American Physicians Service Group, Inc. Reports Continued Strong Earnings in the Third Quarter
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AUSTIN, TX -- (MARKET WIRE) -- 11/02/09 -- American Physicians Service Group, Inc. ("APS") (NASDAQ: AMPH) today announced results for the quarter and nine months ended September 30, 2009. For the three months ended September 30, 2009, revenues were $22.4 million compared to $19.9 million for the same period last year. For the nine months ended September 30, 2009, revenues were $61.7 million compared to $57.3 million in the same period last year. Net income for the third quarter was $6.4 million or $.92 per diluted share, compared to $7.2 million or $.99 per diluted share, in the same period last year. Net income for the first nine months was $16.1 million or $2.28 per diluted share, compared to $16.7 million or $2.29 per diluted share in the same period last year.
Ken Shifrin, APS Chairman of the Board, stated, "We continue to perform at a high level. Revenue was up 12% quarter-over-quarter, underwriting profits remained solid, our Financial Services subsidiary was again profitable and our book value per share increased to a record $22.20. Rating agency A.M. Best recently affirmed our A- rating, saying the rating 'reflects API's excellent risk-adjusted capital position, solid history of operating profitability and strong policyholder retention levels.'"
Tim LaFrey, President of APS, added, "Our core insurance operations continue to grow. Net earned premium was up 12% compared to the third quarter of 2008, a result of moderating rate decreases, increasing policyholder count and ceding less premium under our 2009 reinsurance treaty. Claims data remained favorable, with pending claims dropping by 15% from a year ago. On the investment side, we held to our belief that benefits from safeguarding our capital outweigh the sacrifice in short-term yield and thus further reduced our exposure in non-agency CMOs to $5.6 million from $25.4 million at the beginning of the year. We also continue to shorten the duration of the portfolio to manage for interest rate risk."
Mr. LaFrey continued, "Our Financial Services business turned in another small profit this quarter, a significant improvement over its results during the peak of the economic crisis last year. We continue to explore ways to return this segment to meaningful and sustained profitability."
Mr. Shifrin concluded, "We are gratified that our long-practiced conservative business philosophy has been the cornerstone for excellent performance during a difficult economic period and that our shareholders have benefitted from new stock highs as a result."
APS is an insurance and financial services firm with subsidiaries and affiliates which provide medical malpractice insurance for physicians and other healthcare providers and brokerage and investment services to institutions and high net worth individuals. APS is headquartered in Austin, Texas.
This press release includes forward-looking statements related to APS that involve risks and uncertainties that could cause actual results to differ materially. These forward-looking statements are made in reliance on the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. For further information about these factors that could affect the future results of APS, please see the recent filings with the Securities and Exchange Commission. Prospective investors are cautioned that forward-looking statements are not guarantees of future performance. Actual results may differ materially from management expectations. Copies of the filings are available upon request to APS.
AMERICAN PHYSICIANS SERVICE GROUP, INC.
SELECTED FINANCIAL DATA
(in thousands, except per share data)
September 30, December 31,
2009 2008
------------- -------------
(unaudited)
Assets
Investments $ 237,134 $ 209,709
Cash and cash equivalents 16,680 22,060
Premium and maintenance fees receivables 19,435 17,186
Reinsurance recoverables 10,016 15,293
Deferred policy acquisition costs 2,748 2,500
Deferred tax assets 5,853 9,488
Property and equipment, net 448 590
Intangible assets 2,264 2,264
Federal income tax receivable 2,997 738
Prepaid and other assets 3,325 3,726
------------- -------------
Total assets $ 300,900 $ 283,554
============= =============
Liabilities
Reserve for loss and loss adjustment expense $ 91,393 $ 92,141
Unearned premiums and maintenance fees 40,916 36,785
Funds held under reinsurance treaties 3,255 3,978
Trade accounts payable 190 290
Accrued expenses and other liabilities 5,512 6,327
Mandatorily redeemable preferred stock 6,617 7,568
