<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ Quarterly report pursuant to Section 13 or a59d0 of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996 or
/ / Transition report pursuqant to Section 13 or (d) of the Securities
Exchange Act of 1934 for the transition period from _________ to
_________.
Commission file number 1-11983
FPIC Insurance Group, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
Florida 59-3359111
- ---------------------------------- ----------------------------------
(State or other jurisdiction (IRS Employer
of incorporation of organization) Identification No.)
</TABLE>
1000 Riverside Avenue, Suite 800, Jacksonville, FL 32204
- --------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(904) 354-5910
------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of June 30, 1996, there were 8,139,640 shares of the registrant's common
stock outstanding.
<PAGE> 2
Table of Contents
<TABLE>
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Part I - Financial Information
Item 1. Consolidated Financial Statements (unaudited)
of FPIC Insurance Group, Inc. and Subsidiaries:
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 5
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 9
Part II - Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
Part I Financial Information
Item 1. Financial Statements
FPIC Insurance Group, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
6/30/96 12/31/95
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Bonds and U.S. Government securities:
Available-for-sale, at fair value $223,453,066 $218,303,504
Common stocks, at fair value 155,000 125,000
Real estate investments 2,743,587 2,675,976
Short-term investments, at cost 0 500,000
------------ ------------
TOTAL INVESTMENTS 226,351,653 221,604,480
Cash and cash equivalents 3,053,570 494,095
Premiums receivable, net 15,955,501 10,846,007
Accrued investment income 3,248,968 3,064,866
Reinsurance recoverable on paid losses 70,661 808,900
Due from reinsurers on unpaid losses and advance premiums 9,172,838 9,480,277
Deposits with reinsurers 15,824,719 14,842,952
Property and equipment, net of accumulated depreciation 1,403,891 1,388,543
Deferred policy acquisition costs 1,372,584 818,312
Federal income tax receivable 766,278 1,665,764
Deferred income taxes 10,249,133 9,472,406
Finance charge receivable 341,495 204,641
Prepaid expenses 270,005 347,378
Goodwill 1,560,225 1,108,117
Other assets 457,777 552,031
------------ ------------
TOTAL ASSETS $290,099,298 $276,698,769
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Loss and loss adjustment expense reserves $169,339,000 $164,506,000
Unearned premiums 29,013,231 20,947,885
Paid in advance and unprocessed 2,253,169 3,982,143
FIGA accrual 2,646,094 3,032,234
Accrued expenses and other liabilities 3,274,744 2,674,085
------------ ------------
TOTAL LIABILITIES 206,526,238 195,142,347
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $.10 par value, 50,000,000 shares authorized;
no shares issued and outstanding
Common stock, $.10 par value: 25,000,000 shares authorized;
8,139,640 shares issued and outstanding in 1996; $1 par value:
5,000,000 shares authorized; 1,627,928 shares issued and
outstanding in 1995 813,964 1,627,928
Additional paid-in capital 18,454,709 17,640,745
Net unrealized gain (loss) on investments (1,503,076) 1,625,175
Retained earnings 65,807,463 60,662,574
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 83,573,060 81,556,422
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $290,099,298 $276,698,769
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
FPIC Insurance Group, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
---------------------------------- ----------------------------
1996 1995 1996 1995
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES
Premiums earned, net $13,669,141 $12,280,225 $26,591,470 $23,380,919
Investment income, net 3,376,768 3,340,935 6,525,375 6,235,301
Net realized investment gains (losses) (24,455) 216,914 (35,716) (340,103)
Claims administration fees 938,673 0 1,940,454 0
Commission income 150,137 0 297,788 0
Other income 361,111 334,787 917,279 762,941
-------------- --------------- ------------- -------------
TOTAL REVENUES 18,471,375 16,172,861 36,236,650 30,039,058
-------------- --------------- ------------- -------------
EXPENSES
Losses and loss adjustment expenses, net 10,454,046 9,342,781 22,668,275 19,762,455
Other operating expenses 1,375,859 1,087,326 2,892,001 2,314,614
Claims administration expenses 1,026,196 0 2,025,780 0
-------------- --------------- ------------- -------------
TOTAL EXPENSES 12,856,101 10,430,107 27,586,056 22,077,069
-------------- --------------- ------------- -------------
Income before income taxes 5,615,274 5,742,754 8,650,594 7,961,989
Income taxes 1,731,709 2,059,333 2,691,741 2,840,801
-------------- --------------- ------------- -------------
NET INCOME $3,883,565 $3,683,421 $5,958,853 $5,121,188
============== =============== ============= =============
NET INCOME PER COMMON SHARE $0.47 $0.47 $0.73 $0.66
============== =============== ============= =============
WEIGHTED AVERAGE COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING 8,198,380 7,759,860 8,198,380 7,759,860
