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American Physicians Service Group, Inc. Reports Excellent Second Quarter Earnings
Marketwire
Aug 04, 2009
AUSTIN, TX -- (Marketwire) -- 08/04/09 -- American Physicians Service Group, Inc. ("APS") (NASDAQ: AMPH) today announced results for the quarter and six months ended June 30, 2009. For the three months ended June 30, 2009, revenues were $20.1 million compared to $17.8 million for the same period last year. For the six months ended June 30, 2009, revenues were $39.4 million compared to $37.5 million in the same period last year. Net earnings for the first six months were $9.7 million or $1.36 per diluted share, compared to $9.5 million or $1.30 per diluted share in the same period last year. Net earnings for the second quarter were $4.9 million or $.70 per diluted share, compared to $6.1 million or $.84 per diluted share, in the same period last year.
Ken Shifrin, APS Chairman of the Board, stated, "We continue to deliver excellent performance results. Revenue was up 13% quarter-over-quarter, underwriting profits were solid, our Financial Services subsidiary had its first profitable quarter since the economic downturn began toward the end of 2007 and our book value per share increased to a record $20.88, even while paying our sixth consecutive annual dividend during the quarter. It was also gratifying to have some outside recognition of our performance with inclusion in the Russell 3000 index and a sixth place ranking on Fortune's Small Business 100 list."
Tim LaFrey, President of APS, added, "Favorable trends continued in our insurance operations. Net earned premium was up 15% compared to the second quarter of 2008, a result of a strong 92% retention rate, new business growth and lower ceding under our 2009 reinsurance treaty. Likewise, claims frequency continues to be favorable and outstanding claims continue to fall. We remain conservatively reserved at the upper end of the actuarial range and our reserve per open claim has increased over 18% since June 30, 2008, though we have not seen an adverse trend in claims frequency or severity. We have still experienced no defaults of principal or interest in our investment portfolio, but have continued to take a defensive position regarding non-agency CMOs and have reduced our holdings from $25 million at year-end to $8 million at the end of June. We believe that benefits from safeguarding our capital outweigh the sacrifice in short-term yield."
Mr. LaFrey continued, "Our Financial Services business had been in a loss situation since the economic crisis began in late 2007, but our cost cutting efforts and a modest uptick in activity generated a small profit this quarter. We will continue to monitor costs closely and work to restore this segment's contribution to our success."
Mr. Shifrin concluded, "We continue to strengthen our balance sheet, which permits us to reward shareholders with dividends and make share repurchases without limiting our ability to take advantage of business opportunities. We look forward to reporting our progress as we move into the second half of 2009."
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)
June 30, December 31,
2009 2008
------------ ------------
(unaudited)
Assets
Investments $ 213,770 $ 209,709
Cash and cash equivalents 28,831 22,060
Premium and maintenance fees receivables 17,416 17,186
Reinsurance recoverables 10,498 15,293
Deferred policy acquisition costs 2,417 2,500
Deferred tax assets 9,089 9,488
Property and equipment, net 491 590
Intangible assets 2,268 2,264
Federal income tax receivable 838 738
Prepaid and other assets 3,230 3,726
------------ ------------
Total assets $ 288,848 $ 283,554
============ ============
Liabilities
Reserve for loss and loss adjustment expense $ 90,403 $ 92,141
Unearned premiums and maintenance fees 36,389 36,785
Funds held under reinsurance treaties 4,264 3,978
Trade accounts payable 699 290
Accrued expenses and other liabilities 6,316 6,327
Federal income tax payable - -
Mandatorily redeemable preferred stock 6,531 7,568
------------ ------------
Total liabilities 144,602 147,089
Total shareholders' equity 144,246 136,465
------------ ------------
Total liabilities and shareholders’ equity $ 288,848 $ 283,554
============ ============
Shares outstanding 6,909 7,014
Book value per share $ 20.88 $ 19.46
AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
REVENUES
Gross premiums and maintenance
fees written $ 14,682 $ 15,124 $ 32,222 $ 29,860
Premiums ceded 335 (1,019) 663 376
Change in unearned premiums &
maintenance fees 1,808 489 397 1,712
-------- -------- -------- --------
Net premiums and maintenance
fees earned 16,825 14,594 33,282 31,948
Investment income, net of
investment expense 2,666 2,959 5,217 6,015
Realized capital gains (losses),
net (142) (35) (517) 14
Other-than-temporary impairments (1,100) (1,208) (2,007) (3,852)
Financial services 1,827 1,477 3,275 3,277
Other revenue 45 36 102 53
-------- -------- -------- --------
Total revenues 20,121 17,823 39,352 37,455
EXPENSES
Losses and loss adjustment
expenses 6,797 1,579 12,918 9,088
Other underwriting expenses 2,510 2,498 5,731 5,102
Change in deferred policy
acquisition costs 264 104 83 197
Financial services expenses 1,747 3,316 3,375 5,886
General and administrative
expenses 1,164 1,161 2,388 2,719
-------- -------- -------- --------
Total expenses 12,482 8,658 24,495 22,992
-------- -------- -------- --------
Income from operations 7,639 9,165 14,857 14,463
Income tax expense 2,718 3,019 5,206 4,937
-------- -------- -------- --------
Net income $ 4,921 $ 6,146 $ 9,651 $ 9,526
======== ======== ======== ========
Diluted income per share $ 0.70 $ 0.84 $ 1.36 $ 1.30
======== ======== ======== ========
Diluted weighted average shares
outstanding 7,007 7,284 7,089 7,305
======== ======== ======== ========
Operating Income $ 5,728 $ 6,954 $ 11,292 $ 12,021
======== ======== ======== ========
Diluted operating income per
share $ 0.82 $ 0.95 $ 1.59 $ 1.65
======== ======== ======== ========
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 Six Months Ended
June 30, June 30,
----------------- -----------------
2009 2008 2009 2008
-------- -------- -------- --------
Net Income $ 4,921 $ 6,146 $ 9,651 $ 9,526
Adjustments, net of tax effects:
Add:
Realized capital loss, net 807 808 1,641 2,495
-------- -------- -------- --------
Operating Income $ 5,728 $ 6,954 $ 11,292 $ 12,021
======== ======== ======== ========
Per diluted share:
Net Income $ 0.70 $ 0.84 $ 1.36 $ 1.30
Effect of adjustments $ 0.12 $ 0.11 $ 0.23 $ 0.35
-------- -------- -------- --------
Diluted operating income per share $ 0.82 $ 0.95 $ 1.59 $ 1.65
======== ======== ======== ========
SELECTED INSURANCE DATA FOR API, pre and post merger
Claims History
Claims Reported Open Claims
Date in the Quarter at Quarter End
-------------- --------------
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
September 30, 2006 160 770
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