American Physicians Expands Buyback – Analyst Blog

In an effort to increase shareholder value, the board of directors of American Physicians Service Group (AMPH) has authorized an increase in stock buyback plan, the company said on Thursday. The board has expanded the buyback authorization by $5 million outstanding common shares. The current addition brings American Physicians’ total repurchase authorization to approximately $24 million.

 

The company’s original repurchase program worth $2 million was announced in August 17, 2004, and has been increased six times since then. The last increase of $4 million was authorized on March 11, 2009.

 

Since the announcement of the first share repurchase authorization in 2004, American Physicians has bought back over $18 million shares at an average price of about $17.88.

 

The company repurchased approximately 24,000 shares during the first quarter of 2010 at an average price below its book value of $23.04 at the end of the quarter. As of March 31, 2010, American Physicians had $2.374 million remaining under its previous share repurchase authorization.

 

The expansion of the repurchase authorization came along with American Physicians’ regular annual dividend announcement of 30 cents per share. This represents the company’s seventh consecutive annual dividend.

 

The industry’s statutory capital levels have plunged during the last few years due to recessionary conditions, leading to liquidity challenges for some companies. In this weak liquidity scenario, American Physicians’ strong balance sheet and high levels of income and cash flow position it strongly to add to shareholder value. Cash and cash equivalents at the end of first quarter 2010 were $19.3 million compared with $18.3 million at the end of fourth quarter 2009.

 

However, a soft pricing environment and competitive conditions continue to pose a challenge for American Physicians. Though we expect the company’s underwriting discipline and capital position to provide some relief, there is limited room for significant expansion in earnings in the foreseeable future.