current Accident Year Losses 28,985 36,077
Prior Year Losses (2,108) (228)
Total 26,877 35,849
Underwriting Expenses 7,677 9,130
Underwriting Income (Loss) 2,889 (1,086)
Investment Income 11,103 10,642
Other Income (1) 489 168
Other Expenses (1,309) (2,133)
Pre-tax Income 13,172 7,591
Federal Income Taxes 4,309 170
Minority Interest - (89)
Net Income $ 8,863 $ 7,332
Loss Ratio:
Current Accident Year 77.4% 82.2%
Prior Year Development -5.6% -0.5%
Calendar Year 71.8% 81.7%
Underwriting Expense Ratio 20.5% 20.8%
Combined Ratio 92.3% 102.5%
(1) Includes realized gains and losses
Direct premiums written were $41.5 million in the first quarter of 2006, down
$8.4 million or 16.9% from the same period a year ago. This decrease was
partially caused by the impact of no longer consolidating PIC Florida ($1.8
million) and the exit from the health line ($1.1 million). In addition, we have
experienced price competition in selected markets causing premium reductions in
Illinois, Kentucky and Michigan. Net premiums earned in the first quarter of
2006 were down $6.5 million or 14.7% from the first quarter of 2005. The decline
in net premiums earned was not as great as the decline in direct premiums
written due to the change in reinsurance terms. The insured physician
policies-in-force count at March 31, 2006 totaled 9,472, which is down less than
1% from the end of 2005.
The 2006 first quarter loss ratio was 71.8% with $2.1 million of positive
development from prior accident years. This represents a significant improvement
from the 81.7% loss ratio reported in the first quarter of 2005. The improved
loss ratio is the result of past rate increases and the improved
book-of-business we have developed over the last four years. On an accident year
basis, the loss ratio has decreased from 82.2% in the first quarter of 2005 to
77.4% in the first quarter of 2006. The number of claims reported in the first
quarter of 2006 was 308, down from 347 in the fourth quarter of last year and
404 reported in the first quarter of 2005.
The underwriting expense ratio was relatively flat at 20.5% for the first
quarter of 2006. Other expenses are down $824,000 or 38.6% due to lower
Sarbanes-Oxley/404 costs, intangibles being fully amortized, and lower
investment expenses.
Investment Income
Investment income was $11.1 million in the first quarter of 2006, compared to
$10.6 million for the same period in 2005. The overall investment yields
increased from 5.14% in the first quarter 2005 to 5.28% in the first quarter of
2006. In the first quarter of 2006, we purchased $192.5 million of tax- exempt
securities. We now have a 24.5% allocation of our cash and investment portfolio
in tax-exempt securities. The average return on these tax-exempt securities is
3.8%. As a result, we anticipate our gross investment returns to decline in the
future.
Balance Sheet and Equity Information
APCapital's total assets were $1.089 billion at March 31, 2006, down $20.1
million from December 31, 2005. At March 31, 2006, the Company's total
shareholders' equity was $263.0 million, up from $261.2 million at December 31,
2005, as a result of our first quarter net income. However, net unrealized gains
on the Company's available-for-sale investments decreased $1.9 million, net of
tax, during the first quarter of 2006 and the Company utilized $6.1 million of
equity to repurchase shares in the quarter.
APCapital's book value per common share was $31.93 at March 31, 2006, based on
8,235,582 common shares outstanding, compared to $31.35 at December 31, 2005.
Stock Repurchase Program
The Company repurchased 127,500 shares of its common stock during the first
quarter of 2006 at an average cost of $47.92 per share. Under the November 2,
2005 authorization, the Company has approximately 282,400 shares available for
repurchase at March 31, 2006. On April 6, 2006, the Company's Board of Directors
authorized an additional share repurchase of $20 million of its common shares.
The Board also adopted a plan under Rule 10b5-1 of the Securities Exchange Act
of 1934 to repurchase its common shares pursuant to this authorization.
Outlook
"We are pleased with the continued profitability of our Company," said Clinton.
"We have enhanced our shareholder value through our strong operating results and
share repurchase program. We continue to evaluate opportunities to further
increase shareholder value."
Conference Call
APCapital's website, http://www.apcapital.com , will host a live Webcast of its
conference call in a listen-only format to discuss 2006 first quarter results on
April 28, 2006 at 10:00 a.m. Eastern time. An archived edition of the Webcast
can be accessed by going to the Company's website and selecting "For Investors,"
then "Webcasts." For individuals unable to access the Webcast, a telephone
replay will be available by dialing 1-888-286-8010 or (617) 801-6888 and
entering the conference ID code: 39799490. The replay will be available through
11:59 p.m. Eastern time on May 2, 2006.
Corporate Description
American Physicians Capital, Inc. is a regional provider of medical professional
liability insurance focused primarily in the Midwest markets through American
Physicians Assurance Corporation and its other subsidiaries. Further information
about the companies is available on the Internet at http://www.apcapital.com .
