FPIC Fpic Insurance Grp (MM)

FPIC Insurance Group, Inc. ("FPIC") (Nasdaq:FPIC) reported consolidated income from continuing operations of $8.6 million, or $0.80 per diluted share, for third quarter 2005, up from $7.1 million, or $0.68 per diluted share, for third quarter 2004. Operating earnings increased to $8.7 million, or $0.80 per diluted share, for third quarter 2005, up from $7.2 million, or $0.68 per diluted share, for third quarter 2004. For the nine months ended September 30, 2005, consolidated income from continuing operations was $23.6 million, or $2.20 per diluted share, up from $20.1 million, or $1.91 per diluted share, for the nine months ended September 30, 2004. For the nine months ended September 30, 2005, operating earnings increased to $23.7 million, or $2.22 per diluted share, up from $18.0 million, or $1.71 per diluted share, for the nine months ended September 30, 2004. For additional information regarding the use of operating earnings as a financial measure, see the discussion provided later in this release captioned "Non-GAAP Financial Measures." "FPIC continues to achieve solid top-line and bottom-line results," said John R. Byers, President and Chief Executive Officer. "An improved underwriting margin combined with top-line growth from our Florida insurance operations was the primary driver of our operating results in the third quarter. We believe our ability to achieve attractive margins, together with our continued favorable outlook for our core Florida market, positions us well for the year." -0- *T Financial Highlights for Third Quarter 2005 (as compared to third quarter 2004 unless otherwise indicated) -- Consolidated operating earnings up 21%; -- Fifteen consecutive quarters of positive consolidated operating earnings; -- Net premiums earned up 49% as the result of reduction of reinsurance and pricing improvements; -- 90% combined ratio; overall underwriting margin improved $2.5 million, or 74%; -- Twenty-seven consecutive quarters of positive operating earnings from insurance management operations; -- Increase in assets, shareholders' equity and statutory surplus since year-end; -- Book value per share and tangible book value per share increased since year-end; -- Net investment income increased 25% on portfolio growth and improved yield; -- 15% return on average equity for the trailing twelve months. *T -0- *T Operational Highlights for Third Quarter 2005 (unless otherwise indicated) -- Continued targeted market focus; -- Policyholder retention in Florida remained strong at 95% year to date; -- Solid insurance underwriting results; -- Targeted loss ratio reduced as a result of continued favorable claims experience; -- Over $81 million of cash flow generated by operations year to date. *T Conference Call Information FPIC will host a conference call at 11:00 a.m., Eastern Time, Tuesday, November 8, 2005, to review third quarter 2005 results. To access the conference call, please dial 866-770-7129 (USA) or 617-213-8067 (International) and use the access code 82798359. The conference call will also be broadcast live over the Internet in a listen-only format via FPIC's corporate website at http://www.fpic.com. To access the call from FPIC's home page, click on "Investor Relations" and a conference call link will be provided to connect listeners to the broadcast. Questions can be submitted in advance of the call until 10:00 a.m., Eastern Time, Tuesday, November 8, 2005 via e-mail at ir@fpic.com or through FPIC's corporate website at http://www.fpic.com, where a link on the "Investor Relations" page has been provided. For individuals unable to participate in the conference call, a telephone replay will be available beginning at 1:00 p.m., Eastern Time, Tuesday, November 8, 2005 and ending at 11:59 p.m., Eastern Time, Thursday, November 10, 2005. To access the telephone replay, dial 888-286-8010 (USA) or 617-801-6888 (International) and use the access code 50454943. A replay of the conference call webcast will also be available beginning at 1:00 p.m., Eastern Time, Tuesday, November 8, 2005 on FPIC's website. Caution Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. These forward-looking statements can be identified by such words as, but not limited to, "believe," "expect," "intend," "anticipate," "estimate," "project," "plan," "foresee," "hope," "should," "will," "will likely result" or "will continue" and other similar expressions. These forward-looking statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from such statements. These risks, uncertainties and other factors that could adversely affect our operations or cause actual results to differ materially from anticipated results include, but are not limited to, the following: -0- *T i) Risk factors, including the effect on reserves and underwriting results, associated with changing market conditions that result from fluctuating cyclical patterns of the property and casualty insurance business; ii) The uncertainties of the loss reserving process; iii) The occurrence of insured or reinsured events with a frequency or severity exceeding our estimates; iv) The impact of surplus constraints on growth; v) The competitive environment in which we operate, including reliance on agents to place insurance, physicians electing to practice without insurance coverage, related trends and associated pricing pressures and developments; vi) The actual amount of new and renewal