FPIC Insurance Group, Inc. (“FPIC” or the “Company”) (NASDAQ:
FPIC) reported for the second quarter of 2009:
- operating earnings(1) of $8.2
million, or $1.09 per diluted common share, as compared to $10.3
million, or $1.16 per diluted common share, for the second quarter
of 2008; and
- net income of $9.2 million, or
$1.22 per diluted common share, as compared to $10.3 million, or
$1.16 per diluted common share, for the second quarter of
2008.
For the six months ended June 30, 2008, FPIC reported:
- operating earnings of $16.6
million, or $2.16 per diluted common share, as compared to $21.2
million, or $2.35 per diluted common share, for the first six
months of 2008; and
- net income of $17.6 million, or
$2.29 per diluted common share, as compared to $21.2 million, or
$2.34 per diluted common share, for the first six months of
2008.
(1) To supplement the consolidated financial information
presented herein in accordance with accounting principles generally
accepted in the United States of America (“GAAP”), we report
operating earnings and certain other non-GAAP financial measures
widely used in the insurance industry to assist in evaluating
financial performance over time. For additional information and
reconciliation to GAAP results, see the section entitled
Non-GAAP Financial Measures, found later in this press
release.
“Our second quarter financial results, including our strong
operating earnings per share and significant book value growth,
demonstrate our unwavering focus on achieving sustainable
shareholder value,” said John R. Byers, President and Chief
Executive Officer. “We also continued to achieve excellent
retention of existing business and to grow our policyholder base
during the quarter. These results reflect our ongoing commitment to
and the success of our business strategies.”
Other Unaudited Financial and Operational Highlights for
Second Quarter 2009
(as compared to second quarter 2008 unless otherwise
indicated)
- Our policyholder retention was
95 percent on a national basis and 96 percent in Florida as of June
30, 2009 and 2008.
- Our professional liability
policyholders, excluding alternative risk arrangements, increased 5
percent to 13,999 policyholders as of June 30, 2009 from 13,316
policyholders as of June 30, 2008.
- During the quarter, we
recognized $5.0 million in favorable prior year reserve development
compared to $4.0 million in second quarter 2008. The resulting
calendar year loss ratio was 57.7 percent for the second quarter
2009 compared to 58.2 percent for 2008.
- Consolidated revenues were 9
percent lower primarily as the result of lower Florida premium
rates, as well as lower net investment income.
- Lower rates in our Florida
market and changes in business mix, offset to some extent by growth
in professional liability policyholders, resulted in a 15 percent
decline in net premiums written.
- Net investment income was 6
percent lower as a result of a decrease in average invested assets
and a lower yield on cash and cash equivalents partially offset by
a slight increase in the average yield on fixed income
securities.
- Our expense ratio was 26.5
percent compared to 21.7 percent for 2008. The higher ratio was
primarily due to lower net premiums earned, as well as a lesser
impact from the recovery of previous insurance guaranty fund
assessments.
- Book value per common share grew
11 percent from December 31, 2008 to $37.04 as of June 30, 2009.
The statutory surplus of our insurance subsidiaries as of June 30,
2009 was $236.0 million and the ratio of net premiums written to
surplus was 0.6 to 1.
- In July 2009, our Board of
Directors approved a 500,000 share increase in our share repurchase
program. On a trade date basis, we repurchased 378,644 shares of
our common stock during the three months ended June 30, 2009 at an
average price of $31.22 per share. Through July 31, 2009, we have
repurchased an additional 135,496 shares of our common stock at an
average price of $31.21 per share, and had remaining authority from
our Board of Directors to repurchase an additional 623,474 shares
as of that date.
- On July 30, 2009, we announced a
definitive agreement to acquire Advocate, MD Financial Group Inc.,
which through its subsidiary is the fourth largest provider of
medical professional liability insurance in Texas.
Conference Call Information
We will host a conference call at 11:00 a.m., Eastern Time,
Thursday, August 6, 2009, to review our second quarter 2009 results
and to discuss the contemplated Advocate, MD Financial Group, Inc.
acquisition. To access the conference call, dial (866) 830-9065
(USA and Canada) or (660) 422-4543 (International) and use the
conference ID code 19993657.
The conference call will also be broadcast live over the
Internet in a listen-only format via the Company’s corporate
website at http://www.fpic.com. To access the call from the
Company’s home page, click on “Investor Relations” where a
conference call link will be provided to connect listeners to the
call. Questions can be submitted in advance of the call until 10:00
a.m., Eastern Time, Thursday, August 6, 2009, via e-mail to
ir@fpic.com. The Company will also provide a link on the “Investor
Relations” page of its corporate website where questions can be
submitted.