============== =============== ============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 5
FPIC Insurance Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,958,853 $5,121,188
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 914,255 560,980
Realized (gains) losses on investments 35,716 340,103
Deferred income taxes 834,796 454,902
Changes in assets and liabilities:
Premiums receivable (5,109,494) (2,726,124)
Accrued investment income (184,102) 124,844
Reinsurance recoverable on paid losses 738,239 (548,261)
Due from reinsurers on unpaid losses and advance premiums 307,439 9,351,744
Deposits with reinsurers (981,767) (941,805)
Deferred policy acquisition costs (554,272) (244,863)
Federal income tax receivable 899,496 471,480
Other assets 94,254 (613,959)
Prepaid expenses and finance charge receivable (59,481) (111,189)
Loss and loss adjustment expense reserves 4,833,000 (4,087,000)
Unearned premiums 8,065,346 6,183,948
Paid in advance and unprocessed (1,728,974) (2,404,569)
FIGA accrual (386,140) (365,148)
Accrued expenses and other liabilities 600,659 (818,291)
-------------- -------------
Net cash provided by operating activities 14,277,823 9,747,980
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of short-term investments 500,000 4,149,143
Proceeds from sale or maturity of securities available-for-sale 39,463,681 99,624,743
Purchase of securities available-for-sale (50,755,106) (109,390,511)
Purchase of real estate investments (67,611) 0
Purchase of common stock (30,000) (2,045,000)
Purchase of property and equipment, net (15,348) 0
-------------- -------------
Net cash (used in) provided by investing activities (10,904,384) (7,661,625)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on common stock (813,964) (775,986)
-------------- -------------
Net cash used in financing activities (813,964) (775,986)
-------------- -------------
Net increase (decrease) in cash 2,559,475 1,310,369
-------------- -------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 494,095 12,669
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $3,053,570 $1,323,038
============== =============
Supplemental disclosure of cash flow information:
Federal income taxes paid $642,939 $1,190,000
Interest paid $0 $0
</TABLE>
See accompanying notes.
5
<PAGE> 6
FPIC INSURANCE GROUP, INC.
Notes to the Consolidated Financial Statemens
(Unaudited)
1. BASIS OF PRESENTATION
FPIC Insurance Group, Inc. (the Company) is a Florida corporation formed by
Florida Physicians Insurance Company, Inc. (FPIC) to serve as a holding
corporation for FPIC and other subsidiaries. On June 11, 1996, FPIC and the
Company consummated a Reorganization which generally provided that each share
of common stock of FPIC, par value $1 per share, would be exchanged for five
shares of common stock of the Company, par value $.10 per share.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries, FPIC and McCreary Corporation,
and have been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included. Operating results for
the six-month period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1996. These
consolidated financial statements and notes should be read in conjunction
with the financial statements and notes included in the audited consolidated
financial statements of FPIC and its subsidiary for the year ended December
31, 1995 contained in the Company's Registration Statement on Form S-1, which
was filed with the Securities and Exchange Commission on May 24, 1996 (File
No. 333-04585).
2. INITIAL PUBLIC OFFERING OF COMMON STOCK
On August 6, 1996, the Company completed the offering of 3.4 million shares
of common stock at $10.00 per share, 500,000 of which were offered by the
Company and 2.9 million were offered by certain shareholders of the Company.
Additionally, the Company's Underwriters purchased 510,000 additional shares
from selling shareholders to cover over-allotments. The Company intends to
use the net proceeds of approximately $4.1 million (after discounts,
commissions, and expenses) for general corporate purposes, including future
acquisitions, if any.
6
<PAGE> 7
FPIC INSURANCE GROUP, INC.
Notes to the Consolidated Financial Statemens
(Unaudited)
3. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
The reserve for loss and loss adjustment expenses represent management's best
estimate of the ultimate cost of all losses incurred but unpaid. The
estimated liability is continually reviewed and any adjustments which become
necessary are included in current income. Incurred losses and loss
adjustment expenses for the six-month periods ended June 30, 1996 and 1995
were principally determined by considering prior loss experience, loss
trends, the Company's loss retention levels, and changes in frequency and
severity of claims.
4. INCOME TAXES
Income taxes were accounted for under the asset and liability method. Income
tax expense differs from the normal relationship to financial statement
income principally because of tax exempt interest income.
5. INVESTMENTS
Proceeds from sales of investments available-for-sale were $39,463,681 and
$99,624,743 during the six months ended June 30, 1996 and 1995, respectively.