business; vii) Business risks that result from our size and geographic concentration; viii) Developments in reinsurance markets that could affect our reinsurance programs; ix) The ability to collect reinsurance recoverables; x) The dependence of our insurance management segment upon a major customer, Physicians' Reciprocal Insurers ("PRI"), for its revenue, and consequently, the effects of PRI's premium rate adequacy, claims experience, policyholder retention, financial position and overall market and regulatory environment on its ability to maintain or grow its premium base; xi) Developments in financial and securities markets that could affect our investment portfolio and financing plans; xii) Risk factors associated with the impact of rising interest rates on the market value of our investments; xiii) Risk factors associated with the impact of rising interest rates on our interest costs associated with our long-term debt; xiv) The rates we charge for our products and services being subject to or mandated by legal requirements and regulatory approval, which could affect our business or reinsurance arrangements; xv) Uncertainties relating to government and regulatory policies (such as subjecting us to insurance regulation or taxation in additional jurisdictions or amending, revoking or enacting any laws, regulations or treaties affecting our current operations); xvi) Legal developments, including claims for extra-contractual obligations or in excess of policy limits in connection with the administration of insurance claims; xvii) Business and financial risks associated with the unpredictability of court decisions; xviii) The loss of the services of any of our executive officers; xix) Risks of impairment of assets, generally, including the risk of impairment or inability to continue to recognize deferred acquisition costs, deferred tax assets, goodwill and other deferred or intangible assets; xx) General economic conditions, either nationally or in our market areas, that are worse than expected; xxi) Changes in our financial ratings resulting from one or more of these uncertainties or other factors and the potential impact on our agents' ability to place insurance business on our behalf; and xxii) Other risk factors discussed elsewhere within FPIC's Form 10-Q for the quarter ended September 30, 2005, filed with the United States Securities and Exchange Commission ("SEC") on November 7, 2005; and within FPIC's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the SEC on March 15, 2005. *T Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Financial Measures To supplement FPIC's consolidated financial information presented herein in accordance with generally accepted accounting principles ("GAAP"), FPIC reports non-GAAP measures widely used in the insurance industry to evaluate financial performance over time. Operating earnings is a non-GAAP financial measure widely used by investors and analysts in the insurance sector to facilitate understanding of results by excluding (i) the net effects of realized capital gains and losses, which are tied to the financial markets, and (ii) the cumulative effects of accounting changes and other infrequent or non-recurring items, which can affect comparability across reporting periods. Total shareholders' equity, excluding Statement of Financial Accounting Standards ("FAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, and book value per common share, excluding FAS No. 115, are also non-GAAP financial measures that are used to gauge stockholders' equity and book value excluding the after-tax effect of net unrealized gains and losses relating to fixed maturity securities. Tangible book value is a further non-GAAP measure used by investors and analysts to gauge book values excluding the effects of goodwill and other intangible assets. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, see the table captioned "Reconciliation of Non-GAAP measures to the Nearest Comparable GAAP Measures," provided later in this release. FPIC's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding FPIC's performance and allows for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Corporate Profile FPIC Insurance Group, Inc., through its subsidiary companies, is a leading provider of medical professional liability insurance for physicians, dentists and other healthcare providers, and a provider of insurance management services to other medical professional liability insurance carriers. -0- *T For all your investor needs, FPIC is on the Internet at http://www.fpic.com Got a Tough Question? E-mail us at ir@fpic.com FPIC: Providing Answers in a Changing Market *T -0- *T FPIC Insurance Group, Inc. Unaudited Selected Financial Data (In Thousands, Except per Share Data) Three Months Ended Nine Months Ended ------------------ ----------------- Consolidated Statements of Income Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 --------------------------------- --------- -------- -------- -------- Revenues Net premiums earned $ 57,981 38,873 162,058 105,552 Insurance management fees 10,642 10,389 31,209 27,881 Net investment income 6,290 5,032 18,312 15,218 Commission income 432 1,932 1,546 5,275 Net realized investment (losses) gains (139) (110) (179) 3,363 Other income 209 302 571 664 ---------------------------------------------------------------------- Total revenues 75,415 56,418 213,517 157,953 ---------------------------------------------------------------------- Expenses Net losses and loss adjustment expenses ("LAE") 42,014 32,801 121,540 89,434 Other underwriting expenses 10,074 2,676 25,680 6,894 Insurance management expenses 8,225 7,039 23,361 21,811 Interest expense on debt 898 656 2,494 1,852 Other expenses 1,712 2,038 5,420 5,674 ---------------------------------------------------------------------- Total expenses 62,923 45,210 178,495 125,665 ---------------------------------------------------------------------- Income from continuing operations before income taxes and minority interest 12,492 11,208 35,022 32,288 Less: Income tax expense 3,958 4,080 11,537 11,923 ---------------------------------------------------------------------- Income from continuing operations before minority interest 8,534 7,128 23,485 20,365 Less: Minority interest (56) 26 (128) 303 ---------------------------------------------------------------------- Income from continuing operations 8,590 7,102 23,613 20,062 ---------------------------------------------------------------------- Discontinued Operations Income from discontinued operations (net of income taxes) - 427 369 933 Gain on disposal of discontinued operations (net of income taxes) - - 1,733 - ---------------------------------------------------------------------- Discontinued operations - 427 2,102 933 Net income $ 8,590 7,529 25,715 20,995 ====================================================================== Basic earnings per common share: Income from continuing operations $ 0.84 0.71 2.31 2.02 Discontinued operations - 0.04 0.21 0.09 ---------------------------------------------------------------------- Basic earnings per common share $ 0.84 0.75 2.52 2.11 ====================================================================== Diluted earnings per common share: Income from continuing operations $ 0.80 0.68 2.20 1.91 Discontinued operations - 0.04 0.20 0.09 ---------------------------------------------------------------------- Diluted earnings per common share $ 0.80 0.72 2.40 2.00 ====================================================================== Basic weighted average common shares outstanding 10,278 10,003 10,194 9,954 ====================================================================== Diluted weighted average common shares outstanding 10,783 10,522 10,704 10,502 ====================================================================== *T -0- *T FPIC Insurance Group, Inc. Unaudited Selected Financial Data (In Thousands, Except per Share Data) (continued) As of --------------------- Selected Consolidated Statements of Financial Sept 30, Dec 31, Position Information 2005 2004 ----------------------------------------------- ---------- ---------- Total cash and investments $ 757,760 683,968 Total assets $1,285,557 1,271,306 Liability for losses and LAE $ 633,924 635,118 Liability for losses and LAE, net of reinsurance $ 341,271 301,699 Long-term debt $ 46,083 46,083 Total shareholders' equity $ 242,447 217,120 Total shareholders' equity, excluding FAS 115 (a,c) $ 245,432 214,510 Book value per common share $ 23.37 21.56 Book value per common share, excluding FAS 115 (a,c) $ 23.66 21.30 Tangible book value per common share (b,c) $ 21.52 19.63 Tangible book value per common share, excluding FAS 115 (a,b,c) $ 21.80 19.37 Common shares outstanding 10,372 10,070 Statutory surplus of insurance subsidiaries $ 178,312 160,242 (a) Excludes the after-tax effect of net unrealized (losses) gains relating to our fixed maturity securities. (b) Excludes goodwill of $18,870 and $18,870 and intangible assets of $412 and $561 as of September 30, 2005 and December 31, 2004, respectively. (c) For additional information regarding the use of non-GAAP financial measures, see the discussion provided earlier in this release captioned "Non-GAAP Financial Measures" and the "Reconciliation of Non-GAAP Measures to the Nearest Comparable GAAP Measures" found later in this release. *T -0- *T FPIC Insurance Group, Inc. Unaudited Selected Financial Data (Dollars in Thousands) Three Months Ended Nine Months Ended ---------------------- --------------------- Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 ----------- ---------- ---------- ---------- Selected Consolidated Cash Flow Information -------------------------- Net cash provided by operating activities $ 20,050 29,894 81,319 34,101 Net cash (used in) provided by investing activities $ (77,796) 6,947 (129,952) (18,915) Net cash provided by financing activities $ 462 340 3,447 2,588 Segment Reconciliation of Total Revenues -------------------------- Insurance $ 64,234 44,030 180,572 124,769 Insurance management 11,312 13,300 33,437 36,110 Third party administration - - - - Intersegment eliminations (131) (912) (492) (2,926) ---------------------------------------------------------------------- Total revenues $ 75,415 56,418 213,517 157,953 ====================================================================== Segment Reconciliation of Net Income -------------------------- Insurance $ 6,675 3,545 17,816 12,180 Insurance management 1,915 3,641 5,899 8,133 Third party administration - 343 2,000 682 ---------------------------------------------------------------------- Net income $ 8,590 7,529 25,715 20,995 ====================================================================== Selected Insurance Segment Information -------------------------- GAAP combined ratio: -------------------------- Loss ratio 72.4% 