##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
   Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission File Number:
    000-32057
  American Physicians Capital,
    Inc.
 (Exact name of registrant as
    specified in its charter)
   Michigan

38-3543910(State or other jurisdiction of
    
    incorporation or organization)

(IRS employer 
    identification number)    1301
    North Hagadorn Road, East Lansing, Michigan 48823
 (Address of principal executive
    offices, including zip code)
   Registrants telephone number, including area code:
 (517) 351-1150
  þ o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




---



##### 



TABLE OF
    CONTENTS
  PART I.  FINANCIAL
    INFORMATIONItem 1
.

Financial
    StatementsCondensed
    Consolidated Balance Sheets


3Condensed
    Consolidated Statements of Income


4Condensed
    Consolidated Statements of Shareholders Equity


5Condensed
    Consolidated Statements of Comprehensive Income


6Condensed
    Consolidated Statements of Cash Flows


7Notes to Condensed
    Consolidated Financial Statements


8Item 2
.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


11Item 3
.

Quantitative and
    Qualitative Disclosures About Market Risk


20Item 4
.

Controls and
    Procedures


21PART II.  OTHER
    INFORMATIONItem 2
.

Unregistered Sales
    of Equity Securities and Use of Proceeds


22Item 4
.

Submission of
    Matters to a Vote of Security Holders


22Item 6
.

Exhibits


22Signatures


23Exhibit Index


24Certification of Chief Executive OfficerCertification of Chief Financial OfficerSection 1350 Certification   2




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##### Table of Contents



PART I.  FINANCIAL
    INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 Condensed
    Consolidated Balance Sheets  March 31,


December 31,2007


2006(Unaudited)(In thousands, exceptshare data)ASSETSInvestments:Fixed-income securitiesAvailable-for-sale,
    at fair value

$
247,097


$
255,001Held-to-maturity,
    at amortized cost


501,668



505,572Other investments


6,351



6,476Total investments


755,116



767,049Cash and cash equivalents


118,969



108,227Premiums receivable


38,707



43,068Reinsurance recoverable


110,809



109,013Deferred federal income taxes


30,709



32,795Property and equipment, net of
    accumulated depreciation


9,774



9,775Other assets


25,111



25,888Total assets

$
1,089,195


$
1,095,815LIABILITIESUnpaid losses and loss adjustment
    expenses

$
688,015


$
688,031Unearned premiums


69,738



70,744Long-term debt


30,928



30,928Federal income taxes payable


2,631



189Other liabilities


32,036



37,113Total liabilities


823,348



827,005Commitments &
    ContingenciesShareholders
    EquityCommon stock, no par value,
    50,000,000 shares authorized: 11,196,024 and
    11,556,575 shares outstanding at March 31, 2007 and
    December 31, 2006, respectively






Additional
    paid-in-capital


27,600



41,106Retained earnings


233,440



222,935Accumulated other comprehensive
    income:Net unrealized appreciation on
    investments, net of deferred federal income taxes


4,807



4,769Total shareholders equity


265,847



268,810Total liabilities and
    shareholders equity

$
1,089,195


$
1,095,815    3




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 Condensed
    Consolidated Statements of Income  Three Months EndedMarch 31,2007


2006(Unaudited)(In thousands, except per share data)Net premiums written

$
34,894


$
38,965Change in net unearned premiums


138



(1,522
)Net premiums earned


35,032



37,443Investment income


11,177



11,103Net realized (losses) gains


(2
)


12Other income


213



477Total revenues and other income


46,420



49,035Losses and loss adjustment expenses


22,362



26,877Underwriting expenses


7,361



7,677Investment expenses


187



169Interest expense


773



716General and administrative expenses


332



363Other expenses


3



61Total expenses


31,018



35,863Income before federal income taxes


15,402



13,172Federal income tax expense


4,897



4,309Net income

$
10,505


$
8,863Net income  per common
    shareBasic

$
0.92


$
0.71Diluted

$
0.90


$
0.70    4




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 Condensed
    Consolidated Statements of Shareholders Equity  AccumulatedAdditional





