American Physicians Capital, Inc. Reports First Quarter 2009 Results

Business Wire, April 30, 2009

EAST LANSING, Mich. -- American Physicians Capital, Inc. (APCapital) (NASDAQ:ACAP) today announced net income of $10.1 million or $1.13 per diluted common share for the first quarter of 2009. This compares to net income of $11.4 million, or $1.13 per diluted common share for the first quarter of 2008. At March 31, 2009, APCapital’s book value per share was $28.95 based on 8,569,382 shares outstanding.

“APCapital continues to produce solid financial results and to return value to shareholders even in these turbulent times,” said President and Chief Executive Officer R. Kevin Clinton. “During the first quarter, APCapital repurchased 295,200 shares at an average cost of $41.72 per share and paid out a cash dividend of $.11 per common share.”

“Loss development trends continued to be stable, resulting in $8.2 million of positive reserve development in the first quarter. Reported claims were again low at 244 for the first quarter and severity remained relatively flat,” stated Clinton.

Clinton continued, “I am also pleased to report that on April 9, 2009 A.M. Best Co. affirmed the financial strength rating of A- (Excellent) our primary subsidiary, American Physicians Assurance Corporation, and maintained our outlook as stable. This rating is a reflection of continued positive operating performance and an effective strategic plan.”

Reaffirm Annual Guidance for 2009

“If the current trends in frequency, severity and pricing remain stable in our book of business through 2009, we believe our Company will again report operating earnings of at least $4.25 per diluted share in 2009,” said Clinton.

The guidance and related assumptions are subject to the risks and uncertainties outlined in the Company’s Forward-Looking Statements section of this press release.

[Table Omitted]

Direct premiums written were $30.1 million in the first quarter of 2009, down $3.6 million or 10.5% from the same period a year ago. The decline in direct premiums written for the quarter was primarily the result of rate reductions based on lower claims frequency trends and competitive pressures. We insured 8,806 physicians at March 31, 2009, down slightly from 9,068 insureds at year end 2008.

Net premiums earned in the first quarter of 2009 were down $2.3 million or 7.4% from the first quarter of 2008. The decline in net premiums earned was less than the declines in direct premiums written due to the lag in recognition of the effects of premium decreases.

The 2009 first quarter loss ratio was 53.3% with $8.2 million of positive development from prior accident years. For the three months ended March 31, 2008, the loss ratio was 51.2% with $8.4 million of positive prior year development. On an accident year basis, the loss ratio in the first quarter of 2009 was 81.3%, up from the 77.8% reported in the first quarter of 2008. The increases in the loss ratios reflect the impact of our recent rate decreases.

Claim frequency continued to be at historically low levels. The number of claims reported in the first quarter of 2009 was 244 similar to the 232 reported in the first quarter of 2008. Our open claim count was 1,429, down 14.5% from 1,672 at March 31, 2008 and was relatively flat from year-end 2008. Our average paid claims have remained relatively stable since 2002. We continue to be committed to careful reserving practices. Our average net case reserve per open claim stands at $179,000 at March 31, 2009, up from $148,600 from the same period last year.

The underwriting expense ratio increased slightly in the first quarter of 2009 to 24.3% from 22.2% in the first quarter of 2008. The increase in the underwriting expense ratio was the result of our lower premium rates and volume and the amortization of our new policy and claims information system. Other expenses were down in the first quarter of 2009 due to a $303,000 decline in interest on our trust preferred debt.

Investments

Investment income was $8.2 million in the first quarter of 2009, down from $10.0 million for the same period in 2008. The overall investment yield decreased from 4.7% in the first quarter 2008 to 4.0% in the first quarter of 2009. These decreases are primarily attributable to lower short-term interest rates and the increased allocation to tax-exempt securities in our investment portfolio. Our after-tax yield was 3.11%, down 32 basis points from the first quarter of 2008. Our bond portfolio continued to perform well with no impairments in the quarter. We have included a detailed listing of our fixed-income investment portfolio as of March 31, 2009 as a supplement to this press release.

Balance Sheet and Equity Information