------------- -------------
Total liabilities 147,883 147,089
Total shareholders' equity 153,017 136,465
------------- -------------
Total liabilities and shareholders' equity $ 300,900 $ 283,554
============= =============
Shares outstanding 6,893 7,014
Book value per share $ 22.20 $ 19.46
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share
data) Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
REVENUES
Gross premiums and maintenance
fees written $ 21,446 $ 21,246 $ 53,668 $ 51,106
Premiums ceded 676 711 1,339 1,087
Change in unearned premiums &
maintenance fees (4,527) (6,248) (4,130) (4,536)
-------- -------- -------- --------
Net premiums and maintenance
fees earned 17,595 15,709 50,877 47,657
Investment income, net of
investment expense 2,460 2,996 7,677 9,011
Realized capital gains (losses),
net 159 743 (357) 757
Other-than-temporary impairments (237) (1,217) (2,245) (5,069)
Financial services 2,320 1,558 5,595 4,835
Other revenue 71 97 173 150
-------- -------- -------- --------
Total revenues 22,368 19,886 61,720 57,341
EXPENSES
Losses and loss adjustment
expenses:
Current accident year losses 11,183 9,949 33,699 28,862
Prior year losses (4,762) (7,690) (14,360) (17,515)
-------- -------- -------- --------
Total losses and loss
adjustment expenses 6,421 2,259 19,339 11,347
Other underwriting expenses 3,053 3,220 8,784 8,322
Change in deferred policy
acquisition costs (331) (403) (248) (206)
Financial services expenses 2,207 2,127 5,582 8,013
General and administrative
expenses 1,335 1,502 3,723 4,221
-------- -------- -------- --------
Total expenses 12,685 8,705 37,180 31,697
-------- -------- -------- --------
Income from operations 9,683 11,181 24,540 25,644
Income tax expense 3,241 3,998 8,447 8,935
-------- -------- -------- --------
Net income $ 6,442 $ 7,183 $ 16,093 $ 16,709
======== ======== ======== ========
Diluted income per share $ 0.92 $ 0.99 $ 2.28 $ 2.29
======== ======== ======== ========
Diluted weighted average shares
outstanding 6,989 7,244 7,073 7,286
======== ======== ======== ========
Operating Income $ 6,493 $ 7,491 $ 17,784 $ 19,512
======== ======== ======== ========
Diluted operating income per
share $ 0.93 $ 1.03 $ 2.51 $ 2.68
======== ======== ======== ========
Non-GAAP Financial Measures
Operating Income is a "Non-GAAP" financial measure which is widely used in the insurance industry to evaluate the performance of underwriting operations. Operating Income excludes the after-tax effects of realized investment gains or losses and infrequent items that are not considered core to the underwriting performance of our insurance segment or the operating performance of our financial services segment, and we believe presents a more appropriate view of the performance of our core operations. While we believe disclosure of certain non-GAAP information is appropriate, you should not consider this information without also considering the information we present in accordance with GAAP. The following table is a reconciliation of Net Income to Operating Income:
Reconciliation of Net Income to Operating Income (in thousands, except per
share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- --------- --------
Net Income $ 6,442 $ 7,183 $ 16,093 $ 16,709
Adjustments, net of tax effects:
Realized capital (gains)
losses, net (103) (483) 232 (492)
Other-than-temporary
impairments 154 791 1,459 3,295
-------- -------- --------- --------
Operating Income $ 6,493 $ 7,491 $ 17,784 $ 19,512
======== ======== ========= ========
Per diluted share:
Net Income $ 0.92 $ 0.99 $ 2.28 $ 2.29
Effect of adjustments $ 0.01 $ 0.04 $ 0.23 $ 0.39
-------- -------- --------- --------
Diluted operating income per share $ 0.93 $ 1.03 $ 2.51 $ 2.68
======== ======== ========= ========
SELECTED INSURANCE DATA FOR API, pre and post merger
Claims History
Claims Reported Open Claims
Date in the Quarter at Quarter End
--------------- ---------------
September 30, 2009 100 578
June 30, 2009 100 565
March 31, 2009 104 583
December 31, 2008 77 585
September 30, 2008 114 681
June 30, 2008 92 667
March 31, 2008 98 688
December 31, 2007 128 740
September 30, 2007 89 746
June 30, 2007 84 822
March 31, 2007 113 848
December 31, 2006 102 808
For further information, visit the APS website at www.amph.com or contact: Mr. Kenneth Shifrin, Chairman of the Board (or) Mr. Tim LaFrey, President (or) Mr. Marc Zimmermann, Chief Financial Officer American Physicians Service Group, Inc. 1301 S. Capital of Texas Highway, C-300 Austin, Texas 78746 (512) 328-0888
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