<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1999
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transaction period from ____________to
___________.
Commission file number 1-11983
FPIC Insurance Group, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-3359111
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
225 Water Street, Suite 1400, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
1000 Riverside Avenue, Suite 800, Jacksonville, Florida 32204
(Former address of principal executive offices) (Zip Code)
(904) 354-2482
(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 October 31, 1999 there were 9,700,398 shares of the registrant's common
stock outstanding.
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
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 Comprehensive (Loss) Income 5
Consolidated Statements of Cash Flows 6
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Part II - Other Information
Item 1. Legal Proceedings 24
Item 2. Changes in Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
</TABLE>
<PAGE> 3
FPIC INSURANCE GROUP, INC.
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
(unaudited)
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,201,877 7,062,695
Bonds and U.S. Government securities, available for sale 330,077,784 325,922,559
Equity securities 9,857,491 10,327,990
Other invested assets 4,586,357 4,171,771
Real estate investments 5,297,531 4,581,671
---------------- ----------------
Total cash and investments 357,021,040 352,066,686
Premiums receivable 58,628,964 40,296,590
Accrued investment income 6,082,244 4,981,612
Reinsurance recoverable 2,417,110 3,190,042
Due from reinsurers on unpaid losses and advance premiums 54,141,527 42,100,852
Property and equipment 3,125,525 2,614,686
Deferred policy acquisition costs 2,707,900 2,001,248
Deferred income taxes 19,779,497 9,348,494
Finance charge receivable 418,233 370,875
Prepaid expenses 746,043 644,336
Intangible assets 76,604,384 16,586,261
Federal income tax receivable 3,153,067 271,029
Other assets 5,410,488 4,905,757
---------------- ----------------
Total assets $ 590,236,022 479,378,468
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Loss and loss adjustment expenses $ 272,571,000 242,377,000
Unearned premiums 68,170,103 44,309,691
Paid in advance and unprocessed premiums 1,367,863 5,767,080
Short-term debt 63,719,110 27,165,000
Accrued expenses and other liabilities 17,582,180 8,829,169
---------------- ----------------
Total liabilities 423,410,256 328,447,940
================ ================
Commitments and contingencies
Common stock, $.10 par value, 50,000,000 shares authorized;
9,700,398 and 9,518,679 shares issued and outstanding
at September 30, 1999 and December 31, 1998, respectively 970,040 951,868
Additional paid-in capital 42,466,034 34,297,994
Unearned compensation (262,128) (356,528)
Accumulated other comprehensive (loss) income (4,062,805) 5,621,533
Retained earnings 127,714,625 110,415,661
---------------- ----------------
Total shareholders' equity 166,825,766 150,930,528
---------------- ----------------
Total liabilities and shareholders' equity $ 590,236,022 479,378,468
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FPIC INSURANCE GROUP, INC.
Consolidated Statements of Income
<TABLE>
<CAPTION>
(unaudited)
--------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
1999 1998 1999 1998
----------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Net premiums earned $ 33,170,659 22,986,070 87,303,834 63,796,056
Net investment income 5,009,562 4,259,182 14,342,086 12,971,361
Net realized investment (losses) gains (1,561) (700) 311,795 (47,919)
Claims administration and management fees 6,846,114 2,218,371 19,285,451 7,321,792
Commission income 1,596,780 798,250 3,574,140 1,267,193
Finance charge and other income 660,604 570,000 1,831,296 1,469,241
----------------- -------------- ---------------- ---------------
Total revenues 47,282,158 30,831,173 126,648,602 86,777,724
----------------- -------------- ---------------- ---------------
EXPENSES
Net losses and loss adjustment expenses 26,065,541 17,506,225 59,440,453 50,188,384
Other underwriting expenses 7,576,560 2,396,972 18,071,051 6,820,536
Claims administration and management expenses 7,605,349 2,247,234 19,683,833 7,278,118
Interest expense 984,851 398,146 2,739,790 469,520
Other expenses 1,348,218 955,216 3,482,076 955,216
----------------- -------------- ---------------- ---------------
Total expenses 43,580,519 23,503,793 103,417,203 65,711,774
----------------- -------------- ---------------- ---------------
Income before income taxes 3,701,639 7,327,380 23,231,399 21,065,950
Income taxes 1,039,374 1,846,645 5,932,435 5,753,620
----------------- -------------- ---------------- ---------------
Net income $ 2,662,265 5,480,735 17,298,964 15,312,330
================= ============== ================ ===============
Basic earnings per common share $ 0.27 0.58 1.77 1.65
================= ============== ================ ===============
Diluted earnings per common share $ 0.26 0.55 1.66 1.56
================= ============== ================ ===============
Basic weighted average common shares outstanding 9,759,835 9,471,941 9,775,457 9,295,751
================= ============== ================ ===============
Diluted weighted average common shares outstanding 10,417,088 9,970,882 10,432,710 9,794,692
================= ============== ================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FPIC INSURANCE GROUP, INC.
