Exhibit 99
AMERICAN PHYSICIANS CAPITAL, INC. REPORTS FOURTH QUARTER AND
YEAR END 2006 RESULTS
EAST LANSING, Mich., Feb. 14 /PRNewswire-FirstCall/ -- American Physicians
Capital, Inc. (APCapital) (Nasdaq: ACAP) today announced net income of $12.6
million or $1.06 per diluted common share for the fourth quarter of 2006. For
the year ended December 31, 2006, the Company has generated net income of
$43.2 million or $3.52 per share. In 2006, APCapital has generated operating
income (which excludes realized gains, net of tax) of $.96 per share in the
fourth quarter and $3.34 per share for the year. Book value per common share
was $23.26 at December 31, 2006, based on 11,556,575 common shares
outstanding, an increase of 11.3% from $20.90 at December 31, 2005.
In 2005, the Company generated net income of $10.4 million or $.81 per
share in the fourth quarter and $72.4 million or $5.53 per share for the year.
The year-to-date amounts included the impact of reversing a deferred tax
valuation allowance, which increased net income by $44.1 million.
"APCapital had a very successful and profitable year in 2006," said
President and Chief Executive Officer R. Kevin Clinton. "Our strategic plan
of focused operations and strict underwriting continues to be effective. We
have produced a solid and profitable book-of-business, generating a 16.5%
return on beginning shareholders' equity."
Consolidated Income Statement
(Dollars in thousands)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Direct Premiums Written:
APCapital $ 31,124 $ 36,672 $ 156,866 $ 177,119
PIC Florida - 1,100 - 8,392
$ 31,124 $ 37,772 $ 156,866 $ 185,511
Net Premiums Written $ 29,372 $ 33,968 $ 146,723 $ 157,382
Net Premiums Earned $ 37,053 $ 40,539 $ 149,688 $ 164,283
Incurred Loss and Loss Adjustment
Expenses:
Current Accident Year Losses 27,986 31,536 113,338 131,496
Prior Year Losses (4,748) (2,256) (12,880) (4,372)
Total 23,238 29,280 100,458 127,124
Underwriting Expenses 7,737 7,833 30,521 33,080
Underwriting Income 6,078 3,426 18,709 4,079
Investment Income 11,243 11,581 45,253 45,163
Other Income (1) 2,068 3,483 4,341 3,420
Other Expenses (1,362) (1,542) (5,300) (7,795)
Pre-tax Income 18,027 16,948 63,003 44,867
Federal Income Taxes 5,440 6,441 19,816 (27,952)
Minority Interest - (80) - (453)
Net Income $ 12,587 $ 10,427 $ 43,187 $ 72,366
Loss Ratio:
Current Accident Year 75.5% 77.8% 75.7% 80.0%
Prior Year Development -12.8% -5.6% -8.6% -2.6%
Calendar Year 62.7% 72.2% 67.1% 77.4%
Underwriting Expense Ratio 20.9% 19.3% 20.4% 20.1%
Combined Ratio 83.6% 91.5% 87.5% 97.5%
(1) Includes realized gains and losses
Direct premiums written were $31.1 million in the fourth quarter of 2006,
down $6.6 million or 17.6% from the same period a year ago. The decline in
direct premiums written for the quarter was the result of no longer
consolidating PIC Florida ($1.1 million) and price competition in our core
medical professional liability markets.
For the year ended December 31, 2006, direct premiums written were down
$28.6 million, or 15.4% with $10.7 million of this decrease caused by the
impact of the PIC Florida and health line exit. Throughout 2006, we
experienced price competition in our markets. This was especially intense in
Illinois, Kentucky, and Ohio. However, we continue to insure 9,454 physicians
at December 31, 2006, down only 1.1% from a year ago.
Net premiums earned in the fourth quarter of 2006 were down $3.5 million
or 8.6% from the fourth quarter of 2005 and for the year were down $14.6
million or 8.9%. The decline in net premiums earned was not as great as the
decline in direct premiums written due to the reinsurance terms in place for
2006 whereby the Company retained a greater portion of loss exposure and ceded
less premium.
The 2006 fourth quarter loss ratio was 62.7% with $4.7 million of positive
development from prior accident years. For the year ended December 31, 2006,
the loss ratio was 67.1% with $12.9 million of positive prior year
development. These ratios represent continued improvement from the 72.2% loss
ratio reported in the fourth quarter of 2005 and the 77.4% reported for all of
2005. The lower loss ratio is the result of increased favorable loss
development, past rate increases, a stronger book-of-business, and improved
claims processes.
