FPIC Insurance Group, Inc. (“FPIC” or the “Company”) (NASDAQ:
FPIC) reported for the second quarter of 2011:
- net income(1) of $6.5 million, or $0.76
per diluted common share, compared to $7.5 million, or $0.76 per
diluted common share, for the second quarter of 2010; and
- operating earnings(1),(2) of $4.8
million, or $0.57 per diluted common share, compared to $7.0
million, or $0.71 per diluted common share, for the second quarter
of 2010.
For the six months ended June 30, 2011, FPIC reported:
- net income(1) of $12.8 million, or
$1.48 per diluted common share, compared to $14.7 million, or $1.46
per diluted common share, for the six months ended June 30, 2010;
and
- operating earnings(1),(2) of $10.7
million, or $1.24 per diluted common share, compared to $14.0
million, or $1.39 per diluted common share, for the six months
ended June 30, 2010.
______
(1) These results include $0.8 million, or $0.09 per
diluted common share, for both the three months and six months
ended June 30, 2011 in expenses relating to the Company's
previously announced agreement to be acquired by The Doctors
Company. (2) To supplement the consolidated financial information
presented herein in accordance with accounting principles generally
accepted in the United States of America (“US 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 US GAAP results, see the section entitled
“Non-GAAP Financial Measures” found later in this press release.
John R. Byers, FPIC's President and Chief Executive Officer,
stated, "On May 24, 2011, we announced our agreement to be acquired
by The Doctors Company. While our business continued to perform
well in the quarter, earnings for the quarter and the first six
months of the year reflect certain transaction related expenses.”
Mr. Byers concluded, "Our organization remains focused on providing
superior products and services to our customers and working to
achieve a successful closing of the transaction with The Doctors
Company.”
As a result of the proposed acquisition of FPIC by The Doctors
Company, FPIC will not be hosting an analyst call for the quarter.
For additional information concerning the proposed acquisition, see
our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2011 filed with the Securities and Exchange
Commission (the "SEC") on August 3, 2011.
Certain factors affecting our comparative results for the three
months and six months ended June 30, 2011 are discussed in the
“Unaudited Financial and Operational Highlights” section below.
Unaudited Financial and Operational Highlights for Second
Quarter 2011
(as compared to second quarter 2010 unless otherwise
indicated)
- Professional liability policyholders,
excluding policyholders under alternative risk arrangements,
increased 3 percent to 18,606 policyholders as of
June 30, 2011, compared to 18,111 policyholders as of
June 30, 2010.
- Our national policyholder retention
rate was 94 percent for the six months
ended June 30, 2011 compared to 96 percent for the
comparable period in 2010. Our Florida policyholder retention rate
was 96 percent and 97 percent for the six months
ended June 30, 2011 and 2010, respectively.
- Net premiums written declined 7 percent
and 6 percent, respectively, for the three months and six months
ended June 30, 2011. The decline in net premiums written
for the three months ended June 30, 2011 is primarily the result of
the continued competitive pricing environment in our Florida market
and the expense associated with our awards-made reinsurance
program, which became effective January 1, 2011, offset to some
extent by growth in policyholders. These factors along with
premiums returned to certain insured groups under retrospective
plans resulting from their favorable loss experience contributed to
the decline in net premiums written for the six months ended June
30, 2011.
- Consolidated revenues were 3 percent
and 4 percent lower for the three months and six months ended
June 30, 2011 compared to the same periods in 2010,
primarily as the result of lower net premiums earned and lower net
investment income offset to some extent by higher net realized
investment gains.
- Net investment income was 12 percent
and 13 percent lower for the three months and six months ended
June 30, 2011, respectively, primarily as the result of
lower yields on invested assets due to lower prevailing interest
rates and lower average invested assets as the result of cash
utilized to repurchase shares under our share repurchase program.
Net realized investment gains increased to $2.7 million and $3.4
million for the three months and six months ended
June 30, 2011, compared to $0.8 million and $1.2 million
for the three months and six months ended
June 30, 2010.
- The continuation of favorable overall
claim results as compared to previous estimates resulted in the
recognition of favorable net loss development related to previously
established reserves of $5.0 million and $10.0 million for the
three months and six months ended June 30, 2011,
respectively, compared to $5.0 million and $9.0 million for the
three months and six months ended June 30, 2010,
respectively. The favorable development for the three months and
six months ended June 30, 2011 reflects lower estimates
of incident to claim development, payment frequency and/or payment
severity for the 2005 through 2009 accident years. Our current
accident year loss ratio for the three months and six months ended
June 30, 2011 was 71.9 percent and 72.0 percent,
respectively, compared to 71.9 percent and 71.0 percent for the
same periods in 2010.
