American Physicians Service Group, Inc. Reports 36% Increase in Earnings per Share: Financial News

American Physicians Service Group, Inc. Reports 36% Increase in Earnings per Share
Monday November 3, 2008 5:00 pm ET

AUSTIN, TX--(MARKET WIRE)--Nov 3, 2008 -- American Physicians Service Group, Inc. ("APS") (NasdaqCM:AMPH - News) today announced results for the quarter and nine months ended September 30, 2008. For the three months ended September 30, 2008, net earnings were $7,183,000 or $.99 per diluted share, compared to $5,292,000 or $.73 per diluted share, in the same period last year, or an increase of 36%. For the nine months ended September 30, 2008, net earnings were $16,709,000 or $2.29 per diluted share, versus $17,268,000 or $3.37 per diluted share in the comparable period last year. Results for the nine months ended September 30, 2007 included an extraordinary gain of $2,264,000, or $.44 per diluted share, resulting from the acquisition of American Physicians Insurance Company ("API") on April 1, 2007.

Ken Shifrin, APS Chairman of the Board, stated, "We continue to be pleased with the results from American Physicians Insurance Company, our medical malpractice subsidiary. The excellent earnings and cash flow have been achieved while remaining true to our conservative underwriting, reserving and investing philosophies. This conservatism is not incompatible with aggressively working to expand our business and during the quarter and nine months ended September 30, 2008 the number of policyholders grew by 4% and 6%, respectively, in a very competitive market."

Tim LaFrey, president of APS added, "We said last quarter that our historical pattern of reserving at the upper end of the actuarial range increases the likelihood of recurring favorable quarterly reserve adjustments and, indeed, we recognized approximately $9.7 million of favorable development during the quarter just ended. Even with this adjustment, we remain at the high end of the actuarial reserve range in all periods, including the current year. We have also reduced the number of pending claims since year-end, while increasing our reserves per claim. As Mr. Shifrin said, our investment policy has also been conservative. We have no auction rate securities or sub-prime mortgage securities, have experienced no defaults in our fixed income securities and do not hold any direct interest in AIG, Lehman Brothers, Washington Mutual, or Freddie Mac or Fannie Mae common or preferred stock. Our Alt-A mortgage-backed securities holdings now represent only $4.2 million of our $211 million portfolio. Total cash and marketable securities continue to grow, being $229 million at September 30, 2008 versus $223 million at year-end."

Mr. LaFrey continued, "Our Financial Services business continues to be affected by the general market turmoil, but narrowed its loss significantly compared to the second quarter of 2008. The full effect of our cost cutting measures is beginning to be reflected and we continue to adjust the business with the goal of achieving profitability at current activity levels."

Mr. Shifrin concluded, "With our book value per share increasing to $18.69 at the end of the quarter and what we believe are excellent prospects for seeing it continue to grow, we took advantage of the general decline in stock prices during the quarter and repurchased approximately 41,000 of our common shares under our stock buy-back program. Our board expressed further confidence in our ability to create shareholder value by authorizing an additional $4 million for future share repurchases, and adopting a 10b5-1 plan to provide greater flexibility to make repurchases. While we may continue to make discretionary purchases as we have previously, the 10b5-1 plan will also permit us to make repurchases when we may otherwise be prohibited under insider trading laws. We look forward to concluding a successful 2008 and reporting back to you following year-end."

APS is an insurance and financial services firm with subsidiaries and affiliates that provide medical malpractice insurance for physicians and other healthcare providers; and brokerage and investment services to institutions and high net worth individuals. The Company is headquartered in Austin, Texas.

This press release includes forward-looking statements related to the Company 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 Company's future results, please see the Company's 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 from the Company's investor relations department.

