REPEAT/FPIC Insurance Group, Inc. Reports Second Quarter 2002 Results.Business Editors/Health/Medical Writers REPEATING DUE TO GARBLE gar·ble tr.v. gar·bled, gar·bling, gar·bles 1. To mix up or distort to such an extent as to make misleading or incomprehensible: She garbled all the historical facts. 2. JACKSONVILLE Jacksonville. 1 City (1990 pop. 29,101), Pulaski co., central Ark., inc. 1941. The city has varied industries, including printing and publishing and the manufacture of electronic equipment, ordnance, and plastic and metal products. , Fla.--(BUSINESS WIRE)--Aug. 8, 2002 FPIC FPIC First Professionals Insurance Company (Jacksonville, FL) FPIC Field Programmable Interconnect FPIC Federal Partnership for Interoperable Communications FPIC Field Programmable Interconnect Chip Insurance Group, Inc. (Nasdaq:FPIC) (the "Company") today reported second quarter 2002 financial results. Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before , which exclude the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. effect of realized investment gains and losses, were $2.8 million, or $0.30 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the second quarter 2002, up from second quarter 2001 operating earnings of $2.0 million, or $0.22 per diluted share. Operating earnings were $5.4 million, or $0.57 per diluted share, for the six months ended June June: see month. 30, 2002, up from $3.4 million, or $0.36 per diluted share, for the first six months of 2001. Earnings per diluted share were $0.27 for the second quarter 2002 as compared to $0.20 for the second quarter 2001. Losses per diluted share for the six months ended June 30, 2002 were $2.54 compared to earnings per diluted share of $0.33 for the same period last year. As reported in the first quarter 2002, the Company adopted Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ," which resulted in a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , after-tax charge for the cumulative effect of the accounting change of $29.6 million, or $3.11 per diluted share. Total revenues for the second quarter 2002 were $62.8 million, up 27% from revenues in the second quarter 2001 of $49.4 million. Total revenues for the six months ended June 30, 2002 were $116.2 million, up 22% from total revenues of $95.6 million for the same period in 2001. Second Quarter and Year-to-Date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2002 Highlights -- Second quarter 2002 operating earnings of $0.30 per diluted share -- Strong top-line growth driven by pricing improvements and policyholder growth -- Increases in operating cash flow, assets and reserves -- Reaffirmation of A- (Excellent) group rating from A.M. Best -- Continued monitoring of, and focus on, developing loss trends, claims management and pricing -- A decrease in net investment income, reflecting lower investment portfolio yields and prevailing market interest rates -- The decision to curtail accepting applications for new business, as the result of significant premium and policyholder growth in the first half of 2002 -- New reinsurance agreement with the Hannover Re group, effective July 1, 2002 -- Election of two new Directors John R. Byers Byers may refer to any of the following places:
"We will continue to monitor and address loss trends, maintain our underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discipline and be as efficient as possible in our claims handling at our insurance companies. As to our other operations, we continue to be pleased with the performance of our reciprocal Bilateral; two-sided; mutual; interchanged. Reciprocal obligations are duties owed by one individual to another and vice versa. A reciprocal contract is one in which the parties enter into mutual agreements. management segment and are continuing our efforts to create efficiencies and growth opportunities in our third party administration segment in order to improve that segment's profitability." Mr. Byers continued, "As we have previously reported, our growth in 2002 has significantly exceeded our expectations as a result of improved pricing, higher than expected policyholder Policyholder An individual who owns an insurance policy. retention and increased demand, creating the need and desire for additional capacity. As we reported on August 7, we have entered into a reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. agreement with two reinsurers within the Hannover Re Hannover Re (FWB: HNRGn), in German Hannover Rückversicherung AG, with gross premium of around €9 billion in 2006, is one of the five largest reinsurance groups in the world. Its headquarters are in Hanover, Germany. organization whereby, effective July July: see month. 1, 2002, our largest insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. , First Professionals Insurance Company, Inc., will cede portions of its business this year and next year as an initial step towards addressing our capacity needs. As we previously announced, we will continue to renew our existing policyholders and add policyholders to existing groups, but we will continue to limit new policyholder growth as we consider additional alternatives and opportunities to increase our capacity and position the Company to take further advantage of market conditions."
Consolidated Financial Results
(In thousands, except per common share information)
Unaudited Unaudited
----------------- ------------------
Three Months Ended Six Months Ended
Income Statement Information June 30, June 30, June 30, June 30,
2002 2001 2002 2001
-------------------------------- ------------------------------------
Direct and assumed premiums
written $ 90,426 46,942 179,684 102,115
========= ======= ========= ========
Net premiums written $ 57,164 29,318 113,359 65,216
========= ======= ========= ========
Revenues
Net premiums earned $ 47,560 34,802 86,902 66,319
Claims administration and
management fees 8,291 7,676 15,921 14,894
Net investment income 5,813 5,889 10,701 12,555
Commission income 1,162 1,079 2,036 1,564
Net realized investment
(losses) gains (324) (285) 144 (380)
Finance charges and other
income 250 213 471 673
--------- ------- --------- --------
Total revenues 62,752 49,374 116,175 95,625
--------- ------- --------- --------
Expenses
Net losses and loss
adjustment expenses 41,358 32,732 75,183 62,741
Other underwriting expenses 6,780 4,985 13,471 9,909
Claims administration and
management expenses 7,847 7,645 15,257 15,210
Interest expense 1,254 1,186 2,470 2,339
Other expenses 106 951 177 1,921
--------- ------- --------- --------
Total expenses 57,345 47,499 106,558 92,120
--------- ------- --------- --------
Income from operations before
taxes and cumulative
effect of accounting
change 5,407 1,875 9,617 3,505
Less: Income taxes 2,798 13 4,143 349
--------- ------- --------- --------
Income before cumulative
effect of accounting change 2,609 1,862 5,474 3,156
Less: Cumulative effect
of accounting change -- -- 29,578 --
--------- ------- --------- --------
Net income (loss) $ 2,609 1,862 (24,104) 3,156
========= ======= ========= ========
Consolidated Financial Results
(In thousands, except per common share information)
Unaudited Unaudited
---------------- ----------------
Three Months Ended Six Months Ended
Income Statement Information, June June June June
continued 30, 30, 30, 30,
2002 2001 2002 2001
----------------------------------- ---------------- ----------------
Operating earnings per common share(1)
-----------------------------------
Basic $ 0.30 0.22 0.57 0.36
Diluted $ 0.30 0.22 0.57 0.36
Earnings (loss) per common share
-----------------------------------
Basic $ 0.28 0.20 (2.57) 0.34
Diluted $ 0.27 0.20 (2.54) 0.33
Weighted average shares outstanding
-----------------------------------
Basic 9,390 9,401 9,382 9,397
Diluted 9,516 9,458 9,507 9,447
GAAP combined ratio
-----------------------------------
Loss ratio 87% 94% 87% 95%
Underwriting expense ratio 14% 14% 16% 15%
Combined ratio 101% 108% 103% 110%
(1) Excluding net realized investment gains and losses
Balance Sheet Information Unaudited
As of
June 30, As of Dec
2002 31, 2001
---------------------------------------------- --------- -----------
Total cash and investments $ 443,159 441,966
Total assets $ 826,548 770,822
Liability for loss and loss adjustment
expenses ("LAE") $ 356,247 318,483