Gross realized gains and (losses) from sales of debt securities based on
specific identification, were $23,463 and ($59,179); and $406,120 and
($746,223) for the six months ended June 30, 1996 and 1995, respectively.
The amortized cost of investments in securities available-for-sale was
$225,730,454 and $215,841,118 as of June 30, 1996 and December 31, 1995,
respectively.
6. BUSINESS ACQUISITIONS
On July 1, 1995, McCreary Corporation acquired the assets of McCreary
Enterprises, Inc., a Florida third party administrator, for a cost of
$2,000,000. The acquisition agreement specified annual payments to be made
to the seller from 1996 through 2000 as follows:
1996 $1,000,000
1997 900,000
1998 800,000
1999 700,000
2000 600,000
7
<PAGE> 8
FPIC INSURANCE GROUP, INC.
Notes to the Consolidated Financial Statements
(Unaudited)
These specific payments are subject to adjustment in accordance with the
agreement based on attainment of projections of annual earnings from 1996
through 2000. No individual annual payment will exceed the annual earnings,
and may be reduced if the projected earnings are not attained for that year.
At the end of the five year period, the agreement allows for an additional
payment based on the aggregate earnings of the five year period compared to
the aggregate projected earnings of the same five year period. The effect of
these subsequent payments is to increase the original purchase price and the
recorded goodwill.
In April 1996, the Company paid $500,000 to the seller, representing one half
of the amount of the 1996 annual payment. The remainder of the 1996 annual
payment, up to the aggregate $1,000,000 will be paid in August, 1996, as
projected earnings were attained for the twelve-month period ended June 30,
1996.
7. REINSURANCE
The Company presently has excess of loss reinsurance contracts that serve to
limit the Company's maximum loss to $500,000 per occurrence. To the extent
that any reinsurer is unable to meet its obligations, the Company would be
liable for such defaulted amounts not covered by letters of credit, which the
Company obtains from reinsurers that are not designated as authorized
reinsurers by the Florida Department of Insurance.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in numerous legal actions arising primarily from
claims made insurance policies. The legal actions arising from claims made
insurance policies have been considered by the Company in establishing its
reserves. While the outcomes of all legal actions are not presently
determinable, the Company's management is of the opinion that the settlement
of these actions will not have a material adverse effect on the Company's
financial position or results of operations.
8
<PAGE> 9
Item 2.
FPIC INSURANCE GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
For purposes of this management discussion and analysis, the term
"Company" refers to FPIC Insurance Group, Inc. and its consolidated
subsidiaries, the term "FPIC" refers only to Florida Physicians Insurance
Company, Inc., and the term "McCreary" refers only to McCreary Corporation. On
June 11, 1996, the FPIC shareholders approved FPIC Insurance Group, Inc.
becoming a holding corporation for FPIC and other subsidiaries.
The Company's primary sources of revenue are dividends from its
subsidiaries. The primary sources of revenues for these dividends are premium
earned and investment income derived from the insurance operations of FPIC, and
fee and commission income from McCreary. The Company concentrates on liability
insurance products for the healthcare community, with medical professional
liability (MPL) insurance for physicians and dentists as its primary product.
The Company, through FPIC, writes MPL insurance on a claims-made basis, which
provides protection to the insured against only those claims that arise out of
incidents occurring and of which notice to the insurer is given while coverage
is effective.
The variances discussed below include amounts attributable to the
operations of all the companies except that McCreary, which acquired its assets
on July 1, 1995, is not included in operations for either the three month
period or the six month period ended June 30, 1995.
The Company's financial position and results of operations are subject
to fluctuations due to a variety of factors. Unexpectedly high frequency or
severity of losses in any period would have a material adverse effect of the
Company. Additionally, reevaluations of the Company's loss and loss adjustment
expenses (LAE) reserves could result in an increase or decrease in reserves and
a corresponding adjustment to earnings. The Company's historical results of
operations are not necessarily indicative of future results. All amounts in
this management discussion and analysis have been roudned to the nearest
$100,000.
9
<PAGE> 10
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE
MONTHS ENDED JUNE 30, 1995.
Premiums
- --------
Direct premium written increased $2.9 million, or 23%, from $12.7
million for the three months ended June 30, 1995 to $15.6 million for the three
months ended June 30, 1996. Net premium earned increased $1.4 million, or 11%,
from $12.3 million earned for the three months ended June 30, 1995 to $13.7
million for the three months ended June 30, 1996.
