FPIC Insurance Group Inc. Q1 2010 Earnings Call Transcript

FPIC Insurance Group Inc. Q1 2010 Earnings Call Transcript
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FPIC Insurance Group Inc. (FPIC)

Q1 2010 Earnings Call

May 06, 2010 11.03 a.m. ET

Executives

John Byers - President and CEO

Chuck Divita - CFO

Bob White - President of our Insurance Subsidiaries

Analyst

s

Joe DeMarino - Piper Jaffray

Paul Newsome - Sandler O'Neill

Amit Kumar - Macquarie

Michael Nannizzi - Oppenheimer

Presentation

Operator

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Good morning. My name is, Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the FPIC Insurance Group first quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remark there will be a question-and-answer period. (Operator Instructions). As a reminder ladies and gentlemen, this conference is being recorded today, May 6, 2010. We're now ready to begin the call.

Unidentified Company Speaker

Good morning, everyone, and thank you for joining the FPIC Insurance Group quarterly conference call. The call this morning will include a brief presentation, followed by an opportunity for questions-and-answers. Please be reminded that the call today is being recorded and a replay will be available this afternoon at 2:30 pm. A webcast replay will also be available.

Today's presentation and the discussion that follows may include statements about expected future events and future financial results that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and actual results may differ materially, as a result of risk and uncertainties that we describe more fully in our earnings release and in documents that we file with the Securities and Exchange Commission.

Our earnings release can be found in the Investor Relations section of our website at fpic.com. We do not undertake to revise forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

Today's presentation may also include certain non-GAAP financial measures, which we explain more fully in our earnings release, including a reconciliation of reported non-GAAP measures to the most directly comparable GAAP measure.

Now let me introduce our participants this morning. We have John Byers, President and Chief Executive Officer, Chuck Divita, Chief Financial Officer and Bob White, President of our Insurance subsidiaries. We are now ready for our presentation. Here is John Byers.

John Byers

Thanks, and good morning. The first quarter was another solid quarter for us. We achieved operating earnings per diluted share of $0.69 for the quarter, which reflects the continuation of overall favorable claims trends, as a success of our business developments and capital management initiatives.

We also maintained our excellent retention of existing business and continue to grow our policyholder base, reflecting a strong market positions, and close relationship for our customer base and agents.

Our net rate of premiums increased 8% for the quarter, compared to the first quarter of 2009, primarily as a result of our acquisition of Advocate, MD, which is performing in line with our expectations, which added to our overall first quarter results. Another matters of note, we continue to achieve solid book value for fair growth during first quarter, which increased 3% from year end.

Also our overall claims trends remained solid, highlighted by continued low claims frequencies. Finally, you may have previously seen AM Best recently reaffirmed A minus or excellent financial strength ratings of our insurance subsidiaries, starting a number of factors, including among other things, our excellent capitalizations, our specialty expertise and our extensive understanding of the Florida markets and regulatory and judicial environment.

In addition, we were recently named in the Forbes article as one of the 100 most trustworthy companies out of the universe of more than 8,000 public companies, based on, among other things, transparent and conservative accounting policy, and prudent management. We’re obviously very happy to receive this recognition that reflects the culture we’ve worked in and still within our organization.

Looking ahead, we will maintain our focus on the business strategy for the service well over the years. This includes prudently and profitability operating our businesses, adjusting to evolving market conditions and taking advantage of our growth and other opportunities.

With that overview, I’ll now turn the discussion over to Chuck to review of first quarter financial results in detail. Chuck?

Chuck Divita

Thanks and good morning everyone. As John said, we reported another quarter of solid results and continue to build on past successes. For the quarter, we reported operating earnings per diluted share of $0.69, compared to $0.72 for the prior year’s quarter. And we achieved 12% return on average equity for the trailing 12 months. These results reflected the underlying profitability of our business, and the effectiveness of our capital management strategy.

Our business potential and growth initiatives continue to progress well, highlighted by a high retention of existing business, which has been on the mid-90s for several years, and by the Advocate, MD acquisition.

Our policyholder base, excluding policyholders under alternative risk arrangements, increased 31% from the prior year’s quarter, as a result of the Advocate, MD acquisition, and from our organic growth of 3%.

In terms of business composition, Texas now represents approximately 22% of total policyholders, excluding alternative risk arrangements and our Florida concentration, compared to the prior year’s quarter, declined by nearly 20 points from approximately 83% to 65% of total policyholders.

As John said, net premiums written for the quarter, increased 8% overall, as result of the Advocate MD acquisition. Excluding Advocate MD, net premium written declined 3%, primarily as a result of the lower Florida rates environment, compared to the prior year’s, quarter offset to some extend by organic policyholder growth.

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