Liability for loss and LAE, net of reinsurance $ 252,317 238,073
Revolving credit facility $ 37,000 37,000
Term loan $ 13,125 16,042
Total shareholders' equity $ 151,674 174,574
Common shares outstanding 9,391 9,338
Book value per common share $ 16.15 18.70
Book value per common share, excluding
unrealized gains and losses $ 16.07 18.71
Unaudited
------------------
Six Months Ended
Cash Flow Information June 30, June 30,
2002 2001
---------------------------------------------- --------- --------
Net cash provided by operating activities $ 22,599 6,993
Net cash (used in) provided by investing
activities $ (33,603) 22,240
Net cash (used in) provided by financing
activities $ (2,479) 128
Regarding the quarter and year-to-date results, Kim Kim orphan wanders streets of India with lama. [Br. Lit.: Kim] See : Adventurousness D. Thorpe Thorpe , James Francis Known as "Jim." 1888-1953. American athlete. An outstanding collegiate football player, he later played professional football and baseball. , Executive Vice President and Chief Financial Officer, commented, "We are very pleased to be able to report these results, which are on track for the quarter and year-to-date, especially in view of the many uncertainties facing the financial markets, the economy and businesses everywhere. We believe our straightforward, conservative operating strategy is working and that it has positioned us well." Mr. Thorpe continued, "Investment results continue to be lackluster lack·lus·ter adj. Lacking brightness, luster, or vitality; dull. See Synonyms at dull. Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" . We realized approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.2 million in after-tax losses on WorldCom The former name of MCI. Based in Jackson, MS, WorldCom, Inc. was a major, international telecommunications carrier. It was founded in 1983 by Bernard Ebbers as Long Distance Discount Service (LDDS), a reseller of AT&T WATS lines to small businesses. bonds held and sold during the quarter. These losses were largely offset by realized investment gains during the quarter." Commenting on loss experience and key indicators, Mr. Thorpe stated, "Indications in our loss metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. have been mixed this quarter and so far this year. The settlement of three unusually large claims, two of which were related to one incident, accounted for $3.0 million of the second quarter payments. An amount equal to 75% of these claims will be applied to the annual aggregate deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). or otherwise recovered under the Company's reinsurance programs. "Growth in newly reported claims and incidents was also higher in the quarter and so far in 2002. If trended against growth in average earned exposures, newly reported claims and incidents, which were 1,643 for all companies for the first six months of 2002, were about 18% to 22% higher than historic norms. We have analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. this trend, in particular, and have determined that a significant portion of this increase, or approximately 140 claims and incidents, are accounted for in three of the larger counties in Florida The links in the column FIPS County Code are to the Census Bureau Info page for that county. List of 67 counties in the U.S. state of Florida: State Abbr. FIPS State Code State FL 12 Florida Index # on Map FIPS County Code County Name 1 001 Alachua County , where higher claims and incidents are expected. Approximately 95 of these claims and incidents represent claims filed under corporate endorsements issued in connection with individual policies. The remainder of the increase, or about 50 claims and incidents, reflects growth in out-of-state out-of-state adj. Of, relating to, or being from another state. business. On the positive side, our closed claims activity metrics, including the number of claims with indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. payments, claims closed without indemnity payments and the relationship between these metrics are on track for the second quarter and the first six months of 2002." Mr. Thorpe summed up his remarks on loss experience and reserves by stating, "At this point, we believe our reserving continues to be appropriate and adequate, and we remain comfortable that our pricing will accommodate these trends. However, while we are not overly concerned by the increases in newly reported claims and incidents thus far, we will remain watchful watch·ful adj. 1. Closely observant or alert; vigilant: kept a watchful eye on the clock. See Synonyms at aware, careful. 2. Archaic Not sleeping; awake. of this trend." Commenting on the terms of the new reinsurance agreement with Hannover Re, Mr. Thorpe stated, "While the agreement provides a meaningful amount of reinsurance protection, the finite finite - compact feature of the agreement reduces our costs by capping the reinsurer's loss exposure. The agreement also contains an option for us to commute TO COMMUTE. To substitute one punishment in the place of another. For example, if a man be sentenced to be hung, the executive may, in some states, commute his punishment to that of imprisonment. the treaty if the underlying business performs such that this protection proves to be unnecessary." Other Information Two new Directors, Joan Joan of Arc, St. (1412–1431) heroically followed call to save France. [Christian Hagiog.: Attwater, 187] See : Patriotism D. Ruffier and Kenneth M. Kirschner Kirschner named after Martin Kirschner, a German surgeon, a name commonly associated with surgical equipment. Kirschner apparatus , were elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to serve on the Company's Board of Directors at the Company's 2002 Annual Meeting of Shareholders held on June 5, 2002. Ms. Ruffier and Mr. Kirschner both bring significant business and professional experience with them to the Company's Board. Ms. Ruffier currently serves on various state and community boards Community Boards is a community based mediation program, established in 1976, in San Francisco, California, USA. The program utilizes volunteers from from the neighbourhoods of the city, who work with people involved in disagreements toward the end of resolving the dispute, , including Shands Shands may reference one of the following:
UCF is a member institution of the State University System of Florida. UCF was founded in 1963 as Florida Technological University with the goal of providing highly trained personnel to support the Kennedy Foundation. Ms. Ruffier has served on various corporate boards, including Florida Progress Corporation Florida Progress Corporation a.k.a. Florida Progress was a utility holding company based in St. Petersburg, Florida. The company was the parent company for Florida Power Corporation which distributed power over many parts of central and north Florida. and its subsidiary, Florida Power Corporation Florida Power Corporation was the generation, transmission, and distribution sector of Florida Progress Corporation. The company distributed power over much of central and north Florida. Today the company operates as Progress Energy Florida. , the Federal Reserve Bank of Atlanta The Federal Reserve Bank of Atlanta is responsible for the 6th District of the Federal Reserve, which covers Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee. and SunTrust Bank of Orlando Orlando, city, United States Orlando (ôrlăn`dō), city (1990 pop. 164,693), seat of Orange co., central Fla., in a lake region; inc. 1875. In a citrus fruit and farm area, it is one of the world's most visited vacation spots. . Ms. Ruffier also served as a general partner of Sunshine Cafes and was a certified public accountant Certified Public Accountant (CPA) An accountant who has met certain standards, including experience, age, and licensing, and passed exams in a particular state. with Colley Col´ley n. 1. See Collie. , Trumblower & Howell How´ell n. 1. The upper stage of a porcelian furnace. in Orlando, Florida The city of Orlando is a major city in central Florida and is the county seat of Orange County, Florida. According to the 2000 census, the city population was 185,951. A 2006 U.S. . Mr. Kirschner is a member of the law firm of Kirschner & Legler, P.A. located in Jacksonville, Florida “Jacksonville” redirects here. For other uses, see Jacksonville (disambiguation). Jacksonville is the largest city in the state of Florida and the county seat of Duval County. . Mr. Kirschner began the practice of law in 1968. Since 1998 and prior to the formation of Kirschner & Legler, P.A., Mr. Kirschner was a partner in Holland & Knight knight, in ancient and medieval history, a noble who did military service as a mounted warrior. The Knight in Ancient History In ancient history, as in Athens and Rome, the knight was a noble of the second class who in military service had to , and subsequently, of counsel to LeBoeuf, Lamb, Greene & MacRae, L. L. P., located in Jacksonville, Florida. From 1985 until 1998, Mr. Kirschner was a partner with Kirschner, Main, Graham, Turner Turner can refer to:
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. matters, finance and mergers and acquisitions. Mr. Kirschner has served as an officer and on the boards of directors of several publicly owned Publicly owned can refer to:
One member vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. on the Board of Directors resulted from the death on January January: see month. 11, 2002 of J. Stewart Stewart, river, Canada Stewart, river, 331 mi (533 km) long, rising in the Mackenzie Mts., central Yukon Territory, Canada, and flowing generally W to the Yukon River S of Dawson. Hagen Hagen (hä`gən), city (1994 pop. 214,880), North Rhine–Westphalia, W Germany, on the Ennepe River. It is an industrial center in the Ruhr district. Its manufactures include iron and steel, chemicals, machinery, paper, and textiles. , M.D. and a second member vacancy resulted from the retirement of Curtis E. Gause Gause is the name of several things: People
Effective July 1, 2002, Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by Divita, III was appointed ap·point tr.v. ap·point·ed, ap·point·ing, ap·points 1. To select or designate to fill an office or a position: appointed her the chief operating officer of the company. 2. Director, President and Chief Executive Officer of Employers Mutual, Inc. ("EMI (ElectroMagnetic Interference) An electrical disturbance in a system due to natural phenomena, low-frequency waves from electromechanical devices or high-frequency waves (RFI) from chips and other electronic devices. Allowable limits are governed by the FCC. "), a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of the Company, which provides third party administration services. Mr. Divita previously held the position of Vice President of Financial Planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against at the Company. Prior to joining the Company, Mr. Divita held various positions with Prudential Prudential is the name of two different companies and buildings named after them: Companies:
Mueller may refer to:
As of June 30, 2002, the Company became a member of the Russell 3000 Index The Russell 3000 Index is a stock market index of US stocks. The ticker is "RUA" or similar. See Russell Indexes page for main discussion. See also the iShares Russell 3000. and the Russell 2000 Index Russell 2000 Index An index measuring the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States. . The Russell 3000 Index measures the performance of the 3,000 largest U.S. public companies based on total market capitalization Total Market Capitalization The total market value of all of a firm's outstanding securities. . The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. Conference Call The Company will host a conference call at 10 a.m., Eastern Time, Thursday Thursday: see week. , August 8, 2002, to review second quarter 2002 results and to discuss the Company's performance. To access the conference call, please dial 800/230-1074 (USA) or 612/288-0340 (International). Messrs. Byers and Thorpe will host the call and take questions on an interactive basis from the Company's analysts. Participants in the "listen only" telephone audience will be provided an opportunity during the conference call to submit questions for Messrs. Byers and Thorpe. Questions can be submitted either during the call or in advance of the call via e-mail to ir@fpic.com or through the Company's corporate website at http://www.fpic.com. From the Company's home page, click on "Investor Relations Investor relations The process by which the corporation communicates with its investors. " and a conference call link will be provided to connect you to the call. Questions for listen-only participants will be answered during the conference call as time permits following questions from the Company's analysts. For persons unable to participate in the conference call, a telephone replay will be available beginning at 3:15 p.m., Eastern Time, Thursday, August 8, 2002 and ending at 11:59 p.m., Eastern Time, Saturday Saturday: see week; Sabbath. , August 10, 2002. To access the telephone replay, dial 800/475-6701 (USA) or 320/365-3844 (International) and use the access code 622391. A replay of the conference call web cast will also be available beginning at 1 p.m., Eastern Time, Thursday, August 8, 2002 and ending at 1 p.m., Eastern Time, Thursday, August 15, 2002 on the Company's website. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Disclosure The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor" for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Any written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors (which are described in more detail in documents filed by the Company with the Securities and Exchange Commission) include, but are not limited to, (i) uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc government and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. policies (such as subjecting the Company to insurance regulation or taxation in additional jurisdictions or amending, revoking or enacting any laws, regulations or treaties affecting the Company's current operations), (ii) the occurrence of insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. or reinsured events with a frequency or severity exceeding the Company's estimates, (iii) legal developments, including claims for extra-contractual obligations or in excess of policy limits in connection with the administration of insurance claims, (iv) the uncertainties of the loss reserving process, (v) the actual amount of new and renewal business and market acceptance of expansion plans, (vi) the loss of the services of any of the Company's executive officers, (vii) changing rates of inflation and other economic conditions, (viii) the ability to collect reinsurance recoverables, (ix) the competitive environment in which the Company operates, related trends and associated pricing pressures and developments, (x) the impact of mergers and acquisitions, including the ability to successfully integrate acquired businesses and achieve cost savings, competing demands for the Company's capital and the risk of undisclosed liabilities, (xi) developments in global financial markets that could affect the Company's investment portfolio and financing plans, (xii) risk factors associated with financing and refinancing Refinancing An extension and/or increase in amount of existing debt. , including the willingness of credit institutions to provide financing and the availability of credit generally, (xiii) developments in reinsurance markets that could affect the Company's reinsurance program; and (xiv) changes in the Company's financial ratings resulting from one or more of these uncertainties and other factors. The words "believe," "anticipate," "foresee fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. ," "estimate," "project," "plan," "expect," "intend," "hope," "should," "will likely result" or "will continue" and variations thereof or similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Results of Operations Total revenues for the second quarter 2002 increased 27% to $62.8 million from $49.4 million for the second quarter 2001. Total revenues for the six months ended June 30, 2002 increased 22% to $116.2 million from $95.6 million for the six months ended June 30, 2001. The increase in revenues was primarily the result of price improvements on the Company's core medical professional liability ("MPL 1. (language) MPL - An early possible name for PL/I. [Sammet 1969, p.542]. 2. MPL - MasPar data-parallel version of C. See also ampl. Compiler version 3.1. 3. MPL - Motorola Programming Language. ") business and growth in the number of policyholders in Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and and Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. . Net premiums earned on the Company's professional
