—		operating earnings(1) of $8.1 million, or $1.13 per diluted common share, as compared to $10.2 million, or $1.20 per diluted common share, for the third quarter of 2008;
	—		income from continuing operations of $8.5 million, or $1.18 per diluted common share, as compared to $6.5 million, or $0.76 per diluted common share, for the third quarter of 2008; and
	—		net income of $8.9 million, or $1.24 per diluted common share, as compared to $6.5 million, or $0.76 per diluted common share, for the third quarter of 2008.

 

	—		operating earnings of $24.7 million, or $3.30 per diluted common share, as compared to $31.4 million, or $3.55 per diluted common share, for the first nine months of 2008;
	—		income from continuing operations of $26.0 million, or $3.48 per diluted common share, as compared to $27.6 million, or $3.12 per diluted common share, for the first nine months of 2008; and
	—		net income of $26.5 million, or $3.53 per diluted common share, as compared to $27.6 million, or $3.12 per diluted common share, for the first nine months of 2008.

 

(1)

To supplement the consolidated financial information presented herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we report operating earnings and certain other non-GAAP financial measures widely used in the insurance industry to assist in evaluating financial performance over time.  For additional information and reconciliation to GAAP results, see the section entitled Non-GAAP Financial Measures, found later in this press release.

 

 

	—		Our policyholder retention was 95 percent on a national basis and 96 percent in Florida as of September 30, 2009 compared to 96 percent national retention and Florida retention as of September 30, 2008.
	—		Our professional liability policyholders, excluding alternative risk arrangements, increased 4 percent to 14,254 policyholders as of September 30, 2009 from 13,691 policyholders as of September 30, 2008.
	—		During the quarter, we recognized $5.0 million in favorable prior year reserve development compared to $4.0 million in third quarter 2008.  The resulting calendar year loss ratio was 59.1 percent for the third quarter 2009 compared to 58.6 percent for 2008.
	—		Consolidated revenues were 5 percent higher primarily due to net realized investment gains compared to net realized investment losses in the third quarter 2008, partially offset by a decline in net premiums earned as a result of lower Florida premium rates, as well as lower net investment income.
	—		Lower rates in our Florida market, offset to some extent by growth in professional liability policyholders, primarily resulted in a 9 percent decline in net premiums written.
	—		Net investment income was 12 percent lower for the third quarter of 2009 as a result of a decrease in average invested assets, primarily as a result of common share repurchases under our stock repurchase program, and a lower yield on cash and cash equivalents partially offset by a slight increase in the average yield on fixed income securities.
	—		We realized net investment gains of $0.4 million during the third quarter of 2009 compared to net investment losses of $5.4 million during the comparable period in 2008.
	—		Our expense ratio was 26.2 percent compared to 21.7 percent for the third quarter 2008.  The higher ratio was primarily due to lower net premiums earned, as well as a lesser impact from the recovery of previous insurance guaranty fund assessments.
	—		Book value per common share grew 21 percent from December 31, 2008 to $40.45 as of September 30, 2009.  The statutory surplus of our insurance subsidiaries as of September 30, 2009 was $241.9 million and the ratio of net premiums written to surplus was 0.6 to 1.
	—		On a trade date basis, we repurchased 374,596 shares of our common stock during the three months ended September 30, 2009 at an average price of $32.73 per share.  Through October 30, 2009, we have repurchased an additional 37,500 shares of our common stock at an average price of $36.19 per share, and had remaining authority from our Board of Directors to repurchase an additional 346,874 shares as of that date.
	—		On July 30, 2009, we announced a definitive agreement to acquire Advocate, MD Financial Group Inc. ("Advocate, MD"), which through its subsidiary is the fourth largest provider of medical professional liability insurance in Texas.  The transaction has received the approval of the shareholders of Advocate, MD and we recently received approval for the transaction from the Texas Insurance Commissioner.  The transaction is expected to close during the fourth quarter.

 

 

 

 

 

 

 

 

 

 

i)	The effect of negative developments and cyclical changes in the medical professional liability insurance business;
ii)	The effects of competition, including competition for agents to place insurance, of physicians electing to self-insure or to practice without insurance coverage, and of related trends and associated pricing pressures and developments;
iii)	Business risks that result from our size, products, and geographic concentration;
iv)	The risks and uncertainties involved in determining the rates we charge for our products and services, as well as these rates being subject to or mandated by legal requirements and regulatory approval;
v)	The actual amount of our new and renewal business;

vi)	The uncertainties involved in the loss reserving process, including the possible occurrence of insured losses with a frequency or severity exceeding our estimates;
vii)	The unpredictability of court decisions and our exposure to claims for extra contractual damages and losses in excess of policy limits;
viii)	Developments in financial and securities markets that could affect our investment portfolio;
ix)	Legislative, regulatory or consumer initiatives that may adversely affect our business, including initiatives seeking to lower premium rates;
x)	The passage of additional or repeal of current tort reform measures, and the effect of such measures;
xi)	Assessments imposed by state financial guaranty associations or other insurance regulatory bodies;
xii)	Developments in reinsurance markets that could affect our reinsurance programs or our ability to collect reinsurance recoverables;
xiii)	The loss of the services of any key members of senior management;
xiv)	Changes in our financial ratings resulting from one or more of these uncertainties or other factors and the potential impact on our agents’ ability to place insurance business on our behalf;
xv)	The completion of the acquisition of Advocate, MD; and
xvi)	Other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, including Item 1A.  Risk Factors and Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations, filed with the Securities and Exchange Commission (“SEC”) on March 4, 2009, and other factors discussed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 filed with the SEC on November 4, 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)	For additional information regarding the use of non-GAAP financial measures, see the discussion provided earlier in this release captioned “Non-GAAP Financial Measures” and the “Reconciliation of Non-GAAP Measures to the Nearest Comparable GAAP Measures” provided later in this release.
(2)	Excludes the impact of an accumulated other comprehensive gain associated with investments of $13.9 million as of September 30, 2009 and the impact of an accumulated other comprehensive loss associated with investments of $7.7 million as of December 31, 2008.
(3)	Excludes goodwill of $10.8 million as of September 30, 2009 and December 31, 2008.

 

 

 

 

 

 

(1)	Includes $1.5 million and $3.5 million of premiums associated with alternative risk arrangements for the three and nine months ended September 30, 2009, respectively, compared to $0.6 million and $2.3 million for the comparable periods in 2008, respectively.  Management fees for such arrangements are included in other income.

 

 

 

(1)	The claims with indemnity payment (“CWIP”) ratio is defined as the ratio of total professional liability claims with indemnity payment to the sum of total professional liability claims with indemnity payment and total professional liability claims closed without indemnity payment.