OtherShares


Paid-in


Retained


ComprehensiveOutstanding


Capital


Earnings


Income


Total(Unaudited)(In thousands, except share data)Balance, December 31, 2006


11,556,575


$
41,106


$
222,935


$
4,769


$
268,810Comprehensive incomeNet income










10,505







10,505Other comprehensive income














38



38Total comprehensive income, net of
    taxes


















10,543Options exercised


15,050



143











143Shares tendered/netted in
    connection with option exercise


(3,201
)


(122
)










(122
)Excess tax benefits from
    share-based awards






305











305Fair value compensation of
    share-based awards






66











66Purchase and retirement of common
    stock


(372,400
)


(13,898
)










(13,898
)Balance, March 31, 2007


11,196,024


$
27,600


$
233,440


$
4,807


$
265,847   AccumulatedAdditional





OtherShares


Paid-in


Retained


ComprehensiveOutstanding(1)


Capital


Earnings


Income


Total(Unaudited)(In thousands, except share data)Balance, December 31, 2005


12,500,126


$
74,360


$
179,748


$
7,104


$
261,212Comprehensive incomeNet income










8,863







8,863Other comprehensive loss














(1,866
)


(1,866
)Total comprehensive income, net of
    taxes


















6,997Options exercised


53,550



516











516Shares tendered/netted in
    connection with option exercise


(8,289
)


(270
)










(270
)Excess tax benefits from
    share-based awards






510











510SFAS No. 123R adoption






(46
)










(46
)Fair value compensation of
    share-based awards






180











180Purchase and retirement of common
    stock


(191,250
)


(6,110
)










(6,110
)Forfeiture of restricted stock


(764
)














Balance, March 31, 2006


12,353,373


$
69,140


$
188,611


$
5,238


$
262,989     (1)
    
    Share amounts have been retroactively adjusted to reflect a
    three-for-two
    stock split effective November 1, 2006. See Note 2.   5




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 Condensed
    Consolidated Statements of Comprehensive Income  Three Months EndedMarch 31,2007


2006(Unaudited)(In thousands)Net income

$
10,505


$
8,863Other comprehensive income (loss):Unrealized appreciation
    (depreciation) on
    available-for-sale
    investment securities arising during the period


300



(2,586
)Amortization of net unrealized
    appreciation on
    held-to-maturity
    investment securities since the date of transfer from the
    available-for-sale
    category


(242
)


(285
)Other comprehensive income (loss)
    before tax


58



(2,871
)Deferred federal income tax
    expense (benefit)


20



(1,005
)Other comprehensive income (loss)


38



(1,866
)Comprehensive income

$
10,543


$
6,997    6




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 Condensed
    Consolidated Statements of Cash Flows  Three Months EndedMarch 31,2007


2006(Unaudited)(In thousands)Cash flows from (for) operating
    activitiesNet income

$
10,505


$
8,863Adjustments to reconcile net
    income to net cash from operating activities:Depreciation and amortization


681



621Net realized (gains) losses


2



(12
)Deferred federal income taxes


2,066



3,799Excess tax benefits from
    share-based awards


(305
)


(510
)Share-based compensation


66



180Loss (income) on equity method
    investee


1



(90
)Changes in:Unpaid loss and loss adjustment
    expenses


(16
)


(233
)Unearned premiums


(1,006
)


259Other assets and liabilities


1,298



(4,120
)Net cash from operating
    activities


13,292



8,757Cash flows from (for) investing
    activitiesPurchasesAvailable-for-sale 
    fixed income






(65,350
)Held-to-maturity 
    fixed income






(158,188
)Property and equipment


(268
)


(61
)Proceeds from sales and maturitiesAvailable-for-sale 
    fixed income


8,039



30,928Held-to-maturity 
    fixed income


3,408



8,330Other investments


125



125Property and equipment


4



5Deconsolidation of PIC-Florida






(2,941
)Pending securities transactions


32



5,248Net cash from (for) investing
    activities


11,340



(181,904
)Cash flows from (for) financing
    activitiesCommon stock repurchased


(13,898
)


(6,110
)Federal income tax effect of share
    based awards


305



510Payable for shares repurchased


(318
)


Proceeds from stock options
    exercised


21



246Net cash for financing
    activities


(13,890
)


