Exhibit 99
AMERICAN PHYSICIANS CAPITAL, INC. REPORTS SECOND QUARTER 2006 RESULTS
EAST LANSING, Mich., July 25 /PRNewswire-FirstCall/ -- American Physicians
Capital, Inc. (APCapital) (Nasdaq: ACAP) today announced net income of $10.7
million or $1.29 per diluted common share for the second quarter of 2006. For
the first six months of 2006, the Company has generated net income of $19.6
million or $2.34 per share. In 2006, APCapital has generated operating income
(which excludes realized gains, net of tax) of $1.19 per share in the second
quarter and $2.23 per share year-to-date.
In 2005, the Company generated net income of $47.8 million or $5.44 per
share in the second quarter and $55.1 million or $6.27 per share year-to-date.
However, these amounts included the impact of reversing a deferred tax valuation
allowance, which increased net income by $41.6 million and $44.1 million,
respectively.
"We are very pleased with the continued success of the Company," said
President and Chief Executive Officer R. Kevin Clinton. "Our business plan is
working as we remain competitive in the marketplace while maintaining
profitability and maximizing shareholder value."
Consolidated Income Statement
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Direct Premiums Written:
APCapital $ 32,402 $ 33,705 $ 73,923 $ 81,829
PIC Florida - 2,251 - 4,069
$ 32,402 $ 35,956 $ 73,923 $ 85,898
Net Premiums Written $ 30,082 $ 28,192 $ 69,047 $ 70,423
Net Premiums Earned $ 37,420 $ 39,680 $ 74,863 $ 83,573
Incurred Loss and Loss Adjustment
Expenses:
Current Accident Year Losses 28,674 31,828 57,659 67,905
Prior Year Losses (2,878) (627) (4,986) (855)
Total 25,796 31,201 52,673 67,050
Underwriting Expenses 7,734 8,579 15,411 17,709
Underwriting Income (Loss) 3,890 (100) 6,779 (1,186)
Investment Income 11,569 12,188 22,672 22,830
Other Income (1) 1,486 (25) 1,975 143
Other Expenses (1,328) (2,296) (2,637) (4,429)
Pre-tax Income 15,617 9,767 28,789 17,358
Federal Income Taxes 4,905 (38,268) 9,214 (38,098)
Minority Interest - (253) - (342)
Net Income $ 10,712 $ 47,782 $ 19,575 $ 55,114
Loss Ratio:
Current Accident Year 76.6% 80.2% 77.0% 81.2%
Prior Year Development -7.7% -1.6% -6.6% -1.0%
Calendar Year 68.9% 78.6% 70.4% 80.2%
Underwriting Expense Ratio 20.7% 21.6% 20.6% 21.2%
Combined Ratio 89.6% 100.2% 91.0% 101.4%
(1) Includes realized gains and losses
Direct premiums written were $32.4 million in the second quarter of 2006,
down $3.6 million or 9.9% from the same period a year ago. This decline in
direct premiums written for the quarter was primarily the result of no longer
consolidating PIC Florida ($2.3 million) and exiting health insurance ($1.1
million). APCapital's core medical professional liability business, which had
been decreasing in premium volume in recent quarters, stabilized in the second
quarter of 2006. A 20.4% growth in premiums for the second quarter of 2006 in
the Michigan market offset decreases in other core states.
For the first six months of 2006, direct premiums written were down $12.0
million, or 13.9%, with $6.4 million of this decrease caused by the impact of
the PIC Florida and health line exit. Net premiums earned in the second quarter
of 2006 were down $2.3 million or 5.7% from the second quarter of 2005 and
year-to-date are down $8.7 million or 10.4%. The decline in net premiums earned
was not as great as the decline in direct premiums written due to changes in
reinsurance terms made in 2006. The insured physician policies-in- force count
at June 30, 2006 totaled 9,518 which is down less than 0.5% from the end of
2005.