liability business increased 83% to $44.0 million for the three months
ended June 30, 2002 from $24.1 million for the three months ended June
30, 2001. Net premiums earned on the Company's professional
liability business increased 77% to $80.1 million for the six months
ended June 30, 2002 from $45.2 million for the six months ended June 30,
2001. The differences between these increases and the increases in total
net premiums earned are attributable attributableemanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to declines in group accident and health ("A&H") and assumed reinsurance premiums earned. The Company also had an increase in revenues earned by the Company's reciprocal management segment primarily as a result of an increase in management fees associated with growth in premiums written at Physicians' Reciprocal Insurers and an increase in brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. commissions earned by FPIC Intermediaries, Inc. Total expenses for the second quarter 2002 increased 21% to $57.3 million from $47.5 million for the second quarter 2001. Total expenses for the six months ended June 30, 2002 increased 16% to $106.6 million from $92.1 million for the six months ended June 30, 2001. Net losses and loss adjustment expenses ("LAE") incurred for the three months and six months ended June 30, 2002 increased $8.6 million or 26% and $12.4 million or 20%, respectively when compared with the three months and six months ended June 30, 2001. Net losses and LAE on the Company's professional liability business increased 62% to $39.5 million for the three months ended June 30, 2002 from $24.4 million for the three months ended June 30, 2001. Net losses and LAE on the Company's professional liability business increased 56% to $71.9 million for the six months ended June 30, 2002 from $46.0 million for the six months ended June 30, 2001. The differences between these increases and the increases in total net losses and LAE are attributable to declines in A&H and assumed reinsurance losses and LAE. The increase in net losses and LAE incurred reflects growth in business, taking into consideration expected loss trends. Other underwriting expenses also contributed to the increase in total expenses, primarily as a result of an increase in expenses related to the growth in insurance business. These increases were partially offset by the decline in other expenses due to the Company's adoption of Financial Accounting Standard ("FAS") No. 142. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with FAS 142, the Company ceased the amortization of goodwill and indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those lived intangible assets during the first quarter 2002. The adoption of FAS 142 eliminated amortization expense of approximately $1.1 million after-tax for the six months ended June 30, 2002. The Company reported net income of $2.6 million, or $0.27 per diluted share, for the second quarter of 2002, an increase of $0.7 million or $0.07 per diluted share, when compared with net income of $1.9 million, or $0.20 per diluted share for the second quarter 2001. The Company incurred a net loss of $24.1 million, or $2.54 per diluted share, for the six months ended June 30, 2002 compared with net income of $3.2 million, or 0.33 per diluted share for the first half of 2001. During the first quarter 2002, the adoption of FAS 142 resulted in a one-time, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. that reduced the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the Company's goodwill by $48.4 million. The goodwill impairments resulting from the adoption of FAS 142 were associated entirely with goodwill at the Company's non-insurance segments. Income before cumulative effect of accounting change was $5.5 million, or $0.58 per diluted share for the six months ended June 30, 2002, an increase of $2.3 million, or $0.25 per diluted share, when compared with net income of $3.2 million, or $0.33 per diluted share for the first half of 2001. Insurance Segment The Company's insurance segment is made up of its four insurance subsidiaries, First Professionals Insurance Company, Inc. ("First Professionals"), Anesthesiologists Professional Assurance Company ("APAC APAC Australian Partnership for Advanced Computing APAC Agricultural Policy Analysis Center APAC Asia and Pacific APAC Asian Pacific American Coalition APAC Adapted Physical Activity Council (American Alliance for Health) ") and The Tenere Group, Inc. ("Tenere") companies of Intermed Insurance Company and Interlex Insurance Company. Holding company operations are included within the insurance segment due to the segment's size and prominence prominence /prom·i·nence/ (prom´i-nins) a protrusion or projection. frontonasal prominence and the substantial attention devoted to the segment. Unaudited financial data for the Company's insurance segment for the three months and six months ended June 30, 2002 and 2001 are summarized in the table below. Dollar amounts are in thousands.
Three Months Ended
----------------------------
June 30, Percentage June 30,
2002 Change 2001
----------------------------
Direct and assumed premiums written $ 90,426 93% $ 46,942
========= =========
Net premiums written $ 57,164 95% $ 29,318
========= =========
Net premiums earned $ 47,560 37% $ 34,802
Net investment income 5,754 0% 5,726
Commission income 4 -50% 8
Net realized investment (losses) gains (324) -14% (285)
Finance charges and other income 225 20% 187
Intersegment revenues 787 238% 233
--------- ---------
Total revenues 54,006 33% 40,671
--------- ---------
Net losses and LAE 41,358 26% 32,732
Other underwriting expense 6,780 36% 4,985
Interest expense 1,254 6% 1,186
Other expenses 71 -71% 245
Intersegment expenses 847 -29% 1,201
--------- ---------
Total expenses 50,310 25% 40,349
--------- ---------
Income from operations before taxes and
cumulative effect of accounting change 3,696 1048% 322
Less: Income taxes 2,115 539% (482)
--------- ---------
Income before cumulative effect of
accounting change 1,581 97% 804
--------- ---------
Less: Cumulative effect of accounting
change -- 0% --
--------- ---------
Net income $ 1,581 97% $ 804
========= =========
Three Months Ended
----------------------------
Selected Direct Professional Liability June 30, Percentage June 30,
Claim Information 2002 Change 2001
----------------------------------------------------------------------
Net paid losses and LAE on professional
liability claims only $ 29,038 36% $ 21,277
========= =========
Average net paid loss per professional
liability claim closed with indemnity
payment $ 213 37% $ 156
========= =========
Total professional liability claims
reported
during the period 861 95% 442
========= =========
Total professional liability claims closed
with indemnity payment 91 14% 80
========= =========
Total professional liability claims closed
without indemnity payment 560 83% 306
========= =========
Six Months Ended
----------------------------
June Percentage June
30, 30,
2002 Change 2001
----------------------------
Direct and assumed premiums written $ 179,684 76% $ 102,115
======== ========
Net premiums written $ 113,359 74% $ 65,216
======== ========
Net premiums earned $ 86,902 31% $ 66,319
Net investment income 10,597 -14% 12,263
Commission income 7 -65% 20
Net realized investment (losses) gains 144 138% (380)
Finance charges and other income 422 15% 367
Intersegment revenues 1,313 182% 466
-------- --------
Total revenues 99,385 26% 79,055
-------- --------
Net losses and LAE 75,183 20% 62,741
Other underwriting expense 13,471 36% 9,909
Interest expense 2,470 6% 2,339
Other expenses 142 -71% 491
Intersegment expenses 1,318 -40% 2,206
-------- --------
Total expenses 92,584 19% 77,686
-------- --------
Income from operations before taxes and
cumulative effect of accounting
change 6,801 397% 1,369
Less: Income taxes 2,994 821% (415)
-------- --------
Income before cumulative effect of