(5,354
)Net increase (decrease) in cash
    and cash equivalents


10,742



(178,501
)Cash and cash equivalents,
    beginning of period


108,227



272,988Cash and cash equivalents, end
    of period

$
118,969


$
94,487    7




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes
    to Condensed Consolidated Financial Statements 
    (Unaudited)
  1.
    Significant
    Accounting Policies  Basis
    of Consolidation and Reporting
    Form 10-Q Rule 10-01 Regulation S-X Form 10-Q
  Form 10-K
  Use of
    Estimates
      Nature
    of Business
    Reclassification
    2.
    Stock
    Split  three-for-two
 8




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    3.
    Effects
    of New Accounting Pronouncements       9




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
   4.
    Income
    Per Share    Three Months EndedMarch 31,2007


2006(In thousands, except per share data)Numerator for basic and diluted
    income per common share:Net income

$
10,505


$
8,863Denominator:Denominator for basic income per
    common share  weighted average shares outstanding


11,435



12,398Effect of dilutive stock options
    and awards


213



284Denominator for diluted income per
    common share  adjusted weighted average shares
    outstanding


11,648



12,682Net income 
    basic

$
0.92


$
0.71Net income 
    diluted

$
0.90


$
0.70    10




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
    Form 10-K
  
    Increased competition could adversely affect our ability to sell
    our products at premium rates we deem adequate, which may result
    in a decrease in premium volume.
    Our reserves for unpaid losses and loss adjustment expenses are
    based on estimates that may prove to be inadequate to cover our
    losses.
    An interruption or change in current marketing and agency
    relationships could reduce the amount of premium we are able to
    write.
    If we are unable to obtain or collect on ceded reinsurance, our
    results of operations and financial condition may be adversely
    affected.
    Our geographic concentration in certain Midwestern states and
    New Mexico ties our performance to the business, economic,
    regulatory and legislative conditions in those states.
    A downgrade in the A.M. Best Company rating of our primary
    insurance subsidiaries could reduce the amount of business we
    are able to write.
    Changes in interest rates could adversely impact our results of
    operation, cash flows and financial condition.
    The unpredictability of court decisions could have a material
    impact on our operations.
    Our business could be adversely affected by the loss of one or
    more key employees.
    The insurance industry is subject to regulatory oversight that
    may impact the manner in which we operate our business, our
    ability to obtain future premium rate increases, the type and
    amount of our investments, the levels of capital and surplus
    deemed adequate to protect policyholder interests, or the
    ability of our insurance subsidiaries to pay dividends to the
    holding company.
    Our status as an insurance holding company with no direct
    operations could adversely affect our ability to meet our debt
    obligations and fund future share repurchases.
    Legislative or judicial changes in the tort system may have
    adverse or unintended consequences that could materially and
    adversely affect our results of operations and financial
    condition.
    Our exit from various markets and lines of business may prove
    more costly than originally anticipated. 11




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##### Table of Contents




    Applicable law and various provisions in our articles and bylaws
    may prevent and discourage unsolicited attempts to acquire
    APCapital that you may believe are in your best interests or
    that might result in a substantial profit to you.    Overview
    of the Companys Operations
      three-for-two
  Critical
    Accounting Policies
    Form 10-K
  Description
    of Ratios Analyzed
    GAAP Ratios
    and Other GAAP Financial Measures
   12




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##### Table of Contents



Accident
    Year Loss Ratio
    Results
    of Operations  Three Months Ended March 31, 2007
    Compared to Three Months Ended March 31, 2006
      For the Three Months Ended March 31,Change2007


2006


Dollar


Percentage(Dollars in thousands)Direct premiums written

$
36,302


$
41,521


$
(5,219
)


(12.6
)%Net premiums written

$
34,894


$
38,965


$
(4,071
)


(10.4
)%Net earned premium

$
35,032


$
37,443


$
(2,411
)


(6.4
)%Losses and loss adjustment expensesCurrent year losses


26,627



28,985



(2,358
)


(8.1
)%Prior year losses


(4,265
)


(2,108
)


(2,157
)


102.3
%Total


22,362



26,877



(4,515
)


(16.8
)%Underwriting expenses


7,361



7,677



(316
)


(4.1
)%Total underwriting gain


5,309



2,889



2,420



83.8
%Other revenue (expense) itemsInvestment income


11,177



11,103



74



0.7
%Net realized (losses) gains


(2
)