- Our expense ratio was 30.9 percent and
30.7 percent for the three months and six months ended
June 30, 2011, respectively, compared to 29.2 percent and
28.6 percent for the same periods in 2010. The higher ratios in
2011 are primarily due to lower net premiums earned.
- Other expenses for the three months and
six months ended June 30, 2011 include approximately $1.1
million in transaction related expenses, including investment
banking, legal and other professional expenses, as the result of
our previously announced agreement to be acquired by The Doctors
Company.
- Book value per common share grew 3
percent to $31.79 as of June 30, 2011 from $30.84 as of
December 31, 2010. As of June 30, 2011, the
statutory surplus of our insurance subsidiaries was $246.2 million
and the ratio of net premiums written to surplus was 0.6 to 1.
- On a trade date basis, we repurchased
48,000 shares of our common stock during the three months ended
June 30, 2011 at an average price of $39.40 per share,
and as of June 30, 2011, we had remaining authority from
our Board of Directors to repurchase 600,770 additional shares
under our stock repurchase program.
- For additional information on the
Company's selected insurance data, including written premiums,
policyholder counts and claim statistics, see our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2011 filed
with the SEC on August 3, 2011.
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 these
forward-looking statements include, but are not limited to:
i. The possibility that the proposed acquisition of
the Company by The Doctors Company will not be completed; ii. The
effect of negative developments and cyclical changes in the medical
professional liability insurance business sector; iii. 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; iv. Business risks that result
from our size, products, and geographic concentration; v. 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; 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. Our exposure to claims for extra
contractual damages and losses in excess of policy limits and the
unpredictability of court decisions; viii. The impact of healthcare
reform or other significant changes in the healthcare delivery
system; ix. Legislative, regulatory, special interest or consumer
initiatives that may adversely affect our business, including
initiatives seeking to lower premium rates; x. The judicial and
legislative review of current tort reform measures; xi.
Developments in financial and securities markets that could affect
our investment portfolio; xii. Assessments imposed by state
financial guaranty associations or other insurance regulatory
bodies; xiii. The availability of dividends and management fees
from our insurance subsidiaries; xiv. Developments in reinsurance
markets that could affect our reinsurance programs or our ability
to collect reinsurance recoverables; xv. The results of the
acquisition of Advocate, MD and other growth initiatives; xvi.
Impairment in the value of our goodwill and intangibles; xvii. The
loss of the services of any key members of senior management;
xviii. Negative 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 xix.
Other factors discussed in our Annual
Report on Form 10-K for the year ended December 31, 2010, including
Item 1A. Risk Factors and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, filed
with the SEC on March 9, 2011, and other factors discussed in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2011
filed with the SEC on August 3, 2011
.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of their dates.
Forward-looking statements are made in reliance on the safe harbor
provision of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and, 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 US 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 investment 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.
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 US
GAAP. For more information on these non-GAAP financial measures,
see the tables under the caption “Reconciliation of Non-GAAP
Measures to the Nearest Comparable US GAAP Measures” provided
below. 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.
Reconciliation of Non-GAAP Measures to the
Nearest Comparable US GAAP Measure
Reconciliation of Net Income to Operating Earnings
(in thousands, except earnings per common share)
For the three months ended
June 30,
For the six months ended
June 30,
2011 2010
2011 2010 Net income
$
6,469 7,491
$ 12,803 14,706
Adjustments to reconcile net income to operating earnings: Less:
Net realized investment gains, net of income taxes
1,637 510
2,098
725 Operating earnings
$ 4,832
6,981
$ 10,705 13,981
Diluted earnings per common share
$ 0.76 0.76
$ 1.48 1.46 Less: Adjustments to reconcile net income
to operating earnings
0.19 0.05
0.24 0.07 Operating earnings per diluted
common share
$ 0.57 0.71
$ 1.24 1.39 Diluted
weighted-average common shares outstanding
8,495
9,902
8,658 10,041
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. Chuck Divita 904-360-3611 1000 Riverside
Avenue, Suite 800 Jacksonville, Florida 32204
For all your investor needs, FPIC is on the Internet at
www.fpic.com or e-mail us at ir@fpic.com.
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