Forward-Looking Statement
Certain statements made by American Physicians Capital, Inc. in this release may
constitute forward-looking statements within the meaning of the federal
securities laws. When we use words such as "will," "should," "believes,"
"expects," "anticipates," "estimates" or similar expressions, or make statements
in the section titled "Outlook," we are making forward-looking statements. While
we believe any forward-looking statements we have made are reasonable, they are
subject to risks and uncertainties, and actual results could differ materially.
These risks and uncertainties include, but are not limited to, the following:
* increased competition could adversely affect our ability to sell our products
at premium rates we deem adequate, which may result in a decrease in premium
volume, a decrease in our profitability, or both;
* our reserves for unpaid losses and loss adjustment expenses are based on
estimates that may prove to be inadequate to cover our losses;
* our exit from various markets and lines of business may prove more costly than
originally anticipated;
* tort reform legislation may have adverse or unintended consequences that could
materially and adversely affect our results of operations and financial
condition;
* if we are unable to obtain or collect on ceded reinsurance, our results of
operations and financial condition may be adversely affected;
* the insurance industry is subject to regulatory oversight that may impact the
manner in which we operate our business;
* our geographic concentration in certain Midwestern states and New Mexico ties
our performance to the business, economic, regulatory and legislative conditions
in those states;
* an interruption or change in current marketing and agency relationships could
reduce the amount of premium we were able to write;
* a downgrade in the financial strength rating of our insurance subsidiaries
could reduce the amount of business we were able to write;
* changes in interest rates could adversely impact our results of operation,
cash flows and financial condition;
* our status as an insurance holding company with no direct operations could
adversely affect our ability to meet our debt obligations and fund future share
repurchases;
* any other factors listed or discussed in the reports filed by APCapital with
the Securities and Exchange Commission under the Securities Exchange Act of
1934.
APCapital does not undertake, and expressly disclaims any obligation, to update
or alter its statements whether as a result of new information, future events or
otherwise, except as required by law.
Definition of Non-GAAP Financial Measures
The Company uses operating income, a non-GAAP financial measure, to evaluate
APCapital's underwriting performance. Operating income differs from net income
by excluding the after-tax effect of realized capital gains and (losses).
Although the investment of premiums to generate investment income and capital
gains or (losses) is an integral part of an insurance company's operations, the
Company's decisions to realize capital gains or (losses) are independent of the
insurance underwriting process. In addition, under applicable GAAP accounting
requirements, losses may be recognized for accounting purposes as the result of
other than temporary declines in the value of investment securities, without
actual realization. APCapital believes that the level of realized gains and
(losses) for any particular period is not indicative of the performance of our
ongoing underlying insurance operations in a particular period. As a result, the
Company believes that providing operating income (loss) information makes it
easier for users of APCapital's financial information to evaluate the success of
the Company's underlying insurance operations.
In addition to the Company's reported loss ratios, management also uses accident
year loss ratios, a non-GAAP financial measure, to evaluate the Company's
current underwriting performance. The accident year loss ratio excludes the
effect of prior years' loss reserve development. APCapital believes that this
ratio is useful to investors as it focuses on the relationships between current
premiums earned and losses incurred related to the current year. Although
considerable variability is inherent in the estimates of losses incurred related
to the current year, the Company believes that the current estimates are
reasonable.
Summary Financial Information
APCapital, Inc.
March 31, December 31,
Balance Sheet Data 2006 2005
- --------------------------------------------- ------------ ------------
(In thousands, except
per share data)
Assets:
Available-for-sale - bonds $ 250,422 $ 224,101
Held-to-maturity - bonds 495,158 345,702
Other invested assets 14,091 11,568
Cash and cash equivalents 94,487 272,988
Cash and investments 854,158 854,359
Premiums receivable 44,701 50,729
Reinsurance recoverable 107,491 109,368
Deferred federal income taxes 40,938 44,039
Other assets 41,943 50,833
Total assets $ 1,089,231 $ 1,109,328
Liabilities and Shareholders' Equity:
Unpaid losses and loss adjustment
expenses $ 685,481 $ 689,857
Unearned premiums 77,893 82,098
Long-term debt 30,928 30,928
Other liabilities 31,940 42,592
Total liabilities 826,242 845,475
Minority interest in consolidated
subsidiary - 2,641
Common stock - -
Additional paid-in-capital 69,140 74,444
Retained earnings 188,611 179,748
Unearned stock compensation - (84)
Accumulated other comprehensive income:
Net unrealized appreciation on
investments, net of deferred
federal income taxes 5,238 7,104
Shareholders' equity 262,989 261,212
Total liabilities and
shareholders' equity $ 1,089,231 $ 1,109,328
Shares outstanding 8,236 8,333
Book value per share $ 31.93 $ 31.35
Summary Financial Information
APCapital, Inc.