Consolidated Statements of Comprehensive (Loss) Income
<TABLE>
<CAPTION>
(unaudited)
--------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
1999 1998 1999 1998
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Income $ 2,662,265 5,480,735 17,298,964 15,312,330
--------------- ------------- -------------- --------------
Other Comprehensive Income
Unrealized (losses) gains on securities
Unrealized holding (losses) gains arising
during period (5,722,327) 5,136,926 (15,210,776) 5,781,273
Less reclassification adjustment for (losses)
gains included in net income (1,561) (700) 311,795 (47,919)
Income tax benefit (expense) related to
unrealized gains and losses on securities 2,003,361 (1,797,679) 5,214,643 (2,006,674)
--------------- ------------- -------------- --------------
Other comprehensive (loss) income (3,720,527) 3,338,547 (9,684,338) 3,726,680
--------------- ------------- -------------- --------------
Comprehensive (loss) income $ (1,058,262) 8,819,282 7,614,626 19,039,010
=============== ============= ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
FPIC INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
---------------------------------------
Nine months ended September 30
1999 1998
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,298,964 15,312,330
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 4,055,302 1,533,750
Realized (gain) loss on investments (311,795) 47,919
Realized loss on sale of property and equipment 16,191 9,733
Noncash compensation 94,400 --
Net loss (earnings) from equity investments 260,823 (124,612)
Deferred income taxes 73,919 (282,748)
Changes in assets and liabilities:
Premiums receivable, net (14,584,189) (10,536,690)
Accrued investment income, net (681,245) (1,452,218)
Reinsurance recoverable 772,932 (1,984,612)
Due from reinsurers on unpaid losses and advance premiums 1,225,960 615,615
Deposits with reinsurers -- 18,037,425
Deferred policy acquisition costs (444,464) (218,762)
Prepaid expenses and finance charge receivable 297,987 67,924
Other assets 1,926,451 (2,369,305)
Loss and loss adjustment expenses (7,310,822) 5,457,180
Unearned premiums 15,035,359 8,979,875
Paid in advance and unprocessed premiums (4,399,218) (4,187,250)
Federal income tax receivable (2,882,038) (1,255,773)
Accrued expenses and other liabilities (872,064) (498,170)
------------------ -----------------
Net cash provided by operating activities 9,572,453 27,151,611
------------------ -----------------
Cash flows from investing activities:
Proceeds from sale or maturity of bonds and U.S. Government securities 50,251,325 35,083,754
Purchase of bonds and U.S. Government securities (39,537,825) (71,701,990)
Purchase of equity securities -- (1,280,000)
Purchase of real estate investments (902,312) (261,783)
Purchase of other invested assets (414,586) (7,502,313)
Purchases of property and equipment, net (388,771) (1,275,909)
Purchase of subsidiary's net other assets and stock (507,303) (2,681,703)
Purchase of intangible assets (51,043,751) (10,477,754)
------------------ -----------------
Net cash used in investing activities (42,543,223) (60,097,698)
------------------ -----------------
Cash flows from financing activities:
Receipt of short-term debt 36,554,110 21,750,000
Buyback of common stock outstanding (5,541,313) --
Issuance of common stock, net 2,097,155 8,548,536
------------------ -----------------
Net cash provided by financing activities 33,109,952 30,298,536
------------------ -----------------
Net increase (decrease) in cash and cash equivalents 139,182 (2,647,551)
Cash and cash equivalents at beginning of period 7,062,695 7,679,822
------------------ -----------------
Cash and cash equivalents at end of period $ 7,201,877 5,032,271
================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
Continued.
6
<PAGE> 7
FPIC INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(unaudited)
----------------------------------
Nine months ended September 30
1999 1998
---------------- ------------
<S> <C> <C>
Supplemental disclosure of noncash financing activities:
Interest paid $ 1,829,571 474,588
================ ============
Federal income taxes paid $ 6,000,000 5,068,000
================ ============
Supplemental schedule of noncash investing and financing activities:
The Company purchased all of the capital stock of Administrators For The
Professions, Inc. for $53,830,370 and a 70% equity interest in a limited
liability company for $2,500,000. In conjunction with the acquisitions,
common stock was issued as follows:
Goodwill and other tangible assets acquired $ 56,330,370 --
Cash paid for the capital stock (44,700,000) --
---------------- ------------
Common stock issued and related additional paid-in capital $ 11,630,370 --
================ ============
</TABLE>
7
<PAGE> 8
FPIC INSURANCE GROUP, INC.
Notes to the Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
FPIC Insurance Group, Inc. (the "Company") is an insurance holding company.
The Company's principal direct and indirect subsidiaries include Florida
Physicians Insurance Company, Inc. ("FPIC"), Anesthesiologists'
Professional Assurance Company, Inc. ("APAC"), Administrators For The
Professions, Inc. ("AFP"), McCreary Corporation ("MCC"), Employer's Mutual,
Inc. ("EMI"), The Tenere Group, Inc. ("Tenere") and its subsidiaries -
Intermed Insurance Company ("Intermed") and Interlex Insurance Company
("Interlex").
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its subsidiaries, 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 nine-month
period ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. These
unaudited consolidated financial statements and notes should be read in
conjunction with the financial statements and notes included in the audited
consolidated financial statements of the Company for the year ended
December 31, 1998, which were filed with the Securities and Exchange
Commission on Form 10-K on March 31, 1999.
2. LOSS AND LOSS ADJUSTMENT EXPENSE LIABILITY
The liability for loss and loss adjustment expenses represents management's
best estimate of the ultimate cost of all losses incurred but unpaid. The
estimated liability is continually reviewed and any adjustments that become
necessary are included in current income. Incurred losses and loss
adjustment expenses for the nine-month period ended September 30, 1999 and
1998 were principally determined by considering prior loss experience, loss
trends, the Company's loss retention levels, rate increases, rate of claim
closures, and changes in frequency and severity of claims.
3. INCOME TAXES
Income taxes are 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.
8
<PAGE> 9
4. INVESTMENTS
Proceeds from sales of investments available-for-sale were $50,251,325 and
$35,083,754 during the nine months ended September 30, 1999 and 1998,
respectively.
Gross realized gains and (losses) from investments available-for-sale based
on specific identification were $345,478 and $(33,683) and $325 and
$(48,244) for the nine months ended September 30, 1999 and 1998,
respectively.
The amortized cost of investments available-for-sale was $336,248,781 and
$327,602,037 as of September 30, 1999 and December 31, 1998, respectively.