 
                  AMERICAN PHYSICIANS SERVICE GROUP, INC.
                          SELECTED FINANCIAL DATA

(in thousands, except per share data)


                                                September 30,  December 31,
                                                    2008          2007
                                                ------------  -------------
                                                (Unaudited)
Assets

Investments                                     $    212,995  $     204,802
Cash and cash equivalents                             16,491         18,391
Premium and maintenance fees receivables              18,995         15,946
Reinsurance recoverables                              17,331         24,554
Deferred policy acquisition costs                      2,720          2,514
Deferred tax assets                                   10,300          7,402
Property and equipment, net                              609            350
Intangible assets                                      1,264          1,045
Federal income tax receivable                              -          1,957
Prepaid and other assets                               4,112          5,837
                                                ------------  -------------

Total assets                                    $    284,817  $     282,798
                                                ============  =============

Liabilities

Reserve for loss and loss adjustment expense    $     93,447  $     101,606
Unearned premiums and maintenance fees                39,807         35,417
Funds held under reinsurance treaties                  4,363          4,651
Trade accounts payable                                   354            996
Accrued expenses and other liabilities                 6,085          7,594
Mandatorily redeemable preferred stock                 7,477          8,554
                                                ------------  -------------

Total liabilities                                    151,533        158,818

Common stock                                             713            721
Additional paid-in capital                            77,622         79,752
Accumulated other comprehensive income (loss)         (2,626)           545
Retained earnings                                     57,575         42,962
                                                ------------  -------------

Total shareholders' equity                           133,284        123,980
                                                ------------  -------------

Total liabilities and shareholders' equity      $    284,817  $     282,798
                                                ============  =============

Shares outstanding                                     7,131          7,214

Book value per share                            $      18.69  $       17.19



                  AMERICAN PHYSICIANS SERVICE GROUP, INC.
                          SELECTED FINANCIAL DATA
                                (UNAUDITED)


(In thousands, except share data)   Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------  --------
REVENUES
Gross premiums written              $ 21,246  $ 22,239  $ 51,106  $ 37,284
Premiums Ceded                           711       504     1,087     3,922
Change in Unearned Premiums           (6,248)   (5,112)   (4,536)   (3,129)
                                    --------  --------  --------  --------

   Net premiums earned                15,709    17,631    47,657    38,077

Investment income, net of
 investment expense                    2,996     2,904     9,011     5,743
Realized capital (loss), net            (474)   (3,195)   (4,312)   (3,659)
Management service and other
 revenue                                  97       105       150     3,834
Financial services                     1,558     5,434     4,835    17,623
                                    --------  --------  --------  --------

      Total revenues                  19,886    22,879    57,341    61,618

EXPENSES
Loss and loss adjustment expenses      2,259     4,624    11,347     7,786
Other underwriting expenses            2,817     2,818     8,116     5,409
Management service expenses                -         -         -     3,823
Financial services expenses            2,127     4,907     8,013    15,599
General and administrative expenses    1,502     1,608     4,221     3,800
Impairment of goodwill                     -         -         -     1,247
                                    --------  --------  --------  --------

      Total expenses                   8,705    13,957    31,697    37,664

Income tax expense                     3,998     3,630     8,935     8,949
Minority interests                         -         -         -         1
                                    --------  --------  --------  --------

      Net income before
       extraordinary gain           $  7,183  $  5,292  $ 16,709  $ 15,004

      Extraordinary gain, net of
       tax                                 -         -         -     2,264
                                    --------  --------  --------  --------
      Net income                    $  7,183  $  5,292  $ 16,709  $ 17,268
                                    ========  ========  ========  ========

Diluted income per share            $   0.99  $   0.73  $   2.29  $   3.37
                                    ========  ========  ========  ========

Diluted weighted average shares
 outstanding                           7,244     7,253     7,286     5,114



SELECTED INSURANCE DATA FOR API, pre and post merger

Claims History


                                Claims
                               Reported    Open Claims
                                in the      at Quarter
Date                           Quarter         End
                             ------------- -------------
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
June 30, 2006                          143           710
March 31, 2006                         106           665
December 31, 2005                       84           705