EX-99
2
ap4852ex99.txt
EXHIBIT 99

                                                                      Exhibit 99

            AMERICAN PHYSICIANS CAPITAL, INC. REPORTS FOURTH QUARTER
                            AND YEAR END 2005 RESULTS

    EAST LANSING, Mich., Feb. 15 /PRNewswire-FirstCall/ --
    Significant Fourth Quarter 2005 Events

    *  Net income of $10.4 million or $1.21 per diluted common share for the
quarter
    *  Substantial recovery on fixed-income security previously written-off
    *  Pre-tax income of $17.7 million in medical professional liability for
the quarter
    *  Positive prior year development of $2.5 million on medical professional
liability reserves
    *  Stable reserves for other insurance lines

    American Physicians Capital, Inc. (APCapital) (Nasdaq: ACAP) today announced
net income of $10.4 million or $1.21 per diluted common share for the fourth
quarter of 2005. This compares to net income of $6.5 million, or $.73 per
diluted common share for the 2004 fourth quarter. For the year ended December
31, 2005, the Company has generated net income of $72.4 million or $8.29 per
diluted common share compared to net income of $20.0 million or $2.30 per
diluted share in 2004. The 2005 net income amount includes the $44.1 million
impact of eliminating the deferred tax asset valuation allowance in the second
quarter.

    For the fourth quarter of 2005, operating income, which excludes realized
gains and losses, net of tax, was $8.6 million or $1.00 per diluted share. This
compares to net operating income of $6.3 million or $.71 per diluted share in
the fourth quarter of 2004.

    "We completed our second year of positive financial performance in 2005,"
stated President and Chief Executive Officer R. Kevin Clinton. "Through our
strategic efforts which began in 2002, we have restructured our Company into a
consistently profitable enterprise, focused on our core medical professional
liability product in our core states."



Medical Professional Liability Results

(dollars in thousands)

