American Physicians In Line – Analyst Blog

American Physicians Service Group Inc.’s (AMPH) first quarter operating earnings of 66 cents per share is in line with the Zacks Consensus Estimate. The company had earned 79 cents in the year-ago quarter.

 

The year-over-year decline reflects an increase in expenses. However, the company experienced strong policyholder retention, decrease in pending claims and growth in premiums written.

 

On a GAAP basis, the company reported a net income of $4.5 million or 65 cents per share in the quarter, compared with a net income of $4.7 million or 67 cents per share in the prior-year period. Revenues were $20 million, up 4% year over year.

 

American Physicians’ solid operating performance has resulted in an increase in book value per share. The company reported a book value of $23.89 per share, up from $23.15 as of December 31, 2009.

 

American Physicians reported a 6% increase in gross premiums written from the year-ago period to $18.6 million. The company has achieved a 5% growth in the number of policyholders during the quarter. Retention level remained at 90% while pending claims decreased 6% from the prior quarter end.

 

American Physicians’ loss and loss adjustment expenses were $6.9 million, up from $6.1 million in the prior-year period. The company reported a drop in favorable claims development from the prior-year period. It experienced $4.7 million of favorable claims development in the quarter, compared with $5.7 million in the same period last year.

 

Though revenues were flat at $1.4 million compared with the prior-year quarter in the Financial Services segment, there was a 3.9% year-over-year increase in expenses in the segment, reflecting an increase in professional fees.

 

Total expenses of American Physicians increased to $13.2 million from $12.0 million in the year-ago quarter, primarily reflecting increase in general and administrative expenses and loss and loss adjustment expenses. Investment income was $2.5 million, down 2% year over year, driven by lower yields.

 

The soft pricing environment and the 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. Additionally, the company’s monoline nature subjects its financial condition and results of operations to the cyclical nature of the medical professional liability insurance market.