5. BUSINESS ACQUISITIONS
The acquisition agreements for MCC and EMI specify additional payments,
based upon earnings, to be made to the sellers from the acquisition date
through 2001. The remaining contingent payments and the year of payment for
these two acquisitions are as follows:
<TABLE>
<CAPTION>
MCC EMI
--- ---
<S> <C> <C>
2000 $ 600,000 $ 250,000
2001 -- 250,000
</TABLE>
These payments are subject to adjustment in accordance with the agreements
based on attainment of projected annual earnings from the date of
acquisition through 2001. No individual annual payment will exceed the
annual earnings, and may be reduced if the projected earnings are not
attained for that year. The agreements allow for additional final payments
based on the aggregate earnings compared to the aggregate projected
earnings during the earnout periods. The effect of these subsequent
payments is to increase the original purchase price and the recorded
goodwill.
On July 1, 1997, the Company purchased 20% of the common stock of APS
Insurance Services, Inc. (APS), a Texas insurance service corporation, for
$2,000,000. The purchase agreement provides an option, exercisable until
October 31, 1999, to purchase an additional 35% of the common stock of APS
in 1999, allowing the Company 55% ownership. The Company has elected not to
exercise its option to purchase an additional 35% of the common stock. This
investment is accounted for under the equity method. The market value of
APS approximated its book value at September 30, 1999.
On July 1, 1998, the Company purchased all of the outstanding common stock
of APAC, a medical professional liability insurance company, for aggregate
consideration equal to $18,000,000, paid in cash of $9,000,000 and Company
common stock. Additionally, $3,500,000 was paid for non-compete agreements
and other fees to affiliated parties. APAC insures over 700
anesthesiologists in over 30 states.
Concurrent with the purchase of APAC on July 1, 1998, the Company purchased
a 9.9% interest in American Professional Assurance Ltd. (APAL), a Cayman
Islands captive
9
<PAGE> 10
reinsurer, for $5,500,000. The purchase of such interest is accounted for
under the cost method.
On January 6, 1999, the Company purchased all of the outstanding common
stock of AFP for aggregate consideration equal to $54,000,000, paid in cash
of $44,000,000 and Company common stock. AFP is the manager and
attorney-in-fact for Physicians' Reciprocal Insurers, the second largest
medical professional liability insurer for physicians in the state of New
York.
On March 17, 1999, the Company's subsidiary, FPIC, acquired all of the
outstanding common stock of Tenere for $19,608,000 in cash. Included in the
net assets acquired was approximately $14,000,000 in cash. Tenere,
headquartered in Springfield, Missouri, is a stock holding company, with
two primary insurance subsidiaries, Intermed and Interlex, which provide
medical and legal professional liability insurance.
6. REINSURANCE
The Company's insurance subsidiaries presently have excess of loss
reinsurance contracts that serve to limit the Company's maximum loss to
$500,000 per occurrence, except on the Company's anesthesiology program in
which the maximum loss is $750,000 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. The Company
receives letters of credit from reinsurers that are not designated as
authorized reinsurers by the Departments of Insurance in the states where
it conducts business.
7. COMMITMENTS AND CONTINGENCIES
The Company's insurance subsidiaries are involved in numerous legal actions
arising from insurance policies. The legal actions arising from insurance
policies have been considered by the Company's insurance subsidiaries in
establishing their reserves. While the outcomes of all legal actions are
not presently determinable, 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. BORROWING ARRANGEMENTS
The Company maintains a $75,000,000 revolving credit facility, in which
five banks participate, to meet certain non-operating cash needs as they
may arise. The credit facility terminates January 4, 2002. The Company
anticipates that before such time, it would either extend the financing or
obtain alternative financing. The Company is not required to maintain
compensating balances in connection with this credit facility but is
charged a fee on the unused portion, which ranges from 20 to 30 basis
points. As of September 30, 1999, the Company had borrowed approximately
$63,700,000 against the credit facility for non-operating purposes.
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9. SEGMENT INFORMATION
Under the provisions of SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company determined it has two
reportable operating segments, insurance and third party administration and
management (TPA). The insurance segment provides a variety of insurance
products for participants in the healthcare industry including medical
professional liability (MPL) insurance for medical professionals, managed
care liability insurance, professional and comprehensive general liability
insurance for healthcare facilities, provider stop loss insurance, workers
compensation insurance, and group accident and health coverage. The TPA
segment provides management services and third party administration
services such as the administration of self-insurance plans for large
employers.
The Company evaluates a segment's performance based on net income or loss.
Intersegment revenues for transactions between the two segments are based
on actual costs incurred and are similar to services that may have been
obtained from an unrelated third party. All segments are managed separately
as each business requires different technology and marketing strategies.
Information by industry segment follows (in thousands):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
- --------
External customers:
------------------
Insurance $ 38,917 27,688 103,906 78,264
TPA 8,777 3,471 24,154 9,366
--------- --------- --------- ---------
$ 47,694 31,159 128,060 87,630
Intersegment:
------------
Insurance $ (223) (189) (603) (630)
TPA (189) (139) (808) (222)
--------- --------- --------- ---------
$ 47,282 30,831 126,649 86,778
========= ========= ========= =========
Net income:
- ----------
Insurance $ 2,142 5,119 15,885 14,476
TPA 520 362 1,414 836
--------- --------- --------- ---------
$ 2,662 5,481 17,299 15,312
========= ========= ========= =========
Identifiable assets:
- -------------------
Insurance $ 641,626 488,452
TPA 70,257 9,566
--------- ---------
$ 711,883 498,018
========= =========
</TABLE>
11
<PAGE> 12
The following tables reconcile net income and assets to the Company's
consolidated totals (in thousands):
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net income:
----------
Reportable segments $ 2,662 5,481 17,299 15,312
Other -- -- -- --
------------- ------------- ------------- -------------
Total consolidated $ 2,662 5,481 17,299 15,312
============= ============= ============= =============
<CAPTION>
9/30/99 9/30/98
------- -------
Total assets:
------------
Reportable segments $ 711,883 498,018
Inter Segment assets (118,957) (41,019)
Other (2,690) (1,141)
------------- -------------
Total consolidated $ 590,236 455,858
============= =============
</TABLE>
10. RECONCILIATION OF BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net income and income from
continuing operations $ 2,662,265 5,480,735 17,298,964 15,312,330
=========== =========== =============== ===============
Basic weighted average
shares outstanding 9,759,835 9,471,941 9,775,457 9,295,751
Common stock equivalents 657,253 498,941 657,253 498,941
----------- ----------- --------------- ---------------
Diluted weighted average
shares outstanding 10,417,088 9,970,882 10,432,710 9,794,692
=========== =========== =============== ===============
Basic earnings per share $ 0.27 0.58 1.77 1.65
=========== =========== =============== ===============
Diluted earnings per share $ 0.26 0.55 1.66 1.56
=========== =========== =============== ===============
</TABLE>
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the following discussion and analysis, "Company" refers to FPIC
Insurance Group, Inc., the holding company, and its consolidated subsidiaries.