12



(14
)


(116.7
)%Other income


213



477



(264
)


(55.3
)%Other expenses(1)


(1,295
)


(1,309
)


14



(1.1
)%Total other revenue and expense
    items


10,093



10,283



(190
)


(1.8
)%Income before federal income taxes


15,402



13,172



2,230



16.9
%Federal income tax expense


4,897



4,309



588



13.6
%Net income

$
10,505


$
8,863


$
1,642



18.5
%Loss Ratio:Accident year


76.0
%


77.4
%






1.4
%Prior years


(12.2
)%


(5.6
)%






6.6
%Calendar year


63.8
%


71.8
%






8.0
%Underwriting expense ratio


21.0
%


20.5
%






(0.5
)%Combined ratio


84.8
%


92.3
%






7.5
%     (1)
    
    Other expenses includes investment expenses, interest expense,
    general and administrative expenses and other expenses as
    reported in the unaudited Condensed Consolidated Statements of
    Income included elsewhere in this report. 13




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##### Table of Contents



For the Three Months Ended March 31,Change2007


2006


Dollar


Percentage(Dollars in thousands)Direct premiums writtenMichigan

$
9,263


$
8,390


$
873



10.4
%Illinois


9,840



15,060



(5,220
)


(34.7
)%Ohio


8,365



8,993



(628
)


(7.0
)%New Mexico


5,454



5,304



150



2.8
%Kentucky


2,733



3,008



(275
)


(9.1
)%Other


647



775



(128
)


(16.5
)%Subtotal


36,302



41,530



(5,228
)


(12.6
)%Exited lines of business






(9
)


9



(100.0
)%Total

$
36,302


$
41,521


$
(5,219
)


(12.6
)%          14




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##### Table of Contents



For the Three Months Ended March 31,Change2007


2006


Dollar


Percentage(Dollars in thousands)Other expensesInvestment expenses


187



169



18



10.7
%Interest expense


773



716



57



8.0
%General and administrative expenses


332



363



(31
)


(8.5
)%Other


3



61



(58
)


(95.1
)%Total


1,295



1,309



(14
)


(1.1
)%   Form 10-K
 15




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##### Table of Contents



Liquidity
    and Capital Resources
          available-for-sale held-to-maturity held-to-maturity,
   16




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##### Table of Contents



Financial
    Condition
    Statutory
    Capital and Surplus
    Reserves
    for Unpaid Losses and Loss Adjustment Expenses
      March 31, 2007 versus


March 31, 2007 versusMarch 31,


December 31,


March 31,


December 31, 2006


March 31, 20062007


2006


2006


Change


% Change


Change


% Change(In thousands, except claim and per claim data)Net case reserves

$
305,420


$
311,142


$
358,199


$
(5,722
)


(1.8
)%

$
(52,779
)


(14.7
)%Number of open claims


2,200



2,256



2,976



(56
)


(2.5
)%


(776
)


(26.1
)%Average net case reserve per open
    claim

$
138,827


$
137,918


$
120,363


$
909



0.7
%

$
18,464



15.3
%Net IBNR reserves

$
247,812


$
241,069


$
187,549


$
6,743



2.8
%

$
60,263



32.1
%Total net reserves

$
553,232


$
552,211


$
545,748


$
1,021



0.2
%

$
7,484



1.4
%    17




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##### Table of Contents



Three Months Ended


Year EndedMarch 31, 2007


December 31, 2006Beginning balance, gross

$
688,031


$
689,857Less, reinsurance recoverables


107,965



107,692Net reserves, beginning balance


580,066



582,165Deconsolidation of PIC-FL






(2,418
)Incurred related toCurrent year


26,627



113,338Prior years


(4,265
)


(12,880
)22,362



100,458Paid related toCurrent year


275



3,168Prior years


23,165



96,97123,440



100,139Net reserves, ending balance


578,988



580,066Plus, reinsurance recoverables


109,027



107,965Ending balance, gross

$
688,015


$
688,031Development as a % of beginning
    net reserves


(0.7
)%


(2.2
)%  18




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##### Table of Contents



Other
    Significant Balance Sheet Items
  held-to-maturity available-for-sale.
        additional-paid-in-capital
  Contractual
    Obligations and Off-Balance Sheet Arrangements
  Form 10-K Form 10-Q,
   19