Three Months Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Direct Premiums Written $ 37,797 $ 39,193 $ 183,454 $ 203,034 Net Premiums Written $ 34,018 $ 33,954 $ 157,780 $ 175,042 Net Premiums Earned $ 40,589 $ 43,651 $ 163,570 $ 173,835 Incurred Loss and Loss Adjustment Expenses: Current Accident Year Losses 31,626 35,673 131,081 148,230 Gerling Commutation - - - 4,139 Prior Year Losses (2,500) (1,301) (6,425) (6,850) Total 29,126 34,372 124,656 145,519 Underwriting Expenses 7,857 7,980 32,759 35,320 Underwriting Income (Loss) 3,606 1,299 6,155 (7,004) Net Investment Income and Other 14,104 11,299 43,352 43,476 Pre-tax Income $ 17,710 $ 12,598 $ 49,507 $ 36,472 Loss Ratio: Current Accident Year 77.9% 81.7% 80.1% 85.3% Prior Year Development (including Gerling) -6.1% -3.0% -3.9% -1.6% Calendar Year 71.8% 78.7% 76.2% 83.7% Underwriting Expense Ratio 19.4% 18.3% 20.0% 20.3% Combined Ratio 91.2% 97.0% 96.2% 104.0%
Pre-tax income in the fourth quarter of 2005 totaled $17.7 million, an increase of $5.1 million or 40.6% from the same period in 2004. For the year ended December 31, 2005, this line has produced pre-tax income of $49.5 million compared to $36.5 million in 2004. The improved results reflect the positive impact of rate increases and more stringent underwriting standards implemented since 2002, the exit from unprofitable markets and market segments, as well as favorable loss development patterns. The loss ratio in the fourth quarter of 2005 was 71.8%, which lowered the loss ratio for the year to 76.2%. The 2005 loss ratio is down from 83.7% for 2004. The improved loss ratio was the result of several factors including earned rate increases and the application of stricter underwriting standards. The 2005 loss ratio includes $6.4 million of positive prior year development as compared to $6.9 million a year ago (excluding the effects of the 2004 Gerling commutation). Direct written premiums are down $1.4 million or 3.6% in the fourth quarter of 2005, and for the year premiums are down $19.6 million or 9.6% from 2004. The result of exiting Nevada and Florida, discontinuing the alternative risk program and non-renewing a large hospital account due to underwriting considerations accounted for approximately $10.6 million of this year-over- year decline in premium. Premiums also declined from 2004 due to reducing exposures in certain high risk territories and specialties in Ohio and Kentucky where our premiums are down $4.6 million and $3.5 million year-over- year, respectively. Premium rate increases have ranged from 2.5% to 9.0% by state in 2005, except Kentucky where we increased rates 23.6%. Although we have experienced price competition, we remain committed to profitable underwriting, and thus will continue to adequately price our product. The underwriting expense ratio was 19.4% in the fourth quarter of 2005, up from 18.3% in the fourth quarter of 2004. However, for the year, the underwriting ratio was 20.0%, down slightly from the 20.3% in 2004. Other Insurance Lines Results (dollars in thousands)
Three Months Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Direct Premiums Written $ (25) $ 1,973 $ 2,057 $ 10,911 Net Premiums Written $ (50) $ 2,673 $ (398) $ 11,389 Net Premiums Earned $ (50) $ 2,969 $ 713 $ 26,744 Incurred Loss and Loss Adjustment Expenses: Current Accident Year Losses (90) 2,283 415 23,371 Gerling Commutation - - - 271 Prior Year Losses 244 3,431 2,053 8,625 Total 154 5,714 2,468 32,267 Underwriting Expenses (24) 715 321 7,361 Underwriting Loss (180) (3,460) (2,076) (12,884) Net Investment Income and Other 671 546 2,860 3,510 Pre-tax Income (Loss) $ 491 $ (2,914) $ 784 $ (9,374) Loss Ratio: Current Accident Year * 76.9% 58.2% 87.4% Prior Year Development (including Gerling) * 115.6% 287.9% 33.3% Calendar Year * 192.5% 346.1% 120.7% Underwriting Expense Ratio * 24.1% 45.0% 27.5% Combined Ratio * 216.6% 391.1% 148.2%
(*not meaningful due to negative premium) All of our other insurance lines policies have expired. The negative premium amounts in the fourth quarter are the result of final policy audits or other adjustments. The majority of residual health claims outstanding have been run-off. We continue to manage the run-off of the workers' compensation claims. There were 585 open claims at December 31, 2005, down 47.2% since the start of the year. Investment Income Investment income was $11.6 million in the fourth quarter of 2005, an increase of $659,000 from the fourth quarter of 2004. For the year ended December 31, 2005, investment income was $45.2 million, down $2.2 million from 2004. Investment income is down in 2005 as a result of our efforts to reduce the overall risk of our portfolio, whereby we have liquidated higher risk securities, which had been generating higher returns. In addition, certain CMO securities decreased in market value by approximately $1.1 million in 2005. Due to the accounting treatment associated with these securities, market value adjustments are reflected in investment income. Overall, the investment portfolio of the Company generated a 5.43% return in 2005 as compared to 5.93% in 2004. In the fourth quarter of 2005, we recovered approximately $2.7 million in cash related to securities that had been written-off in previous years. At December 31, 2005, $345.7 million, or 