The 2006 second quarter loss ratio was 68.9% with $2.9 million of positive
development from prior accident years. For the first six months of 2006, the
loss ratio was 70.4% with $5.0 million of positive prior year development. These
ratios represent significant improvements from the 78.6% loss ratio reported in
the second quarter of 2005 and the 80.2% reported for the first six months of
2005. The improved loss ratio is the result of past rate increases, the improved
book-of-business we have developed over the last four years and improved claims
processes. On an accident year basis, the loss ratio has decreased from 80.2% in
the second quarter of 2005 to 76.6% in the second quarter of 2006. Year-to-date,
the accident loss ratio was 77.0% through June 30, 2006, compared to 81.2% for
the same period a year ago. The number of medical professional liability claims
reported in the second quarter of 2006 was 296, down from 308 in the first
quarter of 2006 and 401 reported in the second quarter of 2005.
The underwriting expense ratio decreased in the second quarter of 2006 to
20.7% from 21.6% in the second quarter of 2005. The 2006 year-to-date
underwriting expense ratio was 20.6%, down from 21.2% a year ago. This decrease
is the result of on-going efforts by management to reduce operating costs. In
2006, other expenses were down $968,000 or 42.2% in the second quarter and down
$1.8 million or 40.5% year-to-date compared to the same respective periods last
year. These decreases were due to lower Sarbanes- Oxley/404 costs, less
investment expenses, no amortization, and reduced exit costs.
Investment Income
Investment income was $11.6 million in the second quarter of 2006 and $22.7
million year-to-date. These amounts compare to $12.2 million and $22.8 million
for the same periods in 2005. The overall investment yields decreased from 5.90%
in the second quarter 2005 to 5.46% in the second quarter of 2006. For the first
six months of 2006, our investment yield was 5.36% compared to 5.52% a year ago.
In the first half of 2006, we purchased $193.0 million of tax-exempt securities.
We now have a 24.6% 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. In the second quarter of 2006, we generated a realized gain of $1.4
million from the sale of investment real estate.
Balance Sheet and Equity Information
APCapital's total assets were $1.087 billion at June 30, 2006, down $22.8
million from December 31, 2005. At June 30, 2006, the Company's total
shareholders' equity was $259.0 million, down from $261.2 million at December
31, 2005. The net income of $19.6 million for the first half of 2006 was offset
by decreases in net unrealized gains on the Company's available-for- sale
investments of $3.5 million, net of tax, and the Company utilizing $19.6 million
of equity to repurchase shares during the first six months of 2006.
APCapital's book value per common share was $32.56 at June 30, 2006, based
on 7,957,182 common shares outstanding, compared to $31.35 at December 31, 2005.
Stock Repurchase Program
The Company repurchased 293,100 shares of its common stock during the second
quarter of 2006 at an average cost of $46.09 per share. In the first six months
of 2006, the Company has repurchased 420,600 shares at an average cost of
$46.65. Under the November 2, 2005 authorization, the Company has approximately
269,900 shares available for repurchase at June 30, 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 adopted a plan under Rule 10b5-1 of the
Securities Exchange Act of 1934 to repurchase its common shares pursuant to this
authorization. Through June 30, 2006, the Company has utilized $12.9 million of
this authorization.
Outlook
"APCapital has evolved into a strong profitable Company," said Clinton.
"We've produced consistent profits and increased shareholder value. We are
becoming more aggressive in selected markets where we can grow profitability and
remain watchful for other opportunities to 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 second quarter
results on July 26, 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: 90157086. The replay will be available
through 11:59 p.m. Eastern time on July 31, 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.
Balance Sheet Data
June 30, December 31,
2006 2005
------------ ------------
(In thousands, except per
share data)
Assets:
Available-for-sale - bonds $ 235,414 $ 224,101
Held-to-maturity - bonds 516,579 345,702
Other invested assets 14,247 11,568
Cash and cash equivalents 87,513 272,988
Cash and investments 853,753 854,359
Premiums receivable 40,477 50,729
Reinsurance recoverable 109,791 109,368
Deferred federal income taxes 37,845 44,039
Other assets 44,660 50,833
Total assets $ 1,086,526 $ 1,109,328
Liabilities and Shareholders'
Equity:
Unpaid losses and loss adjustment
expenses $ 691,676 $ 689,857
Unearned premiums 68,749 82,098
Long-term debt 30,928 30,928
Other liabilities 36,125 42,592
Total liabilities 827,478 845,475
Minority interest in consolidated
subsidiary - 2,641
Common stock - -
Additional paid-in-capital 56,163 74,360
Retained earnings 199,323 179,748
Accumulated other comprehensive
income:
Net unrealized appreciation on
investments,
net of deferred federal income
taxes 3,562 7,104
Shareholders' equity 259,048 261,212
Total liabilities and
shareholders' equity $ 1,086,526 $ 1,109,328
Shares outstanding 7,957 8,333
Book value per share $ 32.56 $ 31.35
Summary Financial Information
APCapital, Inc.