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##### Table of Contents



Effects
    of New Accounting Pronouncements
    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  General
    available-for-sale held-to-maturity,
    Qualitative
    Information About Market Risk
  available-for-sale held-to-maturity,
  held-to-maturity held-to-maturity
 20




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##### Table of Contents



Quantitative
    Information About Market Risk
  available-for-sale available-for-sale
  December 31,March 31, 2007


2006Portfolio


Change in


Modified


Portfolio


Change in


ModifiedChange in Rates

Value


Value


Duration


Value


Value


Duration(Dollars in thousands)


(Dollars in thousands)+2%

$
232,954


$
(14,143
)


2.78


$
239,943


$
(15,058
)


2.88+1%


239,681



(7,416
)


2.83



247,111



(7,890
)


2.890


247,097







3.10



255,001







3.16-1%


255,095



7,998



3.18



263,350



8,349



3.23-2%


263,563



16,466



3.27



272,152



17,151



3.33   Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Rule 13a-15(b).
  Changes
    in Internal Control Over Financial Reporting
   21




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##### Table of Contents



PART II.
    OTHER INFORMATION  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds.    Total NumberTotal





of Shares


Maximum Number (or Approximate DollarNumber of


Average


Purchased as


Value) of Shares That May Yet BeShares


Price Paid


Part of Publicly


Purchased Under the Plans or ProgramsPurchased


per Share


Announced Plans


Discretionary Plan(a)


Rule 10b5-1
    Plan(b)For the month ended
    January 31, 2007


49,000


$
37.88



49,000



289,804


$
36,499,457For the month ended
    February 28, 2007


106,000


$
37.77



106,000



228,804


$
34,780,868For the month ended March 31,
    2007


217,400


$
36.98



217,400



70,204


$
32,584,499For the three months ended
    March 31, 2007


372,400


$
37.32



372,400



70,204


$
32,584,499     (a)
    
    In November 2005, the Board of Directors authorized the purchase
    of an additional five percent of the Companys outstanding
    common shares, which represents approximately
    637,500 shares, at the discretion of management as part of
    a repurchase program that began March 30, 2001 (referred to
    as the discretionary plan). This most recent
    authorization brings the total number of shares authorized to be
    repurchased under the discretionary plan to 6,060,659. The
    timing of the purchases and the number of shares to be bought at
    any time depend on market conditions and the Companys
    capital resources and requirements. The discretionary plan has
    no expiration date and may be terminated at any time.(b)
    
    On October 27, 2006, the Companys Board of Directors
    adopted a new stock repurchase plan for 2007 under
    Rule 10b5-1
    and authorized an additional share repurchase of
    $32 million of its common shares. In addition, the Board
    authorized the rollover into the 2007 plan of any unused dollars
    allocated to the 2006 10b5-1 plan, which equaled
    $6.4 million at December 31, 2006. The
    Rule 10b5-1
    plan share repurchases are made pursuant to a formula in the
    plan and are expected to continue until the entire
    authorizations are utilized, subject to conditions specified in
    the plan, but not later than December 31, 2007. The Company
    may terminate the plan at any time.  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Votes


VotesNominee

For


WithheldStephen H. Haynes, M.D.


10,553,098



201,222Mitchell A. Rinek, M.D.


10,553,098



201,222   BrokerFor


Against


Abstain


Non-VotesProposal to ratify appointment of
    BDO Seidman,
    LLP as the Companys independent registered
    public accountants


10,747,164



4,282



2,874



   Item 6.
    Exhibits  Exhibits.
   22




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##### Table of Contents



SIGNATURES      By:
    /s/  R.
    Kevin Clinton     By:
    /s/  Frank
    H. Freund       23




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##### Table of Contents



EXHIBIT INDEX  Exhibit No.

Exhibit Description10
.48

Summary of Incentive Compensation
    Plan as of March 2007 (filed as an exhibit to the Current Report
    on
    Form 8-K
    filed on March 14, 2007 and incorporated herein by
    reference).31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.31
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934.32


Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350 and
    Rule 13a-14(b)
    under the Securities Exchange Act of 1934.  24