On an accident year basis the loss ratio has decreased from 77.8% in the
fourth quarter of 2005 to 75.5% in the fourth quarter of 2006. For the 2006
accident year, the loss ratio was 75.7%, compared to 80.0% for 2005. The
number of medical professional liability claims reported in the fourth quarter
of 2006 was 267, down 23.1% from the 347 claims reported in the fourth quarter
of 2005. For the year ended December 31, 2006, claims reported totaled 1,168,
down 22.8% from the 1,513 reported in 2005.
The underwriting expense ratio increased in the fourth quarter of 2006 to
20.9% from 19.3% in the fourth quarter of 2005. However, the 2006 year end
underwriting expense ratio was 20.4% up only slightly from 20.1% a year ago.
The increases in underwriting ratio were principally the result of our lower
premium volume. In 2006, other expenses were down $2.5 million or 32.0%
compared to 2005. This decrease was due to a combination of lower Sarbanes-
Oxley/404 costs, less investment expenses, no amortization, and reduced exit
costs.
Investment income
Investment income was $11.2 million in the fourth quarter of 2006 and
$45.3 million for the year. These amounts compared to $11.6 million and $45.2
million for the same periods in 2005. The overall investment yields decreased
from 5.52% in the fourth quarter 2005 to 5.19% in the fourth quarter of 2006.
For the year ended December 31, 2006, our investment yield was 5.30% compared
to 5.43% a year ago.
In early 2006, we purchased $193.0 million of tax-exempt securities. We
now have a 23.8% allocation of our cash and investment portfolio in tax-exempt
securities. The average return on these tax-exempt securities is
approximately 4.0% which resulted in the overall decline in investment yield.
Balance Sheet and Equity Information
APCapital's total assets were $1.1 billion at December 31, 2006, down
$13.5 million from December 31, 2005. At December 31, 2006, the Company's
total shareholders' equity was $268.8 million, up from $261.2 million at
December 31, 2005. The increase in shareholders' equity is a result of net
income of $43.2 million for 2006 partially offset by the Company utilizing
$34.8 million of equity to repurchase shares.
Stock Repurchase Program
The Company repurchased 190,650 shares of its common stock during the
fourth quarter of 2006 at an average cost of $37.03 per share. For the year,
the Company repurchased 1,075,350 shares at an average cost of $32.33.
On October 27, 2006, the Company's Board of Directors adopted a new stock
repurchase plan for 2007 under Rule 10b5-1 of the Securities Exchange Act of
1934 and authorized the repurchase of $32 million of its common shares
pursuant to the 2007 10b5-1 plan. In addition, the board authorized the
rollover of any unused dollars allocated to the 2006 10b5-1 plan adopted by
the Board in April 2006. At December 31, 2006, the Company had approximately
$6.4 million unused dollars from the 2006 authorization.
Stock Split
In September 2006, the Company's Board of Directors declared a three-for-
two stock split of its common shares to shareholders. All share and per share
numbers disclosed in this press release are split adjusted.
Outlook
"Our strategy produced very good results in 2006. While price competition
precludes growth in certain markets, there are select niches available where
we have added business. In addition, we have worked hard to retain 82.2% of
our insured physicians," said Clinton. "Through our effective capital
management and discipline, APCapital is well positioned for 2007."
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 fourth quarter and
year end results on February 15, 2007 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: 23614846. The replay will
be available through 11:59 p.m. Eastern time on February 20, 2007.
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 Statements
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;
- the loss of one or more of our key employees could adversely affect our
business;
- unpredictable court decisions could have a material adverse financial
impact on our business operations if award is expanded beyond the
intended insurance coverage;
- applicable law and certain provisions in our articles and bylaws may
prevent and discourage unsolicited attempts to acquire our Company that
may be in the best interest of our shareholders;
- 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
American Physicians Capital, Inc.
Balance Sheet Data
December 31, December 31,
2006 2005
------------- -------------
(In thousands, except
per share data)
Assets:
Available-for-sale - bonds $ 255,001 $ 224,101
Held-to-maturity - bonds 505,572 345,702
Other invested assets 6,476 11,568
Cash and cash equivalents 108,227 272,988
Cash and investments 875,276 854,359
Premiums receivable 43,068 50,729
Reinsurance recoverable 109,013 109,368
Deferred federal income taxes 32,795 44,039
Other assets 35,663 50,833
Total assets $ 1,095,815 $ 1,109,328
Liabilities and Shareholders'
Equity:
Unpaid losses and loss adjustment
expenses $ 688,031 $ 689,857
Unearned premiums 70,744 82,098
Long-term debt 30,928 30,928
Federal income taxes payable 189 762
Other liabilities 37,113 41,830
Total liabilities 827,005 845,475
Minority interest in consolidated
subsidiary - 2,641
Common stock - -
Additional paid-in-capital 41,106 74,360
Retained earnings 222,935 179,748
Accumulated other comprehensive
income:
Net unrealized gains on
investments, net of deferred
federal income taxes 4,769 7,104
Shareholders' equity 268,810 261,212
Total liabilities and
shareholders' equity $ 1,095,815 $ 1,109,328
Shares outstanding 11,557 12,500
Book value per share $ 23.26 $ 20.90
Summary Financial Information
American Physicians Capital, Inc.