60.7% of our fixed-income security portfolio is classified as held-to-maturity. The Company retains $224.1 million of securities classified as available-for-sale and $273.0 million of cash and cash equivalent resources that allow management flexibility with respect to investment options in response to changes in future interest rates. Federal Income Taxes At December 31, 2005, the Company had a net deferred tax asset of $44.0 million. This amount includes deferred tax assets relating to approximately $21.3 million of net operating loss carryforwards available to offset future taxable income, and $8.8 million of alternative minimum tax credit carryforwards. Balance Sheet and Equity Information APCapital's total assets were $1.109 billion at December 31, 2005, up $39.4 million from December 31, 2004. At December 31, 2005, the Company's total shareholders' equity was $261.2 million compared to $202.1 million at December 31, 2004. The increase in equity was the result of the 2005 net income and the non-income effect of the deferred tax valuation allowance reversal during the second quarter of 2005, partially offset by the effect of share repurchases and investment market value declines. APCapital's book value per common share was $31.35 at December 31, 2005, based on 8,333,417 common shares outstanding, compared to $23.31 at December 31, 2004. Share Repurchase Program During the fourth quarter of 2005, the Company repurchased 168,600 shares of its common stock at an average price of $45.42. For the year, the Company has repurchased 433,500 shares at an average price of $39.35. Under the November 2, 2005 authorization, the Company has approximately 410,000 shares available for repurchase at December 31, 2005. Outlook "The 2005 results have demonstrated that we have transformed APCapital into a strong profitable Company," said Clinton. "Our business is profitable and we are well positioned to grow in our key markets. However, we remain careful managers of our capital and will only grow if it can be done at appropriate rates. If not, we will continue our strategy of utilizing our capital more effectively elsewhere." 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 2005 fourth quarter and year-end results on February 16, 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 (international 617-801-6888) and entering the conference passcode: 71780556. The replay will be available through 11:59 p.m. Eastern time on February 21, 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 entitled "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 pressures on premium rates and our potential inability to obtain rate increases; * changes in competitive conditions; * the potential inadequacy of our loss and loss adjustment expense reserves, which could require us to make an adjustment to the level of these reserves and that may materially and adversely impact the results of operations for the period any such adjustment is made; * unforeseen costs or the need for additional reserve enhancements associated with our exit from workers' compensation; * substantial jury awards against our insureds could impose liability on us exceeding our policy limits or the funds we have reserved for the payment of claims; * the passing of tort reform at a national level may have a material adverse impact on our results of operations pertaining to certain markets that currently have tort reform in place at the state level; * recently passed tort reform legislation in Illinois may have a material adverse impact on our results of operations if claims frequency or severity trend upwards, as we may not be able to obtain rate increases the Company deems necessary; * an unanticipated increase in claims frequency or severity patterns; * our potential inability to obtain adequate and affordable reinsurance coverage from creditworthy reinsurers; * our potential inability to collect the full amount of our reinsurance recoverables from reinsurers experiencing financial difficulties, which could result in a future charge to income; * adverse regulatory and market changes in certain states of operation where our business is concentrated; * the loss of our relationships with medical associations; * an interruption or change in our principal third-party distribution relationship; * the potential insolvency of any of the guaranty associations in which we participate; * our potential inability to comply with insurance regulations; * a reduction in our A.M. Best Company rating; * negative changes in financial market conditions; * a significant increase in short-term interest rates; * a downturn in general economic conditions; and * 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 December 31, December 31, 2005 2004 ------------ ------------ (In thousands, except per share data) Assets: Available-for-sale - bonds $ 224,101 $ 657,706 Held-to-maturity - bonds 345,702 - Other invested assets 11,568 9,456 Cash and cash equivalents 272,988 190,936 Cash and investments 854,359 858,098 Premiums receivable 50,729 54,614 Reinsurance recoverable 109,368 103,312 Deferred federal income taxes 44,039 - Other assets 50,833 53,875 Total assets $ 1,109,328 $ 1,069,899 Liabilities and Shareholders' Equity: Unpaid losses and loss adjustment expenses $ 689,857 $ 693,630 Unearned premiums 82,098 90,040 Long-term debt 30,928 30,928 Other liabilities 42,592 50,977 Total liabilities 845,475 865,575 Minority interest in consolidated subsidiary 2,641 2,200 Common stock - - Additional paid-in-capital 74,444 86,956 Retained earnings 179,748 107,382 Unearned stock compensation (84) (368) Accumulated other comprehensive income: Net unrealized appreciation on investments, net of deferred federal income taxes 7,104 8,154 Shareholders' equity 261,212 202,124 Total liabilities and shareholders' equity $ 1,109,328 $ 1,069,899 Shares outstanding 8,333 8,672 Book value per share $ 31.35 $ 23.31 Summary Financial Information APCapital, Inc. Income Statement