Claims Administration Fees and Commission Income
- ------------------------------------------------
This income is generated by McCreary, which acquired its assets on
July 1, 1995. Claims administration fees are revenues generated by McCreary's
core business, which is the administration of self-insured programs for large
employers, primarily in the health and workers compensation areas. Neither
McCreary nor the Company assumes any risk on these products. Instead the risk
is assumed by each employer and any excess coverage desired is placed by
McCreary with various insurers and reinsurers. All the commission income was
generated from the placement of this excess coverage by McCreary.
Losses and Loss Adjustment Expenses, net
- ----------------------------------------
Losses and LAE increased $1.2 million, or 13%, from $9.3 million for
the three months ended June 30, 1995 to $10.5 million for the three months
ended June 30, 1996, reflecting primarily an increase in insured exposures.
The loss ratios of 76.1% for the three months ended June 30, 1995 and 76.5% for
the three months ended June 30, 1996 reflect the stability FPIC has experienced
in its loss trends in recent years.
The Company reduced its unpaid loss and LAE reserves for prior report
years by $2.6 million for the three months ended June 30, 1995 and $3.2 million
for the three months ended June 30, 1996. There can be no assurance that
reserve adequacy reevaluations will produce similar reserve reductions and net
income increases in future periods.
Other Operating Expenses
- ------------------------
Other operating expenses increased $0.3 million, or 27%, from $1.1
million for the three months ended June 30, 1995, to $1.4 million for the three
months ended June 30, 1996. This increase was primarily attributable
to an increase in agents commission expense and general and administrative
expenses.
Claims Administration Expenses
- ------------------------------
These expenses relate entirely to the operation of McCreary.
10
<PAGE> 11
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1995
Premiums
- --------
Direct premium written increased $5.2 million, or 16%, from $32.9
million for the six months ended June 30, 1995 to $38.1 million for the six
months ended June 30, 1996. This increase was primarily attributable to an
increase in 1996 in the number of insureds (302 new insureds over the same six
month period in 1995) and to an increase in the average premium per insured.
This increase was partially offset by an average rate reduction of 2.4% on
physician MPL premiums effective January 1, 1996. Reinsurance premium ceded
increased $0.2 million, or 6%, from $3.3 million for the six months ended June
30, 1995 to $3.5 million for the six months ended June 30, 1996. Net premium
earned increased $3.2 million, or 14%, from $23.4 million for the six months
ended June 30, 1995 to $26.6 million for the six months ended June 30, 1996 for
the foregoing reasons.
Net Investment Income
- ---------------------
Net investment income increased $0.3 million, or 5%, from $6.2 million
for the six months ended June 30, 1995 to $6.5 million for the six
months ended June 30, 1996. This increase was primarily attributable to an
increase in the amount of invested assets, which was partially offset by a
decrease in the current yield, as the Company increased its investment in
tax-free maturities. The tax equivalent yield on invested assets increased from
7.11% for the six months ended June 30, 1995, to 7.30% for the six months ended
June 30, 1996.
The Company's current investment strategy is to acquire investment
grade fixed income securities with an average duration of less than four years.
The Company's intention is to acquire and hold any fixed income investment to
maturity unless management believes there is a clear economic advantage to sell
the security. This strategy is intended to minimize the portfolio's overall
volatility.
Other Income
- ------------
Other income, comprised principally of finance charges on premiums
internally financed by the Company, increased $0.1 million, or 13%, from $0.8
million for the six months ended June 30, 1995 to $0.9 million for the six
months ended June 30, 1996. This increase was primarily attributable to the
increase in the amount of premium financed.
Losses and Loss Adjustment Expenses, net
- ----------------------------------------
Losses and LAE increased $2.9 million, or 15%, from $19.8 million for
the six months ended June 30, 1995 to $22.7 million for the six months ended
June 30, 1996, reflecting in part the increase in insured exposures in 1996.
The loss ratios of 84.5% for the six months ended June 30, 1995 and 85.3% for
the six months ended June 30, 1996 reflect the stability FPIC has experienced
in its loss trends in recent years. Losses for both periods are
principally based on the application of an expected loss ratio to net premium
earned. These loss ratios reflect consideration of prior loss experience and
changes, if any, in the frequency and severity of claims.
In connection with FPIC's normal reserving review, which includes a
reevaluation of the adequacy of reserve levels for prior years' claims, FPIC
reduced its unpaid losses and LAE reserves for prior report years by $4.6
million for the six months ended June 30, 1995 and $5.2 million for the six
months ended June 30, 1996. There can be no assurance that reserve adequacy
reevaluations will produce similar reserve reductions in future periods.
