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American Physicians Capital, Inc. Reports Second Quarter 2010 Results

American Physicians Capital, Inc. (APCapital) (NASDAQ:ACAP) today announced net income of $9.4 million or $.98 per diluted common share for the second quarter of 2010. This compares to net income of $11.0 million, or $.97 per diluted common share for the second quarter of 2009. Year-to-date, the Company has generated net income of $18.4 million or $1.88 per diluted common share in 2010, compared to $21.1 million or $1.82 per diluted common share in the first six months of 2009. At June 30, 2010, APCapital’s book value per share was $25.20 based on 9,339,087 shares outstanding.

As announced on July 8, 2010, APCapital has entered into a definitive merger agreement with The Doctors Company, the largest national insurer of physician and surgeon medical liability, pursuant to which The Doctors Company will acquire APCapital for $41.50 per share in cash. The transaction is expected to close in the fourth quarter of 2010 and is subject to customary closing conditions.

Consolidated Income Statement        
(Dollars in thousands)
  Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
 
Direct Premiums Written $ 24,001   $ 24,245   $ 51,297   $ 54,367  
 
Net Premiums Written $ 25,095   $ 23,389   $ 51,130   $ 52,109  
 
Net Premiums Earned $ 29,388 $ 28,382 $ 56,083 $ 57,688
Incurred Loss and Loss Adjustment Expenses:
Current Accident Year Losses 22,928 23,200 44,841 47,036
Prior Year Losses   (8,276 )   (10,087 )   (16,397 )   (18,311 )
Total 14,652 13,113 28,444 28,725
 
Underwriting Expenses   7,042     7,319     13,669     14,451  
Underwriting Income 7,694 7,950 13,970 14,512
Investment Income 6,298 8,028 12,664 16,218
Other Income (1) 282 212 857 435
Other Expenses   (1,704 )   (846 )   (2,542 )   (1,818 )
Pre-tax Income 12,570 15,344 24,949 29,347
Federal Income Taxes   3,138     4,354     6,566     8,270  
Net Income $ 9,432   $ 10,990   $ 18,383   $ 21,077  
 
Loss Ratio:
Current Accident Year 78.0 % 81.7 % 80.0 % 81.5 %
Prior Year Development -28.1 % -35.5 % -29.3 % -31.7 %
Calendar Year 49.9 % 46.2 % 50.7 % 49.8 %
 
Underwriting Expense Ratio 24.0 % 25.8 % 24.4 % 25.1 %
 
Combined Ratio 73.9 % 72.0 % 75.1 % 74.9 %
 
(1) Includes realized gains and losses
 

Direct premiums written were $24.0 million in the second quarter of 2010, down $244,000 or 1.0% from the same period a year ago. Year-to-date, direct premiums written are down $3.1 million or 5.6%. The rate of decline in direct premiums written slowed in the second quarter of 2010 due to an increase in new business written in Illinois. However, direct premiums have continued to decrease due to rate reductions based on lower claims frequency trends and competitive pressures. We insured 8,631 physicians at June 30, 2010, down from 8,821 insureds at year end 2009.

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