The Company's principal direct and indirect subsidiaries include Florida
Physicians Insurance Company, Inc. ("FPIC"), McCreary Corporation ("McCreary"),
Anesthesiologists' Professional Assurance Company ("APAC"), Administrators For
The Professions, Inc. ("AFP"), and The Tenere Group, Inc. ("Tenere") and its
subsidiaries - Intermed Insurance Company ("Intermed") and Interlex Insurance
Company ("Interlex").
The results of operations for the nine months ended September 30, 1999 include
the results of AFP from January 6, 1999 and Tenere from March 17, 1999. All
amounts in this discussion and analysis have been rounded to the nearest
$100,000.
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the audited consolidated financial
statements and notes included in the Company's Form 10-K for the year ended
December 31, 1998, which was filed with the Securities and Exchange Commission
on March 31, 1999.
IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements under
many different captions. These forward-looking statements are subject to certain
risks, uncertainties or assumptions. Except for historical information, all
information provided under "Quantitative and Qualitative Disclosures About
Market Risk" and "Year 2000" should be considered forward-looking statements.
Should one or more of these risks, uncertainties or other factors materialize or
should any underlying assumptions prove incorrect, actual results, performance
or achievements of the Company may vary materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
The assumptions underlying certain forward-looking statements are that the
Company will continue to: (i) profitably price its insurance products; (ii)
maintain its underwriting standards; (iii) market its insurance products
competitively; (iv) maintain its successful handling of claims; (v) retain
existing agents and key management personnel; and (vi) reserve adequately for
losses and loss adjustment expenses (LAE). Additionally, the primary risk in
maintaining adequate reserves is unexpected changes in the frequency or severity
of reported claims particularly during the last three report years. Other
important considerations include: (i) the Company's reinsurers remaining solvent
and (ii) competitors not further reducing rates for medical professional
liability (MPL) insurance products.
Many of the forward-looking statements are also premised upon the Company's
successfully continuing its growth strategy. Although the Company has
experienced significant growth in the past through accretive acquisitions, there
can be no assurance that the Company will be able to continue to identify
suitable acquisition candidates, be able to negotiate acquisitions on acceptable
terms, and be able to integrate successfully all acquired businesses. The
Company's diversification of its product portfolio and geographic expansion
present additional risks and
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<PAGE> 14
uncertainties. These risks and uncertainties include whether the Company can
demonstrate the necessary underwriting and marketing expertise required by these
new products and locations. Many of the forward-looking statements, as well as
many of the Company's strategies, are dependent upon the market price of the
Company's common stock. The Company's common stock can be affected not only by
the Company's financial performance but also by general economic and market
conditions that are not within the Company's control. The liquidity of the
Company's common stock is small compared to the liquidity of many other stocks.
As a result, the Company's common stock may be more volatile. Any adverse
developments with the Company's common stock price could greatly hinder, among
other things, the Company's growth strategy.
Assumptions relating to the foregoing are difficult or impossible to predict
accurately and many are beyond the control of the Company. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
GENERAL
The Company's primary source of revenue is dividends from its subsidiaries. The
primary sources of revenues for these dividends are premiums earned and
investment income derived from the insurance operations of FPIC, APAC, Intermed
and Interlex, and fee and commission income from McCreary and AFP. The Company
concentrates on liability insurance products for the healthcare community, with
MPL insurance for physicians and dentists as its primary product. The Company,
through FPIC, APAC and Intermed, writes MPL insurance, substantially on a
claims-made basis, providing 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 Company recently supplemented its line of
insurance products by adding coverage for small employer group health plans.
On January 6, 1999, the Company purchased all of the outstanding common stock of
AFP, for aggregate consideration equal to $54,000,000, paid in cash of
$44,000,000 and Company common stock. AFP is the manager and attorney-in-fact
for Physicians' Reciprocal Insurers, the second largest MPL insurer for
physicians in the state of New York.
On March 17, 1999, the Company's subsidiary, FPIC, acquired all of the
outstanding common stock of Tenere for $19,608,000 in cash. Included in the net
assets acquired was approximately $14,000,000 in cash. Tenere, headquartered in
Springfield, Missouri, is a stock holding company, with two primary insurance
subsidiaries, Intermed and Interlex, which provide medical and legal
professional liability insurance.
For information concerning the Company's acquisitions during 1997 and 1998, see
the Company's report on Form 10-K for the year ended December 31, 1998.
The Company's financial position and results of operations are subject to
fluctuations due to a variety of factors. Unexpected high frequency or severity
of losses in any period, particularly in the Company's prior three policy years,
would have a material adverse effect on the Company.
14
<PAGE> 15
Additionally, reevaluations of the Company's liability for loss and loss
adjustment expenses (LAE) could result in an increase or decrease in the
liability and a corresponding adjustment to earnings. The Company's historical
results of operations are not necessarily indicative of future results.