For individuals unable to participate in the conference call, a
telephone replay will be available beginning at 2:30 p.m., Eastern
Time, Thursday, August 6, 2009, and ending at 11:59 p.m., Eastern
Time, Thursday, August 13, 2009. To access the telephone replay,
dial (800) 642-1687 (USA and Canada) or (706) 645-9291
(International) and use the conference ID code 19993657. A replay
of the conference call webcast will also be available beginning at
2:30 p.m., Eastern Time, Thursday, August 6, 2009, on the Company’s
website.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if
they do not materialize or prove correct, could cause our results
to differ materially from those expressed or implied by such
forward-looking statements. Such statements are made in reliance
upon the safe harbor provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of
historical fact are statements that could be deemed forward-looking
statements, including statements: of our plans, strategies and
objectives for future operations; concerning new products, services
or developments; regarding future economic conditions, performance
or outlook; as to the outcome of contingencies; of beliefs or
expectations; and of assumptions underlying any of the foregoing.
Forward-looking statements may be identified by their use of
forward-looking terminology, such as “believes,” “expects,” “may,”
“should,” “would,” “will,” “intends,” “plans,” “estimates,”
“anticipates,” “projects” and similar words or expressions. You
should not place undue reliance on these forward-looking
statements, which reflect our management’s opinions only as of the
date of this press release.
Factors that might cause our results to differ materially from
those expressed or implied by the forward-looking statements
contained in this press release include, but are not limited
to:
i) The effect of negative developments and cyclical changes
in the medical professional liability insurance business; ii) The
effects of competition, including competition for agents to place
insurance, of physicians electing to self-insure or to practice
without insurance coverage, and of related trends and associated
pricing pressures and developments;
iii)
Business risks that result from
our size, products, and geographic concentration;
iv)
The risks and uncertainties
involved in determining the rates we charge for our products and
services, as well as these rates being subject to or mandated by
legal requirements and regulatory approval;
v) The actual amount of our new and renewal business; vi) The
uncertainties involved in the loss reserving process, including the
possible occurrence of insured losses with a frequency or severity
exceeding our estimates; vii) The unpredictability of court
decisions and our exposure to claims for extra contractual damages
and losses in excess of policy limits; viii) Developments in
financial and securities markets that could affect our investment
portfolio; ix) Legislative, regulatory or consumer initiatives that
may adversely affect our business, including initiatives seeking to
lower premium rates; x) The passage of additional or repeal of
current tort reform measures, and the effect of such measures; xi)
Assessments imposed by state financial guaranty associations or
other insurance regulatory bodies; xii) Developments in reinsurance
markets that could affect our reinsurance programs or our ability
to collect reinsurance recoverables; xiii) The loss of the services
of any key members of senior management; xiv) 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 xv) The completion of
the acquisition of Advocate, MD Financial Group Inc.; xvi) Other
factors discussed in our Annual Report on Form 10-K for the year
ended December 31, 2008, including Item 1A. Risk Factors and Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, filed with the Securities and Exchange
Commission (“SEC”) on March 4, 2009, and other factors discussed in
our Quarterly Report on Form 10-Q for the quarter ended June 30,
2009 filed with the SEC on August 5, 2009.
Readers are cautioned not to place undue reliance on
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 the consolidated financial information presented
herein in accordance with GAAP, we report certain non-GAAP
financial measures widely used in the insurance industry to
evaluate financial performance over time. Operating earnings is a
non-GAAP financial measure 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 more closely tied to the financial markets; (ii)
the cumulative effects of accounting changes and other infrequent
or non-recurring items, which can affect comparability across
reporting periods; and (iii) discontinued operations. Tangible book
value is another non-GAAP financial measure used by investors and
analysts to gauge book values excluding 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 tables below the caption “Reconciliation of Non-GAAP
Measures to the Nearest Comparable GAAP Measures,” provided later
in this release. We believe that these non-GAAP financial measures
provide meaningful supplemental information regarding our
performance and allow for greater transparency with respect to
supplemental information used by us in our 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.
Contact Information
FPIC Insurance Group, Inc.
Investor Relations, Dana
Mullins
904-360-3612
225 Water Street, Suite 1400 Jacksonville, Florida 32202
For all your investor needs, FPIC
is on the Internet at www.fpic.com or e-mail us at
ir@fpic.com.
FPIC Insurance Group,
Inc.