84.4% 75.0% 84.7% Underwriting expense ratio 17.4% 6.9% 15.8% 6.5% ---------------------------------------------------------------------- Combined ratio 89.8% 91.3% 90.8% 91.2% ====================================================================== Direct and assumed premiums written $ 78,937 77,179 230,235 252,884 ====================================================================== Net premiums written $ 69,369 65,118 201,762 142,049 ====================================================================== Net paid losses and LAE on professional liability claims(1) $ 33,054 26,203 85,635 88,726 ====================================================================== Total professional liability claims with indemnity payment 118 62 302 251 ====================================================================== Total professional liability claims and incidents closed without indemnity payment 698 448 1,624 1,525 ====================================================================== Professional Liability Claims and Incidents Reported During the Period: -------------------------- Total professional liability claims reported 278 225 781 815 Total professional liability incidents reported 214 270 711 888 ---------------------------------------------------------------------- Total professional liability claims and incidents reported 492 495 1,492 1,703 ====================================================================== As of --------------------- Sept 30, Sept 30, 2005 2004 ---------- ---------- Total professional liability claims and incidents that remained open 4,724 5,418 ====================================================================== Professional liability policyholders (excluding fronting arrangements)(2) 14,199 14,171 ====================================================================== Professional liability policyholders under fronting arrangements(2) - 126 ====================================================================== (1) For the purpose of period over period comparison, net paid losses do not take into account $10,180 received in connection with the American Professional Assurance, Ltd. ceded reinsurance commutation during the second quarter of 2005, which would be a reduction to reported net paid losses. (2) Professional liability policyholders (excluding fronting arrangements) includes policyholders whose individual insurance is 90% reinsured under facultative reinsurance agreements. For the period ended September 30, 2004, 112 such policyholders previously reported under fronting arrangements have been reclassified to professional liability policyholders (excluding fronting arrangements). *T -0- *T FPIC Insurance Group, Inc. Unaudited Selected Financial Data (In Thousands) Reconciliation of Non-GAAP Measures to the Nearest Comparable GAAP Measures Reconciliation from net income to operating earnings: Three Months Ended Nine Months Ended ---------------------- --------------------- Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 ----------- ---------- ---------- ---------- Net income $ 8,590 7,529 25,715 20,995 ---------------------------------------------------------------------- Adjustments to reconcile net income to operating earnings: Less: Net realized investment (losses) gains, net of income taxes(a) (85) (68) (110) 2,066 Less: Discontinued operations, net of income taxes - 427 2,102 933 ---------------------------------------------------------------------- Total adjustments (85) 359 1,992 2,999 Operating earnings $ 8,675 7,170 23,723 17,996 ====================================================================== (a) All net realized investment gains, net of income taxes, for the periods reported relate to the insurance segment. *T -0- *T Reconciliation from book value per common share to book value per common share excluding FAS 115: As of --------------------- Sept 30, Dec 31, 2005 2004 ---------- ---------- Total shareholders' equity $ 242,447 217,120 Less: Net unrealized (losses) gains, after-tax, related to fixed maturity securities, available for sale included in total shareholders' equity (2,985) 2,610 ---------------------------------------------------------------------- Total shareholders' equity, excluding FAS 115 $ 245,432 214,510 ====================================================================== Book value per common share $ 23.37 21.56 ====================================================================== Book value per common share, excluding FAS 115 $ 23.66 21.30 ====================================================================== Reconciliation from book value per common share to tangible book value per common share: As of --------------------- Sept 30, Dec 31, 2005 2004 ---------- ---------- Total shareholders' equity $ 242,447 217,120 Adjustments to reconcile total shareholders' equity to tangible shareholders' equity Less: Goodwill 18,870 18,870 Less: Intangbile assets 412 561 ---------------------------------------------------------------------- Total adjustments 19,282 19,431 ---------------------------------------------------------------------- Tangible shareholders' equity $ 223,165 197,689 ====================================================================== Book value per common share $ 23.37 21.56 ====================================================================== Tangible book value per common share $ 21.52 19.63 ====================================================================== *T