STOCK REPURCHASE PLAN
On June 29, 1999, the Company's Board of Directors approved the extension of a
stock repurchase plan pursuant to which the Company is authorized to repurchase,
at management's discretion, up to 500,000 of its shares on the open market over
a twelve-month period. As of September 30, 1999, the Company has repurchased
308,000 shares pursuant to this plan at a cost of approximately $7,380,000. On
September 11, 1999, the Company's Board of Directors approved an additional
stock buyback program, pursuant to which the Company is authorized to repurchase
an additional 500,000 shares of its stock on the open market when all available
shares have been repurchased under the previously announced program.
SELECTED BALANCE SHEET ITEMS - SEPTEMBER 30, 1999 COMPARED TO DECEMBER 31, 1998
As noted above, the Company completed two significant acquisitions in the first
quarter of 1999, AFP and Tenere, both of which were accounted for under the
purchase method. These acquisitions had an impact on certain balance sheet
accounts and the effects of these acquisitions as well as other changes are
described below.
Premiums Receivable
Premiums receivable increased $18.3 million, from $40.3 million at December 31,
1998 to $58.6 million at September 30, 1999 primarily due to the acquisition of
Tenere which added $2.9 million, additional assumed premium receivables of $9.6
million, additional MPL premium receivables at FPIC and APAC of $3.6 combined,
and additional health premium receivables of $2.2.
Due From Reinsurers on Unpaid Losses and Advance Premiums
Due from reinsurers on unpaid losses and advance premiums increased $12.0
million, from $42.1 million at December 31, 1998 to $54.1 million at September
30, 1999 due to the acquisition of Tenere.
Deferred Income Taxes
Deferred income taxes increased $10.5 million, from $9.3 million at December 31,
1998 to $19.8 million at September 30, 1999. Approximately $5.4 million of the
increase is due to the acquisition of Tenere. The remaining $5.1 million relates
to deferred tax changes due to fluctuations in unrealized gains and losses on
investments available for sale.
15
<PAGE> 16
Intangible Assets
Intangible assets increased $60.0 million, from $16.6 million at December 31,
1998 to $76.6 million at September 30, 1999. The increase is primarily related
to purchased goodwill, associated with the acquisitions of AFP and Tenere, of
$55.0 million and $3.9 million, respectively.
Loss and Loss Adjustment Expenses
The liability for loss and LAE increased $30.2 million, from $242.4 million at
December 31, 1998 to $272.6 million at September 30, 1999. The increase is
primarily due to the acquisition of Tenere and the inclusion of its reserves.
Unearned Premiums
Unearned premiums increased $23.9 million, from $44.3 million at December 31,
1998 to $68.2 million at September 30, 1999. Approximately $8.0 million of the
increase is due to the acquisition of Tenere. The remaining $15.9 million is
primarily due to an increase in premiums assumed during 1999.
Short-Term Debt
Short-term debt increased $36.5 million, from $27.2 million at December 31, 1998
to $63.7 million at September 30, 1999 and is primarily due to additional
borrowings from the credit facility to complete the acquisition of AFP.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities increased $8.8 million, from $8.8 million
at December 31, 1998 to $17.6 million at September 30, 1999 primarily due to the
acquisitions of AFP and Tenere, which added $2.6 million and $5.5 million,
respectively.
Additional Paid-In Capital
Additional paid-in capital increased $8.2 million, from $34.3 million at
December 31, 1998 to $42.5 million at September 30, 1999. This increase is
primarily due to shares issued in connection with the purchase of AFP.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income decreased $9.7 million from $5.6 million
at December 31, 1998 to $(4.1) million at September 30, 1999 due to unrealized
losses on securities available for sale.
16
<PAGE> 17
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1998.
Premiums
Direct premiums written and assumed increased $17.8 million, or 63.7 %, from
$27.9 million for the three months ended September 30, 1998 to $45.7 million for
the three months ended September 30, 1999. The increase in premiums written and
assumed is due to the acquisitions of APAC and Tenere, which added $0.5 million
and $2.3 million, respectively, and additional assumed MPL premium of $13.7
million. Net premiums earned increased $10.2 million, or 44.3%, from $23.0
million for the three months ended September 30, 1998 to $33.2 million for the
three months ended September 30, 1999. The increase in net premiums earned is
due to the acquisitions of APAC and Tenere, which added $0.6 million and $1.9
million, respectively, and additional assumed premium earned of $7.6 million.
Net Investment Income
Net investment income increased $0.7 million, or 16.3%, from $4.3 million for
the three months ended September 30, 1998 to $5.0 million for the three months
ended September 30, 1999. The increase in net investment income is due to the
inclusion of APAC and Tenere. No significant change in the yield or duration of
the Company's fixed-income portfolio occurred during the third quarter of 1999.
Claims Administration and Management Fees and Commission Income
Claims administration and management fees and commission income combined
increased $5.4 million, or 180.0% from $3.0 million for the three months ended
September 30, 1998 to $8.4 million for the three months ended September 30,
1999. The increase is primarily attributable to the acquisition of AFP, which
added $4.9 million in management fees and commissions during the third quarter
of 1999.
Net Losses and Loss Adjustment Expenses
Net losses and LAE increased $8.6 million, or 49.1%, from $17.5 million for the
three months ended September 30, 1998 to $26.1 million for the three months
ended September 30, 1999. The loss and LAE ratios were 76.2% for the three
months ended September 30, 1998 and 78.5% for the three months ended September
30, 1999.