Unaudited Selected Financial
Data
Selected Data Based on the
Consolidated Statements of Income:
(in thousands, except earnings per common share) For the
Quarter Ended For the Six Months Ended
June 30, 2009
June 30, 2008
June 30, 2009 June 30, 2008
Revenues Net premiums earned
$ 37,668 42,823
$
76,080 87,116 Net investment income
7,122 7,599
14,341 15,346 Net realized investment gains (losses)
1,025 (30 )
967 (121 ) Other income
84
101
180 198
Total revenues
45,899 50,493
91,568 102,539 Expenses
Net losses and loss adjustment expenses
21,740 24,902
44,980 50,057 Other underwriting expenses
9,995 9,298
19,101 19,239 Interest expense on debt
903 931
1,798 1,996 Other expenses
— —
— 8 Total expenses
32,638 35,131
65,879
71,300 Income before income taxes
13,261 15,362
25,689 31,239 Less: Income tax expense
4,070 5,033
8,110
10,083 Net income
$ 9,191 10,329
$ 17,579 21,156 Basic earnings per common
share:
$ 1.24 1.19
$
2.34 2.41 Basic weighted-average common
shares outstanding
7,400 8,681
7,527 8,769 Diluted
earnings per common share:
$ 1.22 1.16
$ 2.29 2.34
Diluted weighted-average common
shares outstanding
7,533 8,921
7,680
9,033 Net realized
investment gains (losses): Net realized investment gains before
credit related impairments
$ 1,025 24
$ 2,322 20 Total
other-than-temporary impairments on investments
— (54 )
(1,355 ) (141 ) Portion of other-than-temporary
impairments recognized in other comprehensive loss
—
—
— —
Credit related impairments included in net realized investment
gains (losses)
— (54 )
(1,355 ) (141 ) Net realized investment gains
(losses)
$ 1,025 (30 )
$
967 (121 )
Selected Data Based on the
Consolidated Statements of Financial Position and the Consolidated
Statements of Cash Flows:
(in thousands, except data per common share)
As of
As of
June 30, 2009 December 31, 2008
Total cash and investments
$ 710,581 712,665 Total
assets
$ 977,332 997,985 Liability for losses and
loss adjustment expenses ("LAE")
$ 538,889 555,848
Liability for losses and LAE, net of reinsurance
$
409,534 419,997 Long-term debt
$ 46,083 46,083
Accumulated other comprehensive loss, net
$ (1,969
) (12,389 ) Shareholders' equity
$ 267,438
259,894 Book value per common share
$ 37.04 33.31
Book value per common share, excluding the impact of unrealized
investment gains and losses (1),(2)
$ 36.78 34.30
Tangible book value per common share (1),(3)
$ 35.54
31.92 Common shares outstanding
7,220 7,803 Consolidated
statutory surplus of insurance subsidiaries
$ 235,954
242,812 (in thousands) For the Quarter Ended For the
Six Months Ended
June 30, 2009 June 30, 2008
June 30,
2009 June 30, 2008 Cash flows from continuing operations Net
cash provided by operating activities
$ 3,287 3,380
$ 6,055 14,299 Net cash provided by (used in)
investing activities
$ 20,003 (34 )
$
23,115 (6,763 ) Net cash used in financing activities
$ (9,654 ) (20,115 )
$ (22,067
) (29,687 ) (1) 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” provided later in this
release. (2) Excludes the impact of an accumulated other
comprehensive gain associated with investments of $1.9 million as
of June 30, 2009 and the impact of an accumulated other
comprehensive loss associated with investments of $7.7 million as
of December 31, 2008. (3) Excludes goodwill of $10.8 million as of
June 30, 2009 and December 31, 2008.
Selected Insurance
Data:
(in thousands) For the Quarter Ended Percentage
June 30,
2009 Change June 30, 2008 Direct premiums written (1)
$
36,506 -13 % 42,092 Assumed premiums written
— 0 % —
Ceded premiums written
(5,131 ) 0 % (5,128 )
Net premiums written (1)
$ 31,375 -15 % 36,964
(in thousands) For the Six Months Ended Percentage
June 30, 2009 Change June 30, 2008 Direct premiums written
(1)
$ 82,110 -13 % 93,947 Assumed premiums written
— 0 % — Ceded premiums written
(11,476
) 7 % (12,397 ) Net premiums written (1)
$
70,634 -13 % 81,550
As of
Percentage As of
June 30, 2009 Change June 30, 2008
Professional liability policyholders in force
13,999 5 %
13,316 Professional liability policyholders in force under
alternative risk arrangements
227 110 % 108
Total professional liability policyholders in force
14,226 6 % 13,424 (1) Includes
$0.5 million and $2.0 million of premiums associated with
alternative risk arrangements for the three and six months ended
June 30, 2009, respectively, compared to $0.3 million and $1.7
million for the comparable periods in 2008, respectively.
Management fees for such arrangements are included in other income.