Three Months Ended
March 31,
---------------------------
Income Statement 2006 2005
- --------------------------------------------- ------------ ------------
(In thousands, except
per share data)
Direct premiums written $ 41,521 $ 49,942
Net premiums written $ 38,965 $ 42,231
Net premiums earned $ 37,443 $ 43,893
Investment income 11,103 10,642
Net realized gains (losses) 12 (66)
Other income 477 234
Total revenues 49,035 54,703
Losses and loss adjustment expenses 26,877 35,849
Underwriting expenses 7,677 9,130
Other expenses 1,309 2,133
Total expenses 35,863 47,112
Income before income taxes and
minority interests 13,172 7,591
Federal income tax expense 4,309 170
Income before minority interests 8,863 7,421
Minority interest in net income of
consolidated subsidiary - (89)
Net income $ 8,863 $ 7,332
Adjustments to reconcile net income
to operating income:
Net income $ 8,863 $ 7,332
Add back:
Realized (gains) losses, net of tax (8) 43
Net operating income $ 8,855 $ 7,375
Ratios:
Loss ratio (1) 71.8% 81.7%
Underwriting ratio (2) 20.5% 20.8%
Combined ratio (3) 92.3% 102.5%
Earnings per share data:
Net income
Basic $ 1.07 $ 0.85
Diluted $ 1.05 $ 0.82
Net operating income
Basic $ 1.07 $ 0.85
Diluted $ 1.05 $ 0.83
Basic weighted average shares
outstanding 8,265 8,648
Diluted weighted average shares
outstanding 8,455 8,919
(1) The loss ratio is calculated by dividing incurred loss and loss adjustment
expenses by net premiums earned.
(2) The underwriting ratio is calculated by dividing underwriting expenses by
net premiums earned.
(3) The combined ratio is the sum of the loss and underwriting ratios.
Summary Financial Information
APCapital, Inc.
For the Three Months Ended
March 31,
----------------------------
Selected Cash Flow Information 2006 2005
- --------------------------------------------- ------------ ------------
(In thousands)
Net cash provided by operating activities $ 8,757 $ 1,024
Net cash used in investing activities $ (181,904) $ (89,631)
Net cash (used in) provided by
financing activities $ (5,354) $ 900
Net decrease in cash and cash equivalents $ (178,501) $ (87,707)
APCapital, Inc.
Supplemental Statistics
Medical Professional Liability
Reported
Three Months Ended Claim Count
- --------------------- -----------
March 31, 2006 308
December 31, 2005 347
September 30, 2005 361
June 30, 2005 401
March 31, 2005 404
December 31, 2004 371
September 30, 2004 431
June 30, 2004 459
March 31, 2004 525
Net Premium Earned (in thousands)
------------------------------------------
APCapital
Excluding
PIC
Three Months Ended Florida PIC Florida Total
- ---------------------- ------------ ------------ ------------
March 31, 2006 $ 37,443 $ - $ 37,443
December 31, 2005 39,918 671 40,589
September 30, 2005 39,305 975 40,280
June 30, 2005 39,677 869 40,546
March 31, 2005 41,356 799 42,155
December 31, 2004 42,914 737 43,651
September 30, 2004 43,496 673 44,169
June 30, 2004 43,045 514 43,559
March 31, 2004 42,074 382 42,456
Average Net Average Net
Open Case Reserve Paid Claim
Claim Per Open Average Net (Trailing Four
Three Months Ended Count Claim Paid Claim Quarter Average)
- ---------------------- -------- ------------ ------------ ---------------
March 31, 2006 2,976 $ 120,400 $ 108,100 $ 78,800
December 31, 2005 2,991 122,400 69,100 75,900
September 30, 2005 3,109 119,100 77,300 67,900
June 30, 2005 3,211 116,300 72,500 68,200
March 31, 2005 3,344 114,900 85,800 65,200
December 31, 2004 3,342 117,000 50,500 59,300
September 30, 2004 3,803 103,300 78,100 60,800
June 30, 2004 3,885 100,100 61,000(1) 62,400
March 31, 2004 4,103 95,400 55,200 62,200
Retention Ratio
--------------------------------------------------------
Three Months Ended Year Ended Three Months Ended
March 31, 2005 2005 March 31, 2006
------------------ -------------- ------------------
Illinois 68% 75% 79%
Kentucky 61% 64% 80%
Michigan 87% 84% 85%
New Mexico 86% 89% 82%
Ohio 84% 82% 85%
Total (all states) 79% 82% 82%
Notes:
All values, except net premiums earned, exclude experience from investment in
Physicians Insurance Company (Florida).
(1) Average net paid claim data excludes the effect of Gerling Global
commutation.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020123/ACAPLOGO )
SOURCE American Physicians Capital, Inc.
-0- 04/27/2006
/CONTACT: Ann Storberg, Investor Relations of American Physicians
Capital, Inc., +1-517-324-6629/
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20020123/ACAPLOGO
PRN Photo Desk, photodesk@prnewswire.com/
/Web site: http://www.apcapital.com /
(ACAP)