accounting change 3,807 113% 1,784
-------- --------
Less: Cumulative effect of accounting
change -- 0% --
-------- --------
Net income $ 3,807 113% $ 1,784
======== ========
As of Percentage As of
June Change June
30, 30,
2002 2001
----------------------------
Professional liability policyholders
(Excludes policyholders under fronting
arrangements of 5,136 and 2,820 as of
June 30, 2002 and 2001, respectively) 17,110 43% 11,939
======== ========
Six Months Ended
----------------------------
Selected Direct Professional Liability June Percentage June
30, 30,
Claim Information 2002 Change 2001
---------------------------------------- ----------------------------
Net paid losses and LAE on professional
liability claims only $ 49,038 6% $ 46,383
======== ========
Average net paid loss per professional
liability claim closed with indemnity
payment $ 192 12% $ 171
======== ========
Total professional liability claims
reported during the period 1,643 74% 944
======== ========
Total professional liability claims
closed with indemnity payment 162 -7% 175
======== ========
Total professional liability claims
closed without indemnity payment 932 39% 672
======== ========
Direct and assumed premiums written increased 93% to $90.4 million for the three months ended June 30, 2002 from $46.9 million for the three months ended June 30, 2001. Direct and assumed premiums written increased 76% to $179.7 million for the six months ended June 30, 2002 from $102.1 million for the six months ended June 30, 2001. Direct and assumed premiums written have increased primarily as a result of an increase in direct premiums written on the Company's core MPL business. The increase in direct premiums written is due to the effects of rate increases realized by the Company's insurance subsidiaries and growth in the number of policyholders. First Professionals implemented rate increases in January and December December: see month. 2001; APAC implemented rate increases in July 2001 and 2002; and Intermed implemented rate increases in November November: see month. 2001 and July 2002. In addition, the Company experienced growth in direct premiums written under fronting arrangements for workers compensation business. The growth in direct premiums written was partially offset by a decline of $6.7 million in direct and assumed premiums written under group A&H programs for the six months ended June 30, 2002, which were discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: in 2001. Net premiums written increased 95% to $57.2 million for the three months ended June 30, 2002 from $29.3 million for the three months ended June 30, 2001. Net premiums written increased 74% to $113.4 million for the six months ended June 30, 2002 from $65.2 million for the six months ended June 30, 2001. The increase in net premiums written is due to growth in direct premiums written associated with rate increases at the Company's insurance subsidiaries and an increase in the number of policyholders, as noted above. The growth in direct professional liability premiums written was offset by a decline in group A&H and assumed professional liability premiums written. Net premiums earned increased 37% to $47.6 million for the three months ended June 30, 2002 from $34.8 million for the three months ended June 30, 2001. Net premiums earned increased 31% to $86.9 million for the six months ended June 30, 2002 from $66.3 million for the six months ended June 30, 2001. The increase in net premiums earned is due to rate increases implemented by the Company's insurance subsidiaries and growth in the number of policyholders. Net premiums earned on the Company's professional liability business increased 83% to $44.0 million for the three months ended June 30, 2002 from $24.1 million for the three months ended June 30, 2001. Net premiums earned on the Company's professional liability business increased 77% to $80.1 million for the six months ended June 30, 2002 from $45.2 million for the six months ended June 30, 2001. The differences between these increases and the increases in total net premiums earned are attributable to declines in group A&H and assumed reinsurance premiums earned. In addition, the increase in net premiums earned is less than the increase in premiums written for the same period primarily due to the inherent lag between written and earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. . Direct premiums written include premiums written under fronting agreements for which a relatively small portion of business is retained and therefore, only a small portion of premium is ultimately earned. The Company's largest insurance subsidiary, First Professionals, entered into a finite reinsurance Finite Reinsurance A type of reinsurance that transfers over only a finite or limited amount of risk. Risk is reduced through accounting or financial methods, along with the actual transfer of economic risk. agreement with Hannover Re, effective July 1, 2002, for the primary purpose of adding to its financial capacity to write business in 2002 and 2003 by providing relief from the strain on its statutory surplus that occurs as a result of the significant growth being experienced. By ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. a portion of its risks to Hannover Re, First Professionals is able to reduce its financial leverage and realize immediate reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. for its related up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. acquisition costs, thus adding to its financial capacity. The ultimate cost to First Professionals of such reinsurance is reduced by placing a cap on the amount of exposure being assumed by Hannover Re. In addition, First Professionals has the option to commute the agreement should the business perform such that the underlying protection proves to be unnecessary, in which case the reinsurance would cease, the underlying reinsurance assets and liabilities would unwind Unwind 1. The closure of an investment position. 2. The reconciliation of an error previously unseen by a brokerage house. Notes: 1. Sometimes referred to as closing out a position. , and any net funds under the agreement, less a 4.2% risk charge to Hannover Re, would be retained by First Professionals. Under the terms of the Hannover Re agreement, First Professionals will cede approximately $48.5 million of its unearned premiums as of June 30, 2002, and fifty percent of its direct written premiums, net of other reinsurance, during the last six months of 2002 and the first six months of 2003. As a result, net premiums written for the remainder of 2002 are expected to correspondingly decline from the trends established during the first half of the year and to be lower than those reported in 2001. Net premiums earned are also expected to be lower during the second half of 2002 than the trend established during the first and second quarters; however, net premiums earned for the full year 2002 are still expected to equal or exceed those reported in 2001. On August 2, 2002, Gerling Gerling are an alternative guitar and electronic act from Australia. They formed in 1993, and are based in Sydney. History The band formed in 1993 with the line-up of Darren Cross (guitar, vocals), Presser (real name Paul Towner, drums) and Brad Herdson (guitar, vocals). Global Reinsurance Corporation of America ("Gerling"), one of the Company's current reinsurers, had its financial strength rating lowered by A.M. Best from A- (Excellent) to B+ (Very Good). The rating action by A.M. Best follows an announcement by Gerling of its intention to exit the U.S. non-life In the physical sciences, non-life is an umbrella term set to distinguish or characterize those inanimate chemical precursors found in the primeval soup of the early years of planetary evolution from which life, theoretically, evolved or came into existence. reinsurance market. Gerling has participated in the Company's excess of loss reinsurance programs in 2000, 2001 and 2002 at 15%, 20% and 20%, respectively. Gerling has also provided facultative facultative /fac·ul·ta·tive/ (fak´ul-ta?tiv) not obligatory; pertaining to the ability to adjust to particular circumstances or to assume a particular role. fac·ul·ta·tive adj. 1. reinsurance coverage for non-standard risks. It