(in thousands) For the Six Months Ended Percentage
June
30, 2009 Change June 30, 2008 Net paid losses
$
33,512 22 % 27,550 Less: Net paid losses on assumed business
in run-off
501 20 % 417 Net paid losses
excluding assumed business in run-off
33,011
22 % 27,133 Net paid LAE
21,931 -19 % 27,088
Less: Net paid LAE on assumed business in run-off
—
-100 % 70 Net paid LAE excluding assumed business in
run-off
21,931 -19 % 27,018 Net
paid losses and LAE excluding assumed business in run-off
$
54,942 1 % 54,151 For the Six
Months Ended Percentage
June 30, 2009 Change June 30, 2008
Total professional liability claims closed without indemnity
payment
292 4 % 280 Total professional liability incidents
closed without indemnity payment
350 72 % 203
Total professional liability claims and incidents closed
without indemnity payment
642 33 % 483
Total professional liability claims with indemnity payment
169 16 % 146 CWIP ratio on a
rolling four quarter basis(1)
37 % 32 %
CWIP ratio, including incidents, on a rolling four quarter
basis (1)
18 % 16 %
(1)
The claims with indemnity payment
(“CWIP”) ratio is defined as the ratio of total professional
liability claims with indemnity payment to the sum of total
professional liability claims with indemnity payment and total
professional liability claims closed without indemnity payment.
For the Six Months Ended Percentage
June 30, 2009
Change June 30, 2008 Total professional liability claims reported
during the period
388 6 % 365 Total professional liability
incidents reported during the period
485 -6 %
514 Total professional liability claims and incidents
reported during the period
873 -1 % 879
Total professional liability claims and incidents that
remained open
3,423 -5 % 3,600
Reconciliation of Non-GAAP
Measures to the Nearest Comparable GAAP Measures
Reconciliation of our Combined
Ratio to the Combined Ratio, Excluding Insurance Guaranty Fund
Recoveries:
For the Quarter Ended For the Six Months Ended
June 30, 2009 June 30, 2008
June 30, 2009
June 30, 2008 Loss ratio Current accident year
71.0
% 67.5 %
70.9 % 67.2 % Prior accident years
-13.3 % -9.3 %
-11.8
% -9.7 % Calendar year loss ratio A
57.7
% 58.2 %
59.1 % 57.5 %
Underwriting expense ratio B
26.5 % 21.7 %
25.1 % 22.0 % Insurance guaranty fund recoveries
-0.9 % -2.0 %
-1.0
% -1.8 % Underwriting expense ratio excluding
insurance guaranty fund recoveries C
27.4 %
23.7 %
26.1 % 23.8 % Combined
ratio (Sum of A+B)
84.2 % 79.9 %
84.2 % 79.5 % Combined ratio excluding
insurance guaranty fund recoveries (Sum of A+C)
85.1
% 81.9 %
85.2 % 81.3 %
Reconciliation of Net Income to
Operating Earnings:
(in thousands, except earnings per common share) For
the Quarter Ended For the Six Months Ended
June 30,
2009 June 30, 2008
June 30, 2009 June 30,
2008 Net income
$ 9,191 10,329
$ 17,579 21,156
Adjustments to reconcile net income to operating earnings: Less:
Net realized investment gains (losses), net of income taxes
1,002 (18 )
967
(74 ) Total adjustments
1,002 (18 )
967 (74 )
Operating earnings
$ 8,189 10,347
$ 16,612 21,230
Diluted earnings per common share
$ 1.22 1.16
$ 2.29 2.34 Less: Adjustments to reconcile net income
to operating earnings
0.13 —
0.13 (0.01 ) Operating earnings per
common share
$ 1.09 1.16
$ 2.16 2.35 Diluted
weighted-average common shares outstanding
7,533 8,921
7,680
9,033
Reconciliation of Shareholders’
Equity to Tangible Shareholders’ Equity:
(in thousands, except per common share data)
As
of As of
June 30, 2009 December 31, 2008
Shareholders' equity
$ 267,438 259,894 Adjustments to
reconcile shareholders' equity to tangible shareholders' equity:
Goodwill
(10,833 ) (10,833 )
Tangible shareholders' equity
$ 256,605
249,061 Common shares outstanding
7,220 7,803 Book value
per common share
$ 37.04 33.31
Tangible book value per common share
$
35.54 31.92
Reconciliation of Book Value per
Common Share to Book Value per Common Share, Excluding the Impact
of Net Unrealized Investment Gains (Losses):
(in thousands, except per common share data)
As
of As of
June 30, 2009 December 31, 2008
Shareholders' equity
$ 267,438 259,894 Less: Net
unrealized investment gains (losses)
1,855
(7,721 ) Shareholders' equity, excluding the impact of net
unrealized investment gains (losses)
$ 265,583
267,615 Common shares outstanding
7,220 7,803 Book value per
common share
$ 37.04 33.31
Book value per common share, excluding the impact of net
unrealized investment gains (losses)
$ 36.78
34.30
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