The Company continues to actively pursue measures to alleviate adverse
development in the Florida Dental Association ("FDA") health plan. The Company
has exhausted a $2.2 million rate stabilization fund that was assumed with the
FDA health plan. In addition, the Company has incurred a loss of approximately
$3,400,000, through September 30, 1999, with respect to the plan. To offset such
adverse development, as of April 1, 1999, the Company implemented a rate
increase of approximately 15% related to the FDA health plan, and through
agreements with the FDA and vendors has reduced related administrative expenses
by 13.0%. The Company has also filed with the Florida Department of Insurance
for a 40% rate increase, which, based on independent actuarial analyses
performed for the Company, should alleviate the adverse
17
<PAGE> 18
development as policies are renewed. In the event the rate increase is granted,
the Company plans to reinsure the business. In the event the rate increase is
denied, the Company plans to issue letters of non-renewal to the plan's
participants and terminate the plan. In such event, policies issued under the
plan could remain in force for up to eighteen months.
The liability for losses and LAE represents management's best estimate of the
ultimate cost of all losses incurred but unpaid and considers prior loss
experience, loss trends, the Company's loss retention levels and changes in
frequency and severity of claims. The estimated liability is continually
reviewed and any adjustments that become necessary are included in current
operations.
Other Underwriting Expenses
Other underwriting expenses increased $5.2 million, or 216.7%, from $2.4 million
for the three months ended September 30, 1998 to $7.6 million for the three
months ended September 30, 1999. The increase is primarily attributable to an
increase in expenses related to assumed premiums of $1.6 million, and the
inclusion of APAC and Tenere, which, combined, added $0.4 million. In addition,
general and administrative expenses increased $3.0 million, including a
non-recurring severance charge of $2.4 million. In addition, the Company's
health insurance products have a higher expense factor than the Company's core
MPL products.
Claims Administration and Management Expenses
Claims administration and management expenses increased $5.4 million, or 245.4%,
from $2.2 million for the three months ended September 30, 1998 to $7.6 million
for the three months ended September 30, 1999. The increase is primarily
attributable to the purchase of AFP, which added $4.0 million in management
expenses during the third quarter of 1999 and $0.6 in compensation expense
related to stock grants for AFP employees. The process of converting the
computer system for AFP is taking longer than anticipated. Cost reductions may
be realized at AFP upon completion of the conversion.
Interest Expense
Interest expense increased $0.6 million, or 150.0%, from $0.4 million for the
three months ended September 30, 1998 to $1.0 million for the three months ended
September 30, 1999. The increase is primarily due to the receipt of the initial
$60.0 million line of credit for which the Company incurred interest expense
beginning in the third quarter of 1998. Beginning in 1999, the line of credit
had increased to $75.0 million.
Other Expenses
Other expenses increased $0.4 million or 44.4%, from $0.9 million for the three
months ended September 30, 1998 to $1.3 million for the three months ended
September 30, 1999. The increase is primarily attributable to amortization
expense on intangible assets, recorded in connection with acquisitions accounted
for under the purchase method.
18
<PAGE> 19
Net Income
For the reasons stated above, net income decreased $2.8 million, or 50.9%, from
$5.5 million for the three months ended September 30, 1998 to $2.7 million for
the three months September 30, 1999. Diluted earnings decreased $0.29 per share,
or 52.7%, from $0.55 per share for the three months ended September 30, 1998 to
$0.26 per share (including the $.16 per share nonrecurring severance charge) for
the three months ended September 30, 1999. Excluding the nonrecurring severance
charge of $.16 per share, diluted earnings per share for the three months ended
September 30,1999 would be $.42 per share.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1998.
Premiums
Direct premiums written and assumed increased $38.0 million, or 45.6%, from
$83.4 million for the nine months ended September 30, 1998 to $121.4 million for
the nine months ended September 30, 1999. The increase in premiums written and
assumed is due to the acquisitions of APAC and Tenere, which added $6.7 million
and $4.7 million, respectively, and additional assumed premiums written of $22.8
million. Net premiums earned increased $23.5 million, or 36.8%, from $63.8
million for the nine months ended September 30, 1998 to $87.3 million for the
nine months ended September 30, 1999. The increase in net premiums earned is due
to the acquisitions of APAC and Tenere, which added $3.1 and $4.4 million
respectively, additional assumed MPL premium of $12.9 million, and additional
health premium of $3.1 million.
Net Investment Income
Net investment income increased $1.3 million, or 10.0%, from $13.0 million for
the nine months ended September 30, 1998 to $14.3 million for the nine months
ended September 30, 1999. The increase in net investment income is due to the
inclusion of APAC and Tenere.
Claims Administration and Management Fees and Commission Income
Claims administration and management fees and commission income increased $14.3
million, or 166.3%, from $8.6 million for the nine months ended September 30,
1998 to $22.9 million for the nine months ended September 30, 1999. The increase
is attributable to the purchase of AFP, which added $14.3 million in management
fees and commissions during the nine months ended September 30, 1999.
Net Losses and Loss Adjustment Expenses
Net losses and LAE increased $9.2 million, or 18.3%, from $50.2 million for the
nine months ended September 30, 1998 to $59.4 million for the nine months ended
September 30, 1999. The loss and LAE ratios were 78.7% for the nine months ended
September 30, 1998 and 68.1% for the nine months ended September 30, 1999.
19
<PAGE> 20
The Company continues to actively pursue measures to alleviate adverse
development in the Florida Dental Association ("FDA") health plan. The Company
has exhausted a $2.2 million rate stabilization fund that was assumed with the
FDA health plan. In addition, the Company has incurred a loss of approximately
$3,400,000, through September 30, 1999, with respect to the plan. To offset such
adverse development, as of April 1, 1999, the Company implemented a rate
increase of approximately 15% related to the FDA health plan, and through
agreements with the FDA and vendors has reduced related administrative expenses
by 13.0%. The Company has also filed with the Florida Department of Insurance
for a 40% rate increase, which, based on independent actuarial analyses
performed for the Company, should alleviate the adverse development as policies
are renewed. In the event the rate increase is granted, the Company plans to
reinsure the business. In the event the rate increase is denied, the Company
plans to issue letters of non-renewal to the plan's participants and terminate
the plan. In such event, policies issued under the plan could remain in force
for up to eighteen months.