Other Operating Expenses
- ------------------------
Other operating expenses increased $0.6 million, or 26%, from $2.3
million, for the six months ended June 30, 1995 to $2.9 million for the six
months ended June 30, 1996. This increase was primarily attributable to an
increase of $0.3 million for commission expense to agents and $0.3 million for
general and administrative expenses.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The payment of losses, LAE, and operating expenses in the ordinary
course of business is the principal need for the Company's liquid funds. Cash
used to pay these items has been provided by operating activities. Cash
provided from these activities was sufficient during the six months ended June
30, 1996, to meet the Company's needs. Management believes these sources will
be sufficient to meet the Company's cash needs for operating purposes for at
least the next twelve months. However, a number of factors could cause
increases in the dollar amount of losses and LAE paid and may,
therefore, adversely affect future reserve development and cash flow needs.
Management believes these factors include, among others, inflation, changes in
medical procedures, increasing influence of managed care and adverse legislative
changes.
The Company did not borrow any funds in the six months ended June 30,
1995 and 1996, and has no current plans to borrow funds during 1996.
Shareholder dividends payable by FPIC are subject to certain
limitations imposed by Florida law. In 1996, FPIC is permitted, within
insurance regulatory guidelines, to pay dividends of approximately $11.6
million without regulatory approval.
12
<PAGE> 13
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
FPIC's Annual Meeting of Shareholders was held on June 11, 1996. At the
meeting, the following directors, actions and plans were elected, adopted and
approved by the vote shown.
<TABLE>
<CAPTION>
Against or Abstentions and
For Withheld Broker non-votes
---- ---------- ----------------
<S> <C> <C> <C>
I. Election of Five Directors:
Gaston J. Acosta-Rua, M.D. 993,150 13,500
Curtis E. Gause, D.D.S. 989,350 17,300
Guy T. Selander, M.D. 993,450 13,200
David M. Shapiro, M.D. 992,150 14,500
James G. White, M.D. 993,450 13,200
II. Agreement of Merger and
Plan of Reorganization 908,280 18,200 80,170
III. Adoption of Employee Stock
Purchase Plan 842,256 59,570 104,824
I. Adoption of Omnibus Incentive Plan 814,150 69,530 122,970
V. Adoption of Director Stock Option Plan 769,606 134,524 102,520
</TABLE>
These matters are more fully described in FPIC's proxy statement dated May 8,
1996.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit (10) - Supplemental Executive Retirement Plan, as amended.
Exhibit (27) - Financial Data Schedule (for SEC use only).
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FPIC Insurance Group, Inc.
/s/ ROBERT B. FINCH
August 13, 1996 -------------------------------------
Robert B. Finch, Chief Financial Officer
and Treasurer (a duly authorized officer and
the principal financial officer of the registrant)
13
<PAGE> 1
EXHIBIT 10
FLORIDA PHYSICIANS INSURANCE COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 ELIGIBILITY FOR BENEFITS . . . . . . . . . . . . . . . . . . . . 5
3 AMOUNT AND FORM OF RETIREMENT BENEFIT . . . . . . . . . . . . . 6
4 PAYMENT OF RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . 7
5 DEATH BENEFITS PAYABLE . . . . . . . . . . . . . . . . . . . . . 7
6 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 2
FLORIDA PHYSICIANS INSURANCE COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PREAMBLE
--------
The Supplemental Executive Retirement Plan is amended and restated in its
entirety effective as of January 1, 1996. The principle objective of this
Supplemental Executive Retirement Plan is to ensure the payment of a
competitive level of retirement income in order to attract, retain and motivate
selected executives. The plan is designed to provide a benefit which, when
added to other retirement income of the executive, will meet the objective
described above. Eligibility for participation in the plan on December 31,
1996, is limited to the two (2) top executives of the Company who are
presently: William R. Russell, President and Chief Executive Officer and
Steven R. Smith, Executive Vice President and Chief Operating Officer.
<PAGE> 3
1. DEFINITIONS
1.1 "Affiliate" means any corporation, partnership or other
organization which, during any period of employment of a Participant, was at
least 50% controlled by the Company or an affiliate of the Company.
1.2 "Basic Plan" means the Florida Physicians Insurance Company,
Inc. Defined Benefit Plan and any successor thereto.
1.3 "Basic Plan Benefit" means the amount of benefit payable from
the Basic Plan to a Participant in the form of a straight life annuity.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Cause" means any of the following: (i) the Participant's
commission of dishonest acts, fraud, misappropriation, or embezzlement
affecting the Company; (ii) the Participant's commission of any felony under
state or federal law; or (iii) the failure or refusal of the Participant to
comply with any reasonable lawful policy or directive or instruction of the
Board.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Committee" means members of the Compensation Committee of
the Board.
