—	income from continuing operations of $17.7 million, or $1.75 per diluted common share, up from $7.4 million, or $0.69 per diluted common share, for first quarter 2006;
—	operating earnings of $17.7 million, or $1.74 per diluted common share, up from $7.3 million, or $0.68 per diluted common share, for first quarter 2006; and
—	net income of $17.7 million, or $1.75 per diluted common share, up from $9.5 million, or $0.88 per diluted common share, for first quarter 2006.

 

—	On February 20, 2007, A.M. Best upgraded the financial strength rating of our insurance subsidiaries to “A-” (Excellent) with a stable outlook from a financial strength rating of “B++” (Good) with a stable outlook.
—	During February 2007, our subsidiary, First Professionals, commuted, effective January 1, 2007, all assumed reinsurance treaties with PRI under which First Professionals acted as a reinsurer. As full settlement, First Professionals paid cash and delivered securities with an aggregate value of $87.7 million to PRI. The corresponding net liabilities of First Professionals on the date of the commutation totaled $103.4 million. An after-tax gain of $9.7 million was recognized on the transaction.
—	Operating earnings increased 143% (156% on a diluted per share basis). Excluding the impact of the PRI commutation, operating earnings increased 11% (16% on a diluted per share basis).

 

 

—	Income from continuing operations increased 140%. Excluding the impact of the PRI commutation, income from continuing operations increased 10% primarily as a result of higher net investment income and lower other expenses, partially offset by an increase in other underwriting expenses.
—	Net income increased 87%. Excluding the impact of the PRI commutation, net income declined 15% due to the prior year’s quarter including $2.1 million from discontinued operations.
—	Excluding the impact of the PRI commutation, net premiums written declined 21%, primarily as the result of a rate decrease we implemented at First Professionals effective December 1, 2006, a 4% decline in professional liability policyholders and a shift in business mix.
—	Policyholder retention in Florida was 94% and overall policyholder retention was 93% for the first quarter of 2007 compared to 92% retention in Florida and overall policyholder retention of 92% for the comparable period in 2006.
—	Our loss ratio was 42%, 69% excluding the impact of the PRI commutation, as compared to 73% for the first quarter of 2006. The decline in the loss ratio reflects the continuation of favorable loss trends, including a lower number of reported claims and incidents. Severity of claims continued to be within our expectations.
—	Our expense ratio was 19%. Excluding the impact of the PRI commutation, our expense ratio was 22%, compared to 17% for first quarter 2006. The higher expense ratio primarily reflects lower net premiums earned and the redeployment of corporate resources previously supporting our former insurance management segment to our insurance operations.
—	Portfolio growth and a higher overall yield contributed to a 14% increase in net investment income.
—	Shareholders’ equity increased 2%, and statutory surplus of our insurance subsidiaries increased 13% as of March 31, 2007 compared to the balances as of December 31, 2006.
—	We repurchased 323,709 shares of our common stock during the quarter at an average price of $40.80 per share; 280,816 shares remained available for repurchase under our current board-authorized stock repurchase program as of March 31, 2007.

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 extracontractual damages and losses in excess of policy limits;
viii)	Legislative, regulatory or consumer initiatives that may adversely affect our business, including initiatives seeking to lower premium rates;
ix)	The passage of additional or repeal of current tort reform measures, and the effect of such new measures and tort reform measures already in effect;
x)	Developments in reinsurance markets that could affect our reinsurance programs or our ability to collect reinsurance recoverables;
xi)	Developments in financial and securities markets that could affect our investment portfolio;
xii)	The loss of the services of any key members of senior management;
xiii)	Assessments imposed by state financial guarantee associations or other insurance regulatory bodies;

 

 

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)	Risks of impairment of assets, generally, including the risk of impairment or inability to continue to recognize goodwill, deferred acquisition costs and deferred tax assets; and
xvi)	Other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2006, including Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, filed with the SEC on March 9, 2007, and other factors discussed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed with the SEC on May 2, 2007.

 

FPIC Insurance Group, Inc. Investor Relations, Dana Mullins, 904-360-3612 225 Water Street, Suite 1400 Jacksonville, Florida 32202

For all your investor needs, FPIC is on the Internet at http://www.fpic.com or  e-mail us at ir@fpic.com.

 

 

(1)	Excludes goodwill of $10.8 million as of March 31, 2007 and December 31, 2006.
(2)	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” found later in this release.
(3)	Reflects a payment of $87.7 million as a result of the commutation of reinsurance treaties with PRI.

 

 

 

(1)	The 2007 calendar year loss ratio and underwriting expense ratio include the impact of the reinsurance commutation between First Professionals and PRI. Excluding the impact of the commutation, the calendar year loss ratio and underwriting expense ratio would be 69% and 22%, respectively.

 

 

(1)	For purposes of period over period comparisons, net paid losses and LAE do not take into account the commutation of the reinsurance treaty between First Professionals and PRI effective January 1, 2007, which would be a reduction of net paid losses and LAE.
(2)	The 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.
(3)	The CWIP Ratio was 29% and the CWIP Ratio, including incidents was 15% as of the four quarters ended with the first quarter of 2007 compared to 31% and 16%, respectively, as of the four quarters ended with the first quarter of 2006.