is presently expected that Gerling will fully meet its obligations to the Company. Management also anticipates that it will be able to successfully replace Gerling's participation at the next reinsurance renewal date, January 1, 2003. As of June 30, 2002, the aggregate amount of reinsurance recoverables from Gerling was $11.1 million. Net investment income was relatively flat for the three months ended June 30, 2002 compared to the three months ended June 30, 2001. Net investment income decreased 14% to $10.6 million for the six months ended June 30, 2002 from $12.3 million for the six months ended June 30, 2001. The decline in net investment income for the first six months of 2002 is primarily due to lower prevailing interest rates and reduced yields on fixed income investments, beginning in the second half of 2001. The Company also held more funds in invested cash during the first six months of 2002 as compared to 2001 in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of possible improvements in fixed income rates in the near term. The Company incurred net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. on holdings and sales of WorldCom bonds during the second quarter 2002 of approximately $1.9 million. These losses were offset by realized investment gains during the second quarter 2002 of approximately $1.6 million. Net realized investment losses for the second quarter 2002 were $0.3 million, while the Company reported net realized investment gains for the first six months of 2002 of approximately $0.1 million. Net losses and LAE increased 26% to $41.4 million for the three months ended June 30, 2002 from $32.7 million for the three months ended June 30, 2001. Net losses and LAE increased 20% to $75.2 million for the six months ended June 30, 2002 from $62.7 million for the six months ended June 30, 2001. The increase in net losses and LAE is consistent with the growth in business, taking into consideration expected loss trends and other pertinent PERTINENT, evidence. Those facts which tend to prove the allegations of the party offering them, are called pertinent; those which have no such tendency are called impertinent, 8 Toull. n. 22. By pertinent is also meant that which belongs. Willes, 319. considerations. Net losses and LAE on the Company's professional liability business increased 62% to $39.5 million for the three months ended June 30, 2002 from $24.4 million for the three months ended June 30, 2001. Net losses and LAE on the Company's professional liability business increased 56% to $71.9 million for the six months ended June 30, 2002 from $46.0 million for the six months ended June 30, 2001. The differences between these increases and the increases in total net losses and LAE are attributable to declines in group A&H and assumed reinsurance losses and LAE. The Company's loss ratios for the three months ended June 30, 2002 and 2001 were 87% and 94%, respectively. The Company's loss ratios for the six months ended June 30, 2002 and 2001 were 87% and 95%, respectively. A loss ratio is defined as the ratio of loss and LAE incurred to net premiums earned. The 8% decrease in the reported loss ratio for the six months ended June 30, 2002 is due to the Company's exit from its former group A&H business (3%), loss expense reduction and productivity (2%), changes in the mix of assumed reinsurance (1%), and expected improvements in underwriting results associated with improvements in pricing (2%). The liability for losses and LAE represents management's best estimate of the ultimate cost of all losses incurred but unpaid and considers historical loss experience, expected loss trends, the Company's loss retention levels and trends in the frequency and severity of claims. The process of establishing reserves for property and casualty claims is a complex and uncertain process, requiring significant reliance upon estimates. The Company's estimates are revised as additional experience and other data become available and are reviewed periodically or as other significant events occur that may affect reserves. Any such revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. could result in future changes in the estimates of losses or reinsurance recoverables and would be reflected in the Company's results of operations when the change occurs. For the purposes of setting aside reserves on risks insured during the current period, for which very little experience is present, a forecasted loss ratio is determined that is applied to earned premiums during the period. This forecasted loss ratio is judgmentally determined taking into account the results of the most recent actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin study performed, current pricing and underwriting, and expected loss and LAE trends and other pertinent considerations. In addition, management monitors and analyzes key loss and LAE indicators and trends throughout the year, including but not limited to paid losses, newly reported claims and incidents, closed claim activity, and other metrics in order to assess the reasonableness of its loss reserve estimates and the forecasted loss and LAE ratio being applied during the current period. Net paid losses and LAE on professional liability claims were $29.0 million for the second quarter 2002, up 36%, from $21.3 million for the second quarter of 2001. Net paid professional liability losses and LAE were $49.0 million for the first six months of 2002, up 6%, from $46.4 million for the first half of 2001. The settlement of three unusually large claims, two of which were related to one incident, accounted for $3.0 million of the second quarter settlements. An amount equal to 75% of these claims will be applied to the annual aggregate deductible or otherwise recovered under the Company's reinsurance programs. Newly reported professional liability claims and incidents were 861 and 1,643 for the second quarter and first six months of 2002, respectively, up significantly from the comparable numbers reported, 442 and 944, for the second quarter and first half of 2001, respectively. If trended against growth in average earned exposures, newly reported claims and incidents for the first six months of 2002 were about 18% to 22% higher than historic norms. The Company has analyzed this trend and determined that a significant portion of this increase, or approximately 140 claims and incidents, are accounted for in three of the larger counties in Florida, where higher claims and incidents are expected. Approximately 95 of these claims and incidents represent claims filed under corporate endorsements issued in connection with individual policies. The remainder of the increase, or about 50 claims and incidents, reflects growth in out-of-state business. Closed claims metrics, including the number of claims with indemnity payments, claims closed without indemnity payments and the relationship between these metrics appear to be on track with expectations for the second quarter and the first six months of 2002. Based on the analysis performed through the first six months of 2002, the Company believes its liability for loss and LAE continues to be adequate, and while the Company is not overly concerned by the increases in newly reported claims and incidents at this point, it will continue to closely follow this trend and others. Furthermore, given the inherent uncertainty in reserve estimates, there can be no assurance that the ultimate amount of actual losses will not exceed the related amounts currently estimated. Any such differences, either positive or negative, could have a material effect on the Company's results of operations and financial position. Other underwriting expenses increased 36% to $6.8 million for the three months ended June 30, 2002 from $5.0 million for the three months ended June 30, 2001. Other underwriting expenses increased 36% to $13.5 million for the six months ended June 30, 2002 from $9.9 million for the six months ended June 30, 2001. The increase in other underwriting expenses is primarily attributable to additional acquisition and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. associated with the growth in insurance business. In addition, First Professionals, the Company's largest insurance subsidiary, performed a study in 2001 of expenses