1.8 "Company" means Florida Physicians Insurance Company until the
Restructure and on and after the Restructure, FPIC Insurance Group, Inc.
1.9 "Disability Retirement Benefit" means the benefit payable at
the Normal Retirement Date determined pursuant to Section 3.3 of this Plan.
1.10 "Early Retirement Benefit" means the benefit payable at the
Early Retirement Date determined pursuant to Section 3.2 of this Plan.
2
<PAGE> 4
1.11 "Early Retirement Date" means the first day of the month
following the earlier of (i) the date the Participant reaches age 60 and elects
to retire, or (ii) the date the Participant reaches age 55 and elects to retire
with the consent of the Committee.
1.12 "Earnings" means the basic salary of a Participant excluding
bonuses, averaged over the highest three consecutive years of Service;
provided, however, Earnings as a result of employment after attainment of age
65 shall not be considered.
1.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.14 "Normal Retirement Benefit" means the benefit payable at or
after age 65 determined pursuant to Section 3.1 of this Plan.
1.15 "Normal Retirement Date" means the first day of the month
following the later of (i) the date the Participant reaches age 65, or (ii) the
date the Participant terminates employment with the Company.
1.16 "Other Retirement Income" means retirement income payable to a
Participant from the following sources:
(a) his Social Security Benefit,
(b) any benefit previously paid or payable from a defined
benefit plan maintained by:
(i) Florida Physicians Insurance Company,
(ii) Physicians Insurance Company of Ohio, or
(iii) Professional Insurance Management Company, or
3
<PAGE> 5
(iv) Any subsidiaries of any of the above
(c) any benefits which would have been paid or payable
from a defined benefit plan described in Section
1.16(b) which were not paid because the individual
elected not to receive the benefit or continued
employment and was ineligible for the benefits, also
shall be considered to have been paid for purposes of
determining Other Retirement Income. For purposes of
determining a Participant's Early Retirement Benefit
or Disability Retirement Benefit under this Plan any
amount paid or payable from a defined benefit plan
described in Section 1.16(b) shall be based on such
Participant's Earnings at the time of such Early
Retirement Date.
1.17 "Participant" means an employee of the Company designated as a
Participant. The Participants on December 31, 1995, are as follows: William
R. Russell, President and Chief Executive Officer and Steven R. Smith,
Executive Vice President and Chief Operating Officer. Any additional
Participants will be selected by the Committee.
1.18 "Permanent and Total Disability" means termination of
employment with the Company on or after the date the Participant attains age 60
and has at least 10 years of Service due to an injury or illness which is
considered a permanent and total disability within the meaning of Code Section
22(e)(3) and any regulations or rulings promulgated thereunder. A doctor
approved, or selected by, the Committee shall make the final determination of
whether a Participant meets the provisions of such Code Section.
1.19 "Plan" means the Company's Supplemental Executive Retirement
Plan.
1.20 "Restructure" means the corporate reorganization pursuant to
which Florida Physicians Insurance Company shall become the wholly-owned
subsidiary of FPIC Insurance Group, Inc.
4
<PAGE> 6
1.21 "Retirement Benefit" means either the Early Retirement
Benefit, Disability Retirement Benefit, or Normal Retirement Benefit as
determined pursuant to Section 3.
1.22 "Service" means a Participant's credited years of service as
defined in the Basic Plan.
1.23 "Social Security Benefit" means the annual Primary Insurance
Amount estimated by the Company to be payable to the Participant at age 65 (or
later date if applicable) under the Federal Social Security Act, provided,
however, that:
(a) the Social Security Benefit for a Participant who
dies, retires, or terminates employment prior to age
65 will be calculated assuming:
(i) the Participant will receive future wages
which would be treated as wages for purposes
of the Federal Social Security Act at the
same level as received by the Participant
from the Company on the date of employment
termination; and
(ii) the Participant will elect to begin receiving
his Social Security Benefit as of the
earliest age then allowable under the said
Act, or if later, the date the Participant
terminates employment with the Company.
(b) the Social Security Benefit for a Participant who is
entitled to a Disability Retirement Benefit will be
calculated assuming the Participant's disability
would make him eligible for Social Security
disability benefits.
(c) the Social Security Benefit; once calculated, will be
frozen as of the date the Participant dies, retires,
is totally disabled or otherwise terminates
employment, whichever is applicable.
