FPIC Insurance Group, Inc. Reports Fourth Quarter and Year 2007 Results
JACKSONVILLE, Fla.–(BUSINESS WIRE)–FPIC Insurance Group, Inc. (â€œFPICâ€?) (NASDAQ:FPIC) reported for the fourth quarter of 2007:
- income from continuing operations of $15.1 million, or $1.62 per diluted common share, as compared to $9.9 million, or $0.94 per diluted common share, for the fourth quarter 2006;
- operating earnings of $15.3 million, or $1.64 per diluted common share, as compared to $10.0 million, or $0.94 per diluted common share, for the fourth quarter 2006; and
- net income of $15.1 million, or $1.62 per diluted common share, as compared to $9.4 million, or $0.89 per diluted common share, for the fourth quarter 2006.
For the year ended December 31, 2007, FPIC reported:
- income from continuing operations of $51.1 million, or $5.23 per diluted common share, as compared to $32.9 million, or $3.09 per diluted common share, for the year ended December 31, 2006;
- operating earnings of $51.4 million, or $5.27 per diluted common share, as compared to $32.9 million, or $3.08 per diluted common share, for the year ended December 31, 2006; and
- net income of $50.9 million, or $5.21 per diluted common share, as compared to $51.6 million, or $4.83 per diluted common share, for the year ended December 31, 2006.
Net income for the fourth quarter of 2006 includes a loss from discontinued operations of $0.5 million. Net income for the year ended December 31, 2007 includes a loss from discontinued operations of $0.2 million. Net income for the year ended December 31, 2006 includes income from discontinued operations of $18.6 million (which includes an after-tax gain of $12.0 million arising from the disposition of such operations).
The results for the year ended December 31, 2007 also include a $9.7 million after-tax gain resulting from the commutation, effective January 1, 2007, of all reinsurance treaties under which our subsidiary, First Professionals Insurance Company, Inc. (â€œFirst Professionalsâ€?), acted as a reinsurer for Physiciansâ€™ Reciprocal Insurers (â€œPRIâ€?).
The results for the year ended December 31, 2007 also include a charge of $4.2 million ($2.6 million after-tax) for an assessment by the Florida Office of Insurance Regulation (the â€œFlorida OIRâ€?) with respect to the insolvency of a group of Florida-domiciled homeownersâ€™ insurance companies owned by Poe Financial Group. The results for the year ended December 31, 2006 include a $9.4 million ($5.8 million after-tax) charge for two separate assessments made by the Florida OIR with respect to the same insolvency. As allowed by Florida law, our insurance subsidiaries are entitled to recoup this assessment from their Florida policyholders and have made the necessary filings to do so.
Certain other factors affecting our comparative results for the fourth quarter and year 2007 are discussed in the â€œUnaudited Financial and Operational Highlightsâ€? section below.
â€œWe are very pleased to report that our continued execution of our business strategy delivered record bottom-line results during the fourth quarter and the year 2007,â€? said John R. Byers, President and Chief Executive Officer. â€œBook value per share also grew 17 percent in 2007 to its highest point in our history as a result of our earnings growth and effective capital management. With our strong capital and market positions, we are well-positioned to continue to deliver value to our shareholders.â€?
Unaudited Financial and Operational Highlights for Fourth Quarter 2007
(as compared to fourth quarter 2006 unless otherwise indicated)
- Operating earnings increased 54 percent (74 percent on a diluted per share basis).
- Income from continuing operations increased 52 percent (72 percent on a diluted per share basis).
- Consolidated revenues declined 11 percent, primarily as a result of lower net premiums earned and lower net investment income.
- Direct premiums written declined 17 percent primarily as a result of lower premium rates in our Florida market and, to a lesser extent, a change in overall business mix.
- Net investment income was 11 percent lower, primarily as a result of a decrease in average invested assets resulting from the PRI reinsurance commutation and share repurchases.
- On December 1, 2007, our subsidiaries, First Professionals and Anesthesiologists Professional Assurance Company (“APAC”) implemented effective rate decreases of 11.7 percent and 11.4 percent, respectively, to their Florida based medical professional liability premiums. Effective March 1, 2008, the rate decreases at First Professionals and APAC will be adjusted to 8.5 percent to reflect the factor in our rate filings with respect to the recovery of the previous Florida OIR assessments discussed above.
- Policyholder retention was 94 percent nationally and 95 percent in Florida for the year ended December 31, 2007 compared to 92 percent national retention and 94 percent Florida retention for the year ended December 31, 2006.