incurred in the administration of claims and based on the results of this study decreased the amount of expenses allocated to LAE in 2002. Other expenses decreased 71% to $0.07 million for the three months ended June 30, 2002 from $0.2 million for the three months ended June 30, 2001. Other expenses decreased 71% to $0.1 million for the six months ended June 30, 2002 from $0.5 million for the six months ended June 30, 2001. The decline in other expenses is due to the Company's adoption of FAS 142. In accordance with FAS 142, the Company ceased the amortization of goodwill and indefinite lived intangible assets during the first quarter 2002. Income tax expense increased to $2.1 million for the three months ended June 30, 2002 from an income tax benefit of $0.5 million for the three months ended June 30, 2001. Income tax expense increased to $3.0 million for the six months ended June 30, 2002 from an income tax benefit of $0.4 million for the six months ended June 30, 2001. In late 2001, the Company hired external investment managers and began repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. portions of its investments in tax-exempt tax-ex·empt adj. 1. Not subject to taxation, as the capital or income of a philanthropic organization. 2. Producing interest that is exempt from income tax: tax-exempt bonds. n. municipal securities to investments in taxable securities. The increase in income tax expense is partially associated with an increase in investment income from taxable securities. In addition, the Company is nearing completion of the examination of its 1998 and 1999 federal income tax returns by the Internal Revenue Service and in connection therewith there·with adv. 1. With that, this, or it. 2. In addition to that. 3. Archaic Immediately thereafter. Adv. 1. , established a reserve in the second quarter of 2002 for potential tax contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , which accounted for the remainder of the increase in income tax expense. Management believes that its positions are meritorious mer·i·to·ri·ous adj. Deserving reward or praise; having merit. [Middle English, from Latin merit on these and other potential issues raised in the examination and that the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. made is appropriate; however, there can be no assurance that the Company will ultimately prevail on such matters. Reciprocal Management Segment The Company's reciprocal management segment is made up of Administrators for the Professions, Inc. ("AFP (1) (AppleTalk Filing Protocol) The file sharing protocol used in an AppleTalk network. In order for non-Apple networks to access data in an AppleShare server, their protocols must translate into the AFP language. See file sharing protocol. "), the Company's New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of subsidiary, and its two wholly owned subsidiaries, FPIC Intermediaries, Inc. ("Intermediaries") and Group Data Corporation ("Group Data"). AFP acts as administrator and attorney-in-fact attorney-in-fact n. someone specifically named by another through a written "power of attorney" to act for that person in the conduct of the appointer's business. for Physicians' Reciprocal Insurers ("PRI PRI: see Institutional Revolutionary party. (Primary Rate Interface) An ISDN service that provides 23 64 Kbps B (Bearer) channels and one 64 Kbps D (Data) channel (23B+D), which is equivalent to the 24 channels of a T1 line. "), the second largest medical professional liability insurer for physicians in the state of New York. Intermediaries acts as a reinsurance broker and intermediary Intermediary See: Financial intermediary intermediary See financial intermediary. in the placement of reinsurance. Group Data acts as a broker in the placement of annuities for structured settlements. The segment also includes the business of Professional Medical Administrators, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("PMA PMA (papillary-marginal-attached), n a system of epidemiologic scoring of periodontal disease devised by Schour and Massler in which the symbols denote the areas involved in gingival inflammation. PMA Progressive muscular atrophy "), a 70% owned subsidiary of the Company. PMA provides brokerage and administration services for professional liability insurance programs. Unaudited financial data for the Company's reciprocal management segment for the three months and six months ended June 30, 2002 and 2001 are summarized in the table below. Dollar amounts are in thousands.
Three Months
Ended
----------------------------
June Percentage June
30, 30,
2002 Change 2001
----------------------------
Claims administration and
management fees $ 5,143 12% $ 4,605
Net investment income 45 -63% 121
Commission income 782 20% 650
Other income 21 11% 19
Intersegment revenues 803 -16% 960
-------- --------
Total revenues 6,794 7% 6,355
-------- --------
Claims administration and
management expenses 4,592 16% 3,948
Other expenses 35 -94% 543
Intersegment expenses 426 284% 111
-------- --------
Total expenses 5,053 10% 4,602
-------- --------
Income from operations before
taxes and cumulative effect
of accounting change 1,741 -1% 1,753
Less: Income taxes 673 18% 568
-------- --------
Income before cumulative
effect of accounting change 1,068 -10% 1,185
-------- --------
Less: Cumulative effect
of accounting change -- 0% --
-------- --------
Net income (loss) $ 1,068 -10% $ 1,185
======== ========
Three Months
Ended
----------------------------
June Percentage June
30, 30,
2002 Change 2001
----------------------------
Reciprocal premiums written
under management $ 49,147 15% $ 42,921
======== ========
As of
----------------------------
June Percentage June
30, 30,
2002 Change 2001
----------------------------
Reciprocal statutory assets
under management $ 811,145 0% $ 809,828
======== ========
Professional liability policyholders
under management 10,364 20% 8,649
======== ========
Six Months Ended
---------------------------
June Percentage June
30, 30,
2002 Change 2001
---------------------------
Claims administration and
management fees $ 9,743 14% $ 8,577
Net investment income 85 -54% 183
Commission income 1,263 71% 740
Other income 41 -86% 291
Intersegment revenues 1,288 -23% 1,672
-------- -------
Total revenues 12,420 8% 11,463
-------- -------
Claims administration and
management expenses 8,659 9% 7,938
Other expenses 35 -97% 1,086
Intersegment expenses 798 259% 222
-------- -------
Total expenses 9,492 3% 9,246
-------- -------
Income from operations before
taxes and cumulative effect
of accounting change 2,928 32% 2,217
Less: Income taxes 1,119 42% 788
-------- -------
Income before cumulative
effect of accounting change 1,809 27% 1,429
-------- -------
Less: Cumulative effect
of accounting change 24,363 100% --
-------- -------
Net income (loss) $ (22,554) -1678% $ 1,429
======== =======
Six
Months
Ended
---------------------------
June Percentage June
30, 30,
2002 Change 2001
---------------------------
Reciprocal premiums written
under management $ 75,215 14% $ 66,245
======== =======