Income Statement
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(In thousands, except per share data)
Direct premiums written $ 31,124 $ 37,772 $ 156,866 $ 185,511
Net premiums written $ 29,372 $ 33,968 $ 146,723 $ 157,382
Net premiums earned $ 37,053 $ 40,539 $ 149,688 $ 164,283
Investment income 11,243 11,581 45,253 45,163
Net realized gains 1,862 2,783 3,310 2,033
Other income 206 700 1,031 1,387
Total revenues 50,364 55,603 199,282 212,866
Losses and loss adjustment
expenses 23,238 29,280 100,458 127,124
Underwriting expenses 7,737 7,833 30,521 33,080
Other expenses 1,362 1,542 5,300 7,795
Total expenses 32,337 38,655 136,279 167,999
Income before income taxes
and minority interests 18,027 16,948 63,003 44,867
Federal income tax expense
(benefit) 5,440 6,441 19,816 (27,952)
Income before minority
interests 12,587 10,507 43,187 72,819
Minority interest in net income
of consolidated subsidiary - (80) - (453)
Net income $ 12,587 $ 10,427 $ 43,187 $ 72,366
Adjustments to reconcile net
income to operating income:
Net income $ 12,587 $ 10,427 $ 43,187 $ 72,366
Add back:
Realized gains, net of tax (1,210) (1,809) (2,152) (1,321)
Net operating income $ 11,377 $ 8,618 $ 41,035 $ 71,045
Ratios:
Loss ratio (1) 62.7% 72.2% 67.1% 77.4%
Underwriting ratio (2) 20.9% 19.3% 20.4% 20.1%
Combined ratio (3) 83.6% 91.5% 87.5% 97.5%
Earnings per share data:
Net income
Basic $ 1.09 $ 0.82 $ 3.59 $ 5.65
Diluted $ 1.06 $ 0.81 $ 3.52 $ 5.53
Net operating income
Basic $ 0.98 $ 0.68 $ 3.42 $ 5.55
Diluted $ 0.96 $ 0.67 $ 3.34 $ 5.43
Basic weighted average shares
outstanding 11,599 12,659 12,015 12,807
Diluted weighted average shares
outstanding 11,865 12,909 12,274 13,094
(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
American Physicians Capital, Inc.
Selected Cash Flow Information
For the Year Ended
December 31,
-----------------------------
2006 2005
------------- -------------
(In thousands)
Net cash from operating activities $ 55,984 $ 38,962
Net cash (for) from investing
activities $ (187,372) $ 57,333
Net cash for financing activities $ (33,373) $ (14,243)
Net (decrease) increase in cash and
cash equivalents $ (164,761) $ 82,052
American Physicians Capital, Inc.
Supplemental Statistics
Medical Professional Liability
Reported
Three Months Ended Claim Count
- ------------------------ ------------
December 31, 2006 267
September 30, 2006 297
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
Three Months Ended PIC Florida Florida Total
- ------------------------ ------------ ------------ ------------
December 31, 2006 $ 37,051 $ - $ 37,051
September 30, 2006 37,774 - 37,774
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
Paid Claim
Average Net (Trailing
Case Four
Open Reserve Per Quarter
Three Months Ended Claim Count Open Claim Average)
- ------------------------ ------------ ------------ ------------
December 31, 2006 2,256 $ 137,900 $ 59,100
September 30, 2006 2,347 138,800 57,600
June 30, 2006 2,558 136,300 63,000
March 31, 2006 2,976 120,400 78,800
December 31, 2005 2,991 122,400 75,900
September 30, 2005 3,109 119,100 67,900
June 30, 2005 3,211 116,300 68,200
March 31, 2005 3,344 114,900 65,200
December 31, 2004 3,342 117,000 59,300
September 30, 2004 3,803 103,300 60,800
June 30, 2004 3,885 100,100 62,400
March 31, 2004 4,103 95,400 62,200
Retention Ratio
-----------------------
Year Ended Year Ended
2006 2005
---------- ----------
Illinois 81% 75%
Kentucky 70% 64%
Michigan 85% 84%
New Mexico 82% 89%
Ohio 83% 82%
Total (all states) 82% 82%
Notes:
All values, except net premiums earned, exclude experience from
investment in Physicians Insurance Company (Florida).
SOURCE American Physicians Capital, Inc.
-0- 02/14/2007
/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 /