Three Months Ended Year Ended December 31, December 31, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- (In thousands, except per share data) Direct premiums written $ 37,772 $ 41,166 $ 185,511 $ 213,945 Net premiums written $ 33,968 $ 36,627 $ 157,382 $ 186,431 Net premiums earned $ 40,539 $ 46,620 $ 164,283 $ 200,579 Investment income 11,581 10,922 45,163 47,373 Net realized gains 2,783 318 2,033 1,551 Other income 700 615 1,387 1,177 Total revenues 55,603 58,475 212,866 250,680 Losses and loss adjustment expenses 29,280 40,086 127,124 177,786 Underwriting expenses 7,833 8,695 33,080 42,681 Other expenses 1,542 3,074 7,795 10,463 Total expenses 38,655 51,855 167,999 230,930 Income before income taxes and minority interests 16,948 6,620 44,867 19,750 Federal income tax expense (benefit) 6,441 84 (27,952) (290) Income before minority interests 10,507 6,536 72,819 20,040 Minority interest in net income of consolidated subsidiary (80) (27) (453) (10) Net income $ 10,427 $ 6,509 $ 72,366 $ 20,030 Adjustments to reconcile net income to operating income: Net income $ 10,427 $ 6,509 $ 72,366 $ 20,030 Add back: Realized gains, net of tax (1,809) (207) (1,321) (1,008) Net operating income $ 8,618 $ 6,302 $ 71,045 $ 19,022 Ratios: Loss ratio (1) 72.2% 86.0% 77.4% 88.6% Underwriting ratio (2) 19.3% 18.7% 20.1% 21.3% Combined ratio (3) 91.5% 104.7% 97.5% 109.9% Earnings per share data: Net income Basic $ 1.24 $ 0.76 $ 8.48 $ 2.37 Diluted $ 1.21 $ 0.73 $ 8.29 $ 2.30 Net operating income Basic $ 1.02 $ 0.74 $ 8.32 $ 2.25 Diluted $ 1.00 $ 0.71 $ 8.14 $ 2.18 Basic weighted average shares outstanding 8,439 8,539 8,538 8,455 Diluted weighted average shares outstanding 8,606 8,881 8,729 8,721
(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 Year Ended December 31, ----------------------- 2005 2004 ---------- ---------- (In thousands) Net cash provided by operating activities $ 38,963 $ 43,887 Net cash provided by investing activities $ 57,332 $ 49,637 Net cash used in financing activities $ (14,243) $ (4,639) APCapital, Inc. Supplemental Statistics Medical Professional Liability Reported Claim Count --------------------------------------------- Excluding Total Florida Florida (All States) ------------ ------------ ------------ Three Months Ended December 31, 2005 346 1 347 September 30, 2005 354 7 361 June 30, 2005 395 6 401 March 31, 2005 403 1 404 December 31, 2004 365 6 371 September 30, 2004 424 7 431 June 30, 2004 454 5 459 March 31, 2004 515 10 525 December 31, 2003 467 62 529 September 30, 2003 566 65 631 June 30, 2003 588 106 694 March 31, 2003 602 201(1) 803 Net Premium Earned (in thousands) --------------------------------------------------------- Florida Excluding --------------------------- Total Florida APCapital PIC (All States) ------------ ------------ ------------ ------------ Three Months Ended December 31, 2005 39,918 $ - $ 671 $ 40,589 September 30, 2005 39,345 (40) 975 40,280 June 30, 2005 39,677 - 869 40,546 March 31, 2005 41,124 232 799 42,155 December 31, 2004 42,715 199 737 43,651 September 30, 2004 42,965 531 673 44,169 June 30, 2004 42,842 203 514 43,559 March 31, 2004 41,793 281 382 42,456 December 31, 2003 37,833 1,431 610 39,874 September 30, 2003 38,279 2,764 - 41,043 June 30, 2003 32,463 5,912 - 38,375 March 31, 2003 34,700 4,785 - 39,485 Average Net Open Case Reserve Claim Per Open Average Net Count Claim Paid Claim ------------ ------------ ------------ Three Months Ended December 31, 2005 2,991 $ 122,400 $ 69,100 September 30, 2005 3,109 119,100 77,300 June 30, 2005 3,211 116,300 72,500 March 31, 2005 3,344 114,900 85,800 December 31, 2004 3,342 117,000 50,500 September 30, 2004 3,803 103,300 78,100 June 30, 2004 3,885 100,100 61,000(2) March 31, 2004 4,103 95,400 55,200 December 31, 2003 4,447 87,600 55,100 September 30, 2003 4,780 82,200 82,200 June 30, 2003 4,788 79,800 60,300 March 31, 2003 4,830 75,400 71,500 Retention Ratio ---------------------------- Year Ended Year Ended 2005 2004 ------------ ------------ Illinois 75% 67% Kentucky 64% 73% Michigan 84% 88% New Mexico 89% 92% Ohio 82% 79% Total (all states) 82% 83% Notes: All values, except net premiums earned, exclude experience from investment in Physicians Insurance Company (Florida). (1) Includes 76 claims reported by 4 physicians at the end of their coverage with the company. (2) 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- 02/15/2006 /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 /

The following information was filed by American Physicians Capital Inc on Thursday, February 16, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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