- The number of professional liability policyholders insured by our insurance subsidiaries remained essentially level with 13,372 policyholders at December 31, 2007 compared to 13,402 policyholders at December 31, 2006.
- As a result of the continuation of favorable loss trends, our 2007 accident year loss ratio was lowered by 1.9 percentage points for the full year from that reported at September 30, 2007, to 67.3 percent. In addition, these trends resulted in the recognition of $7.0 million of favorable development on prior year reserves during fourth quarter 2007. We recognized $5.1 million of favorable development on prior year reserves during fourth quarter 2006. The resulting calendar year loss ratio was 47.3 percent for fourth quarter 2007 compared to 56.6 percent for fourth quarter 2006.
- Excluding the PRI reinsurance commutation discussed above, we have recognized $16.0 million of favorable prior year loss development for the year ended December 31, 2007, compared to $5.1 million for the year ended December 31, 2006. Excluding the impact of the commutation, the 2007 calendar year loss ratio would be 59.3 percent compared to 66.8 percent for 2006.
- Our expense ratio was 20.7 percent compared to 29.0 percent. The lower expense ratio is primarily due to a $4.2 million guaranty fund assessment recorded during the fourth quarter of 2006, offset to a certain extent by lower net premiums earned during the fourth quarter of 2007.
- Book value per common share increased 17 percent to $33.03 as of December 31, 2007 from $28.34 as of December 31, 2006. The statutory surplus of our insurance subsidiaries increased 16 percent to $261.6 million as of December 31, 2007 compared to $226.0 million as of December 31, 2006.
- On a trade date basis, we repurchased 219,453 shares of our common stock during the quarter at an average price of $42.31 per share. During 2007, we repurchased 1,173,982 shares of our common stock. Through February 25, 2008, we have repurchased an additional 211,006 shares of our common stock, on a trade date basis, at an average price of $41.41 per share and had remaining authority from our Board of Directors to repurchase 219,537 more shares as of that date.
Conference Call Information
We will host a conference call at 11:00 a.m., Eastern Time, Thursday, February 28, 2008, to review our fourth quarter and year 2007 results. To access the conference call, dial (866) 830-9065 (USA and Canada) or (660) 422-4543 (International) and use the conference ID code 33072695.
The conference call will also be broadcast live over the Internet in a listen-only format via our corporate website at http://www.fpic.com. To access the call from FPICâ€™s home page, click on â€œInvestor Relationsâ€? and a conference call link will be provided to connect you to the broadcast. Questions can be submitted in advance of the call until 10:00 a.m., Eastern Time, Thursday, February 28, 2008, via e-mail at email@example.com or through our corporate website at http://www.fpic.com, where a link on the â€œInvestor Relationsâ€? page has been provided.
For individuals unable to participate in the conference call, a telephone replay will be available beginning at 2:30 p.m., Eastern Time, Thursday, February 28, 2008, and ending at 11:59 p.m., Eastern Time, Thursday, March 6, 2008. To access the telephone replay, dial (800) 642-1687 (USA and Canada) or (706) 645-9291 (International) and use the access code 33072695. A replay of the conference call webcast will also be available beginning at 1:00 p.m., Eastern Time, Thursday, February 28, 2008, on FPICâ€™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 â€œbelieves,â€? â€œexpects,â€? â€œmay,â€? â€œshould,â€? â€œwould,â€? â€œwill,â€? â€œintends,â€? â€œplans,â€? â€œestimates,â€? â€œanticipates,â€? â€œprojectsâ€? and similar words or expressions. You should not place undue reliance on these forward-looking statements, which reflect our managementâ€™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)||Assessments imposed by state financial guaranty associations or other insurance regulatory bodies;|
|ix)||Developments in financial and securities markets that could affect our investment portfolio;|
|x)||Legislative, regulatory or consumer initiatives that may adversely affect our business, including initiatives seeking to lower premium rates;|
|xi)||The passage of additional or repeal of current tort reform measures, and the effect of such current measures and tort reform measures already in effect;|
|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 agentsâ€™ ability to place insurance business on our behalf;|
|xv)||Other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2007, including Item 1A. Risk Factors and Item 7. Managementâ€™s Discussion and Analysis of Financial Condition and Results of Operations, filed with the SEC on February 27, 2008.|
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 accounting principles generally accepted in the United States of America (â€œGAAPâ€?), 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 a further 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 table captioned â€œReconciliation of Non-GAAP Measures to the Nearest Comparable GAAP Measures,â€? 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.
FPIC Insurance Group, Inc., through its subsidiary companies, is a leading provider of medical professional liability insurance for physicians, dentists and other healthcare providers.
|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 firstname.lastname@example.org.