Income Statement
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(In thousands, except per (In thousands, except per
share data) share data)
Direct premiums written $ 32,402 $ 35,956 $ 73,923 $ 85,898
Net premiums written $ 30,082 $ 28,192 $ 69,047 $ 70,423
Net premiums earned $ 37,420 $ 39,680 $ 74,863 $ 83,573
Investment income 11,569 12,188 22,672 22,830
Net realized gains (losses) 1,336 (256) 1,348 (322)
Other income 150 231 627 465
Total revenues 50,475 51,843 99,510 106,546
Losses and loss adjustment
expenses 25,796 31,201 52,673 67,050
Underwriting expenses 7,734 8,579 15,411 17,709
Other expenses 1,328 2,296 2,637 4,429
Total expenses 34,858 42,076 70,721 89,188
Income before income taxes
and minority interests 15,617 9,767 28,789 17,358
Federal income tax expense
(benefit) 4,905 (38,268) 9,214 (38,098)
Income before minority
interests 10,712 48,035 19,575 55,456
Minority interest in net income of
consolidated subsidiary - (253) - (342)
Net income $ 10,712 $ 47,782 $ 19,575 $ 55,114
Adjustments to reconcile net income to
operating income:
Net income $ 10,712 $ 47,782 $ 19,575 $ 55,114
Add back:
Realized (gains) losses, net
of tax (868) 166 (876) 209
Net operating income $ 9,844 $ 47,948 $ 18,699 $ 55,323
Ratios:
Loss ratio (1) 68.9% 78.6% 70.4% 80.2%
Underwriting ratio (2) 20.7% 21.6% 20.6% 21.2%
Combined ratio (3) 89.6% 100.2% 91.0% 101.4%
Earnings per share data:
Net income
Basic $ 1.32 $ 5.54 $ 2.39 $ 6.38
Diluted $ 1.29 $ 5.44 $ 2.34 $ 6.27
Net operating income
Basic $ 1.21 $ 5.56 $ 2.28 $ 6.41
Diluted $ 1.19 $ 5.46 $ 2.23 $ 6.29
Basic weighted average shares
outstanding 8,120 8,625 8,192 8,636
Diluted weighted average shares
outstanding 8,292 8,782 8,372 8,796
(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.
Selected Cash Flow Information
For the Six Months Ended
June 30,
---------------------------
2006 2005
------------ ------------
(In thousands)
Net cash from operating activities $ 27,635 $ 12,536
Net cash for investing activities $ (194,960) $ (19,597)
Net cash for financing activities $ (18,150) $ (6,610)
Net decrease in cash and cash
equivalents $ (185,475) $ (13,671)
APCapital, Inc.
Supplemental Statistics
Medical Professional Liability
Reported
Three Months Ended Claim Count
- ---------------------------------------- ------------
June 30, 2006 296
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 PIC
Three Months Ended Florida Florida Total
- ---------------------------------------- ------------ ------------ ------------
June 30, 2006 $ 37,517 $ - $ 37,517
March 31, 2006 37,448 - 37,448
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 Paid Claim
Open Case Reserve Average Net (Trailing
Claim Per Open Paid Four Quarter
Three Months Ended Count Claim Claim Average)
- ---------------------------------------- ------------ ------------ ------------ ------------
June 30, 2006 2,558 $ 136,300 $ 33,100 $ 63,000
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
------------------------------------------
Six Months Six Months
Ended Ended
June 30, Year Ended June 30,
2005 2005 2006
------------ ------------ ------------
Illinois 71% 75% 82%
Kentucky 64% 64% 69%
Michigan 80% 84% 84%
New Mexico 89% 89% 83%
Ohio 81% 82% 83%
Total (all states) 80% 82% 81%
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- 07/25/2006
/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)