(d) For purposes of determining the Social Security
5
<PAGE> 7
Benefit, amounts which would have been payable
beginning at age 65 (or such later date as specified
as the Normal Retirement Age as specified under the
Social Security Act) but were not paid because the
Participant did not apply for such benefits or was
ineligible for such because of continued employment,
will be considered to have been paid.
1.24 "Surviving Spouse" means the spouse of a Participant who is
eligible to receive a surviving spouse benefit under the Basic Plan.
1.25 "Vested Benefit Percentage" means the percentage of a
Participant's Retirement Benefit which is vested pursuant to Section 2.2, or if
applicable Section 2.3 or 2.4.
2. ELIGIBILITY FOR BENEFITS
2.1 Each Participant under this Plan is eligible to retire and
receive a Retirement Benefit, as determined under Section 3 of this Plan,
beginning on the earlier of such Participant's (i) Early Retirement Date or
(ii) Normal Retirement Date.
2.2 A Participant's Retirement Benefit will vest ratably
commencing on such Participant's initial date of employment with the Company,
or an Affiliate (considering only the time the entity was an Affiliate) with
1/240 of the total Retirement Benefit vesting at the end of each month the
Participant is employed by the Company, or an Affiliate (considering only the
time the entity was an Affiliate). A Participant's vested Retirement Benefit
shall not be forfeited except pursuant to Section 2.5.
2.3 Notwithstanding Section 2.2 of this Plan, a Participant shall
be 100% vested in such Participant's Retirement Benefit under this Plan on the
date such Participant attains age 64 if such Participant is an employee of the
Company on such date.
2.4 Notwithstanding Section 2.2, the Committee may, in its sole
discretion, 100% vest a Participant's Retirement Benefit even if the
Participant has not attained age 64 or does not have 20
6
<PAGE> 8
years of Service with the Company.
3. AMOUNT AND FORM OF RETIREMENT BENEFIT
3.1 The Normal Retirement Benefit will equal (60% x A)-B, where
A = Earnings
B = Other Retirement Income
3.2 The Early Retirement Benefit will equal the Normal Retirement
Benefit multiplied by the Vested Benefit Percentage, multiplied by the factor
shown below corresponding to the number of years a Participant's Early
Retirement Date precedes such Participant's Normal Retirement Date. The
factors will be prorated for a partial year (counting a partial month as a
complete month).
<TABLE>
<CAPTION>
Number of Years Early
Retirement Date Precedes
Normal Retirement Date Factor
---------------------- ------
<S> <C>
1 .9231
2 .8462
3 .7692
4 .7308
5 .6923
6 .6538
7 .6154
8 .5769
9 .5292
10 .4862
</TABLE>
3.3 If a Participant terminates employment due to a Permanent and
Total Disability, the Participant will be eligible for a Disability Retirement
Benefit. The Disability Retirement Benefit will equal (60% x A)-B, where
A = Earnings
B = Other Retirement Income
7
<PAGE> 9
The Company may require, no more frequently than once in any calendar year,
that a disabled Participant submit medical evidence of disability satisfactory
to the Company. The Company will have sole discretion to discontinue a
disability benefit based on a consideration of such evidence or lack thereof.
3.4 The Normal Retirement Benefit will be determined as of the
first day of the month following the date the Participant attains, or would
have attained, age 65, even if the Participant continued employment with the
Company. Payments of the Normal Retirement Benefit will begin on the Normal
Retirement Date.
3.5 The Early Retirement Benefit will be determined as of, and
will begin on, the Early Retirement Date.
3.6 Payments of the Disability Retirement Benefit will begin on
the Normal Retirement Date.
3.7 The benefits determined under this Plan will be payable in the
same form as benefits payable under the Basic Plan; provided, however, that in
the event the Participant elects to receive benefits under the Basic Plan in
the form of a lump sum, benefits under this Plan will be payable in the form of
a straight life annuity, unless the Committee approves a payment of a lump sum
hereunder. (If the Basic Plan is not in existence, such form of benefit
hereunder shall be the form elected by the Participant as if the Basic Plan
were still in existence based on Basic Plan provisions in effect on the date of
its termination). The amount payable under all forms of benefits other than a
straight life annuity shall be determined pursuant to Section 3.8.
3.8 For purposes of determining the amount of payment under any
form of benefit other than a single life annuity, the Committee shall determine
the single sum amount necessary to purchase a straight life annuity in the
amount determined in Sections 3.1 or 3.2 from an insurance company "A Best
Rated" or better as selected by the Committee. All other forms of benefits
shall be the benefit which can be purchased with such single sum amount as
determined by such selected insurance company.
