EX-99
2
ap8979ex99.txt
EXHIBIT 99

                                                                      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 /

The following information was filed by American Physicians Capital Inc on Wednesday, February 14, 2007 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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