Claims administration and management fees increased 12% to $5.1 million for the three months ended June 30, 2002 from $4.6 million for the three months ended June 30, 2001. Claims administration and management fees increased 14% to $9.7 million for the six months ended June 30, 2002 from $8.6 million for the six months ended June 30, 2001. The claims administration and management fees earned by AFP are comprised entirely of management fees from PRI and the increase is due to the growth in premiums written by PRI. In accordance with the management agreement between AFP and PRI, AFP receives a management fee equal to 13% of PRI's direct premiums written, with an adjustment for expected return Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: premiums. As such, the Company's revenues and results of operations are financially sensitive to the revenues and financial condition of PRI. In addition, PRI, as an MPL insurer, is subject to many of the same types of risks as those of the Company's insurance subsidiaries. Commission income increased 20% to $0.8 million for the three months ended June 30, 2002 from $0.7 million for the three months ended June 30, 2001. Commission income increased 71% to $1.3 million for the six months ended June 30, 2002 from $0.7 million for the six months ended June 30, 2001. The increase in commission income is due to an increase in brokerage commission earned by Intermediaries for the placement of reinsurance. Other income for the three months ended June 30, 2002 was relatively flat when compared to the three months ended June 30, 2001. Other income decreased 86% to $0.04 million for the six months ended June 30, 2002 from $0.3 million for the six months ended June 30, 2001. Under the management agreement between AFP and PRI, AFP receives, in addition to management fees, an amount equal to 10% of PRI's statutory net income or is responsible for 10% of PRI's statutory net loss. The provisions of New York law addressing the sharing of net income or net loss contain certain ambiguities and interpretation issues. In considering such matters, PRI, AFP and the New York Department of Insurance have entered into discussions regarding the removal from the management agreement of this sharing by AFP of net income or net loss effective in 2002. Claims administration and management expenses increased 16% to $4.6 million for the three months ended June 30, 2002 from $3.9 million for the three months ended June 30, 2001. Claims administration and management expenses increased 9% to $8.7 million for the six months ended June 30, 2002 from $7.9 million for the six months ended June 30, 2001. The increase in claims administration and management expenses is due to an increase in operating expenses incurred to manage the growth in business at PRI. Other expenses decreased 94% to $0.04 million for the three months ended June 30, 2002 from $0.5 million for the three months ended June 30, 2001. Other expenses decreased 97% to $0.04 for the six months ended June 30, 2002 from $1.1 million for the six months ended June 30, 2001. The decline in other expenses is due to the effects of the Company's adoption of FAS 142. In accordance with FAS 142, the Company, including the reciprocal management segment, ceased the amortization of goodwill and indefinite lived intangible assets during the first quarter 2002. In connection with its adoption of FAS 142, the reciprocal management segment recorded a transitional impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $24.4 million, after-tax. In management's opinion, the non-cash transitional impairment charge, which represents the cumulative effect of the accounting change, primarily reflects certain intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and synergies, which are opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. in nature, carry a higher degree of uncertainty, and therefore were treated conservatively in the valuation required by FAS 142. Third Party Administration Segment The Company's third party administration ("TPA (Transient Program Area) See transient area. TPA - Transient Program Area ") segment is made up of Employers Mutual, Inc. ("EMI"). Unaudited financial data for the Company's TPA segment for the three months and six months ended June 30, 2002 and 2001 are summarized in the table below. Dollar amounts are in thousands.
Three Months
Ended
-------------------------
June Percentage June
30, 30,
2002 Change 2001
-------------------------
Claims administration and
management fees $ 3,148 3% $ 3,071
Net investment income 14 -67% 42
Commission income 376 -11% 421
Other income 4 -43% 7
Intersegment revenues 44 -82% 240
------ ------
Total revenues 3,586 -5% 3,781
------ ------
Claims administration and
management expenses 3,255 -12% 3,697
Other expenses -- -100% 163
Intersegment expenses 361 198% 121
------ ------
Total expenses 3,616 -9% 3,981
------ ------
Loss from operations before
taxes and cumulative effect
of accounting change (30) 85% (200)
Less: Income taxes 10 114% (73)
------ ------
Loss before cumulative
effect of accounting change (40) 69% (127)
------ ------
Less: Cumulative effect of
accounting change -- 0% --
------ ------
Net loss $ (40) 69% $ (127)
====== ======
Six Months Ended
-----------------------------
June Percentage June
30, 30,
2002 Change 2001
-----------------------------
Claims administration and
management fees $ 6,178 -2% $ 6,317
Net investment income 19 -83% 109
Commission income 766 -5% 804
Other income 8 -47% 15
Intersegment revenues 80 -85% 534
-------- --------
Total revenues 7,051 -9% 7,779
-------- --------
Claims administration and
management expenses 6,598 -9% 7,272
Other expenses -- -100% 344
Intersegment expenses 565 132% 244
-------- --------
Total expenses 7,163 -9% 7,860
-------- --------
Loss from operations before
taxes and cumulative effect
of accounting change (112) -38% (81)
Less: Income taxes 30 225% (24)
-------- --------
Loss before cumulative
effect of accounting change (142) -149% (57)
-------- --------
Less: Cumulative effect of
accounting change 5,215 100% --
-------- --------
Net loss $ (5,357) -9298% $ (57)
======== ========
As of As of
June Percentage June
30, 30,
2002 Change 2001
-----------------------------
Covered lives under
employee benefit programs 108,445 2% 105,943
======== ========
Covered lives under workers
compensation programs 37,700 6% 35,600
======== ========
Claims administration and management fees were $3.1 million for the three months ended June 30, 2002, which was relatively level with the comparable amount reported for the three months ended June 30, 2001. Claims administration and management fees decreased 2% to $6.2 million for the six months ended June 30, 2002 from $6.3 million for the six months ended June 30, 2001. The Company's results of operations for the period ended June 30, 2001 include the Company's Albuquerque Albuquerque (ăl`bəkûr'kē), city (1990 pop. 384,736), seat of Bernalillo co., W central N.Mex., on the upper Rio Grande; inc. 1890. division, which was disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of in December 2001. Excluding the effect of the Albuquerque TPA division, claims administration and management fees increased $0.8 million or 35% and $1.2 million or 24% for the three months and six months ended June 30, 2002, respectively, when compared with the three months and six months ended June 30, 2001. The increase in claims administration and management fees reflects growth in new business. Claims administration and management expenses decreased 12% to $3.3 million for the three months ended June 30, 2002 from $3.7 million for the three months ended June 30, 2001. Claims administration and management expenses decreased 9% to $6.6 million for the six months ended June 30, 2002 from $7.3 million for the six months ended June 30, 2001. The decline in claims administration and management expenses is due to the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of the Company's Albuquerque division. Excluding the effect of the Albuquerque TPA division, claims administration and management expenses increased $0.3 million or 10% and $0.9 million or 16% for the three months and six months ended June 30, 2002, respectively, when compared with the three months and six months ended June 30, 2001. The increase in claims administration and management expenses is due to additional expenses incurred as the result of new business. Other expenses decreased to $0 for the three months and six months ended June 30, 2002 from $0.2 million for the three months ended June 30, 2001 and $0.3 million for the six months ended June 30, 2001. The decline in other expenses is due to the Company's adoption of FAS 142. In accordance with FAS 142, the Company, including the TPA segment, ceased the amortization of goodwill and indefinite lived intangible assets during the first quarter 2002. In connection with the adoption of FAS 142, the TPA segment recorded a transitional impairment charge of $5.2 million, after-tax. In management's opinion, the non-cash transitional impairment charge, which represents the cumulative effect of the accounting change, primarily reflects changes in market conditions and an increase in competition in recent years in the markets served by the TPA segment. Corporate Profile FPIC Insurance Group, Inc., through its subsidiary companies, is a leading provider of professional liability insurance for physicians, dentists Dentists can refer to one of the following:
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