8
<PAGE> 10
4. PAYMENT OF RETIREMENT BENEFITS
4.1 Benefits payable in accordance with Section 3 will commence on
the first day of the month following the earlier of Participant's (i) Normal
Retirement Date or (ii) Early Retirement Date. Benefits will continue to be
paid on the first day of each succeeding month. The last payment will be on
the first day of the month in which the retired Participant dies unless
otherwise elected in accordance with Section 3.7.
5. DEATH BENEFITS PAYABLE
5.1 If a Participant dies before receiving a Retirement Benefit
under this Plan, the Surviving Spouse of such Participant will be eligible to
receive an annuity for the life of the Surviving Spouse equal to 50% of the
Retirement Benefit such Participant would have received pursuant to Section 3
if the Participant had terminated employment, survived until the earliest
permissible benefit commencement date, had received all necessary consents and
elected to receive a benefit under the form of a 50% joint and survivor
annuity. A Surviving Spouse's benefits will be payable monthly, and will
commence on the date selected by the Surviving Spouse, but no sooner than the
first date the Participant could have begun receiving benefits under the Plan.
The last payment will be on the first day of the month in which the Surviving
Spouse dies or remarries, whichever event occurs first.
5.2 If a Participant dies after receiving a Retirement Benefit
under this Plan, survivor benefits, if any, shall be paid in accordance with
the form of benefit determined under Section 3.7 hereof.
6. MISCELLANEOUS
6.1 The Committee may amend this Plan at any time or from time to
time, in whole or in part. However, no amendment to the Plan will reduce a
Participant's right to receive the benefits or the right of a Surviving Spouse
to continue to receive a benefit in accordance with this Plan as in effect on
the date of execution.
9
<PAGE> 11
6.2 The Company agrees that it will not merge or consolidate with
any other company or organization, or permit its business activities to be
taken over by any other organization unless and until the succeeding or
continuing company or other organization shall expressly assume all obligations
and liabilities herein set forth.
6.3 Nothing contained herein will confer upon any Participant the
right to be retained in the service of the Company, nor will it interfere with
the right of the Company to discharge or otherwise deal with Participants
without regard to the existence of this Plan.
6.4 This Plan is unfunded, and the Company will make Plan benefit
payments solely on a current disbursement basis.
6.5 To the maximum extent permitted by law, no benefit under this
Plan shall be assignable or subject in any manner to alienation, sale,
transfer, claims of creditors, pledge, attachment or encumbrances of any kind.
6.6 If the Company shall acquire an insurance policy or annuity
contract or any other asset in connection with the liabilities assumed
hereunder, it is expressly understood and agreed that no Participant shall have
any right with respect to, or claim against, such policy or other asset. Such
policy or asset shall not be deemed to be held under any trust for the benefit
of or to be held in any way as collateral security for the fulfillment of the
obligations of the Company under this Plan. It shall be and remain, a general,
unpledged, unrestricted asset of the Company and to the extent the Participant
acquires a right to receive any payments from the Company under this Plan, such
right shall be no greater than the right of any unsecured, general creditor of
the Company.
6.7 The Committee shall have the full authority to and power to
interpret the plan including but not limited to determining eligibility, the
amount of benefits and the date benefits are payable.
10
<PAGE> 12
6.8 The masculine gender, where appearing in the Plan will be
deemed to include the feminine gender, and the singular may include the plural,
unless the context clearly indicates the contrary.
6.9 Each Participant shall receive a copy of this Plan and the
Company will make available for inspection by any Participant a copy of the
rules and regulations used in administering the Plan.
6.10 This Plan is established under and will be construed according
to the laws of the State of Florida.
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Second Quarter 10-Q and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 223,453
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 2,744
<TOTAL-INVEST> 226,352
<CASH> 3,053
<RECOVER-REINSURE> 71
<DEFERRED-ACQUISITION> 1,373
<TOTAL-ASSETS> 290,099
<POLICY-LOSSES> 169,339
<UNEARNED-PREMIUMS> 29,013
<POLICY-OTHER> 2,253
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 814
<OTHER-SE> 82,759
<TOTAL-LIABILITY-AND-EQUITY> 290,099
26,591
<INVESTMENT-INCOME> 6,525
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 3,155
<BENEFITS> 22,668
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 2,892
<INCOME-PRETAX> 8,651
<INCOME-TAX> 2,692
<INCOME-CONTINUING> 5,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,959
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.00
<RESERVE-OPEN> 164,506
<PROVISION-CURRENT> 26,226
<PROVISION-PRIOR> (5,308)
<PAYMENTS-CURRENT> 141
<PAYMENTS-PRIOR> 15,944
<RESERVE-CLOSE> 169,339
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
