JACKSONVILLE, Fla. -- FPIC Insurance Group, Inc. (“FPIC” or the “Company”) (NASDAQ: FPIC) reported for the third quarter of 2009:

• 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.

For the nine months ended September 30, 2009, FPIC reported:

• 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.

“We’re pleased with our third quarter results, which reflect our strong financial and operating positions. Our operating earnings and significant growth in book value per share reflect the overall profitability of our business, the performance of our investment portfolio and the efficacy of our capital management initiatives. We also continued to achieve excellent business retention levels and growth in our policyholder base,” said John R. Byers, President and Chief Executive Officer. “We expect to complete the acquisition of Advocate, MD during the fourth quarter and look forward to its operations becoming an important part of our combined organization.”

Other Unaudited Financial and Operational Highlights for Third Quarter 2009

(as compared to third quarter 2008 unless otherwise indicated)

• 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.

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