The liability for losses and LAE represents management's best estimate of the
ultimate cost of all losses incurred but unpaid and considers prior loss
experience, loss trends, the Company's loss retention levels, and changes in
frequency and severity of claims. The estimated liability is continually
reviewed and any adjustments that become necessary are included in current
operations.
Other Underwriting Expenses
Other underwriting expenses increased $11.3 million, or 166.2%, from $6.8
million for the nine months ended September 30, 1998 to $18.1 million for the
nine months ended September 30, 1999. The increase is attributable to the
acquisitions of APAC and Tenere, which added $0.9 million and $1.1 million,
respectively, additional ceding commissions of $5.0 million related to assumed
premiums and additional general and administrative expenses of $4.3 million,
including a non-recurring severance charge of $2.4 million. In addition, the
Company's health insurance products have a higher expense factor than the
Company's core MPL products.
Claims Administration and Management Expenses
Claims administration and management expenses increased $12.4 million, or
169.8%, from $7.3 million for the nine months ended September 30, 1998 to $19.7
million for the nine months ended September 30, 1999. The increase is primarily
related to the purchase of AFP, which added $11.1 million in management expenses
during the nine months ended September 30, 1999 and $0.6 in compensation expense
related to stock grants to AFP employees. The process of converting the computer
system for AFP is taking longer than anticipated. Cost reductions may be
realized at AFP upon completion of the conversion.
Interest Expense
Interest expense increased $2.3 million, or 460.0%, from $0.5 million for the
nine months ended September 30, 1998 to $2.8 million for the nine months ended
September 30, 1999. The increase is primarily due to the receipt of the initial
$60.0 million line of credit for which the Company incurred interest expense
beginning in the third quarter of 1998. Interest expense for the nine
20
<PAGE> 21
months ended September 30, 1999 has three quarters of expense on the outstanding
portion of the $75.0 million line of credit.
Other Expenses
Other expenses increased $2.6 million or 288.8%, from $0.9 million for the nine
months ended September 30, 1998 to $3.5 million for the nine months ended
September 30, 1999. The increase is primarily attributable to amortization
expense on intangible assets, recorded in connection with acquisitions accounted
for under the purchase method.
Net Income
For the reasons stated above, net income increased $2.0 million, or 13.1%, from
$15.3 million for the nine months ended September 30, 1998 to $17.3 million for
the nine months ended September 30, 1999. Diluted earnings increased $0.10 per
share or 6.4%, from $1.56 per share for the nine months ended September 30, 1998
to $1.66 per share (including the $.16 per share nonrecurring severance charge)
for the nine months ended September 30, 1999. Excluding the nonrecurring
severance charge of $.16 per share, diluted earnings per share for the nine
months ended September 30, 1999 would be $1.82 per share.
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. Operating cash flows for
the nine months ended September 30, 1999 provided cash of $9,572,453. 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 maintains a $75,000,000 revolving credit facility with five banks to
meet certain non-operating cash needs as they may arise. The credit facility
terminates January 4, 2002. The Company anticipates that before such time, it
would either extend the financing or obtain alternative financing. The Company
is not required to maintain compensating balances in connection with this credit
facility but is charged a fee on the unused portion, which ranges from 20 to 30
basis points. As of September 30, 1999, the Company had borrowed approximately
$63,700,000 against the credit facility for non-operating purposes.
Dividends payable by the Company's insurance subsidiaries are subject to certain
statutory limitations imposed by the laws in the states in which they operate.
In 1999, insurance subsidiaries are permitted, within insurance regulatory
guidelines, to pay dividends to the Company of approximately $18,300,000 without
regulatory approval.
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<PAGE> 22
Accounting Pronouncements
No accounting pronouncements were issued or effective during the quarter ending
September 30, 1999 that would materially affect the Company.
Guaranty Fund Assessments
The Company is subject to assessment by the Florida Insurance Guaranty
Association, Inc. (FIGA) as well as similar associations in other states where
it is licensed, for the provision of funds necessary for the settlement of
covered claims under certain policies of insolvent insurers. In addition to the
standard FIGA assessments, the Florida Legislature may levy special assessments
to settle claims caused by certain catastrophic losses. The Company would be
assessed on the basis of premium written. At September 30, 1999, the provision
for special assessments is approximately $113,000. However, damages caused by
future catastrophes, such as hurricanes, could subject the Company to
assessments.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
conditions, such as changes in interest rates, spreads among various asset
classes, foreign currency exchange rates, and other relevant market rate or
price changes. Market risk is directly influenced by the volatility and
liquidity in the markets in which the related underlying assets are traded. The
following is a discussion of the Company's primary market risk exposures and how
those exposures are currently managed as of September 30, 1999. The Company's
market risk sensitive instruments are entered into for purposes other than
trading.
The fair value of the Company's debt and equity investment portfolio as of
September 30, 1999 was $339,935,275. Approximately 97% of the portfolio was
invested in fixed maturity securities. The primary risks to the investment
portfolio are interest rate risk and credit risk associated with investments in
fixed maturity securities. The Company's exposure to equity risk is not
significant.
The Company does not believe it has any foreign currency exposure. The Company
does not conduct any operations outside of the United States nor does the
Company own any non-U.S. dollar denominated securities.
Generally, the Company does not invest in derivatives and does not currently use
hedging strategies in its investment portfolio. However, the Company has
invested in one interest rate swap contract to fix the interest rate in
connection with its revolving credit facility. As of September 30, 1999, the
Company's investments in collateral mortgage obligations and asset-backed
securities represented less than one percent of the investment portfolio. The
Company's investment portfolio is predominately fixed-income with approximately
54% allocated to the municipal sector. The balance is diversified through
investments in Treasuries, agencies, corporates and mortgage-backed securities.
The three market risks that can most directly affect the investment portfolio
are changes in U.S. interest rates, credit risks and legislative changes
impacting the tax-exempt status of municipal securities.
22
<PAGE> 23
Adverse impacts to the Company resulting from changes in interest rates are
primarily controlled through limiting the duration, or average maturity, of the
overall portfolio. The Company manages the duration of its portfolio relative to
the duration of the anticipated liabilities of the Company. Credit risks are
controlled through investing in securities with above average credit ratings.
The Company's portfolio is rated by Moody's and Standard & Poor's with
approximately 72% of the portfolio rated AAA, 15% rated AA, 3% rated A and 10%
rated BBB. From time to time discussion arises in the United States Congress
relative to changing or modifying the tax-exempt status of municipal securities.
While the Company is diligent in its efforts to stay current on legislative acts
that could adversely impact the tax exempt status of municipal securities, and
while it is uncertain as to whether these changes would ultimately affect
valuation of municipal securities currently held in the portfolio, at present
there are no hedging or other strategies being specifically used to minimize
this risk. If interest rates were to rise 100 basis points, the fair value of
the Company's fixed maturity securities would decrease approximately
$17,600,000.
There have been no significant changes to the Company's exposure to financial
market risks during the year nor does the Company anticipate any significant
changes in future reporting periods.
YEAR 2000
Certain computer programs written with two digits rather than four digits to
define the applicable year may experience problems handling dates near the end
of and beyond the year 1999 (the Year 2000 problem or "Y2K"). This may cause
computer applications to fail or to create erroneous results unless corrective
measures are taken.
The Company's information systems management staff has performed a thorough
review of the Company's operations and the operations of each of its
subsidiaries. These reviews considered the readiness of software systems written
internally and those provided by third parties to process data and perform date
calculations correctly using dates beginning January 1, 2000 and beyond.
Hardware, including servers, PC workstations, network routers and communications
equipment, was reviewed to determine that firmware and operating system software
were Y2K compliant.
The Company expects its mission critical software and hardware systems to be
fully functional on January 1, 2000 and beyond. Third parties who provide
software and/or hardware to the Company have provided statements of Y2K
compliance. Any problems that may occur regarding Y2K are expected to be minor
in nature and not have an impact on the Company's ability to provide services
and products to customers. With respect to contingency plans for mission
critical systems, the Company believes that there are viable alternatives if
these systems are non-compliant. However, the Company has completed an action
plan to resolve all known Y2K issues. The Company believes all mission critical
systems are Y2K compliant as of September 30, 1999. The Company will continue to
reassess the need for formal contingency plans.
The most reasonably possible worst-case scenario involving Y2K issues would be
if one or more of the Company's policyholder systems were found to be
non-compliant. In such event, the Company could experience an interruption in
services, although no loss of current data is
23
<PAGE> 24
anticipated. In addition, if a third party system is not Y2K compliant, the
Company could experience an interruption in services. Should the worst-case
scenario occur, it could, depending on its duration, have a material impact on
the Company's results of operations and financial position.
The cost to convert the Company to Y2K compliance is not expected to exceed
$150,000. The Company estimates that it has expended approximately $123,000
through September 30, 1999 on Y2K compliance. Regarding future acquisitions, the
Company, as a part of its due diligence, will determine Y2K compliance and its
impact on the dynamics of the acquisition.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information
As of September 30, 1999, the Company had repurchased 308,000 shares
of its stock under its previously announced stock buyback program,
leaving 192,000 shares available for repurchase under the program. The
Company's Board of Directors has approved an additional stock buyback
program, pursuant to which the Company is authorized to repurchase up
to an additional 500,000 shares of its stock on the open market when
all available shares have been repurchased under the previously
announced program. This newly announced stock buyback program
continues through September 2000. Shares will be repurchased under
each of the Company's stock buyback programs at such times and in such
amounts as management deems appropriate.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K
(i) Form 8-K filed on July 7, 1999 reporting the extension of
the Company's stock repurchase program filed pursuant to
Item 5 of Form 8-K.
(ii) Form 8-K filed on August 23, 1999 reporting the departure of
certain executive officers filed pursuant to Item 5 of Form
8-K.
24
<PAGE> 25
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/ Steven J. Coniglio
----------------------
November 12, 1999 Steven J. Coniglio,
Acting Chief Financial Officer
(a duly authorized officer and the principal
financial officer of the registrant)
25
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of FPIC Insurance Group, Inc. for the nine months ended
September 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 334,282
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 9,857
<MORTGAGE> 0
<REAL-ESTATE> 5,298
<TOTAL-INVEST> 349,819
<CASH> 7,202
<RECOVER-REINSURE> 2,417
<DEFERRED-ACQUISITION> 2,708
<TOTAL-ASSETS> 590,236
<POLICY-LOSSES> 272,571
<UNEARNED-PREMIUMS> 68,170
<POLICY-OTHER> 1,368
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 63,719
0
0
<COMMON> 970
<OTHER-SE> 165,856
<TOTAL-LIABILITY-AND-EQUITY> 590,236
87,304
<INVESTMENT-INCOME> 14,342
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<OTHER-INCOME> 24,691
<BENEFITS> 59,440
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<UNDERWRITING-OTHER> 18,071
<INCOME-PRETAX> 23,231
<INCOME-TAX> 5,932
<INCOME-CONTINUING> 17,299
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<NET-INCOME> 17,299
<EPS-BASIC> 1.77
<EPS-DILUTED> 1.66
<RESERVE-OPEN> 279,882
<PROVISION-CURRENT> 75,294
<PROVISION-PRIOR> (21,058)
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</TABLE>
