##### 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 1934
 For the quarterly period ended June 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-32057
 American Physicians Capital, Inc.
  Michigan
(State or other jurisdiction of 
incorporation or organization)
    
    38-3543910
(IRS employer
identification number)
     þ o
  o o
  Large accelerated filer o
    
    Accelerated Filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



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
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    40PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 6. Exhibits
    
    
    44Signatures
    
    
    45Exhibit Index
    
    
    46EX-10.59EX-31.1EX-31.2EX-32.1EX-99.1
  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
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)AssetsInvestments:Fixed-income securitiesAvailable-for-sale, at fair value
    
    $
    263,083
    
    
    $
    205,073Held-to-maturity, at amortized cost
    
    
    328,728
    
    
    
    368,851Other investments
    
    
    57,193
    
    
    
    53,303Total investments
    
    
    649,004
    
    
    
    627,227Cash and cash equivalents
    
    
    140,651
    
    
    
    172,162Premiums receivable
    
    
    26,556
    
    
    
    29,662Reinsurance recoverable
    
    
    63,754
    
    
    
    63,283Deferred federal income taxes
    
    
    16,233
    
    
    
    17,328Property and equipment, net of accumulated depreciation
    
    
    7,848
    
    
    
    8,090Other assets
    
    
    26,114
    
    
    
    26,762Total assets
    
    $
    930,160
    
    
    $
    944,514LiabilitiesUnpaid losses and loss adjustment expenses
    
    $
    596,077
    
    
    $
    608,807Unearned premiums
    
    
    45,677
    
    
    
    50,670Long-term debt
    
    
    25,928
    
    
    
    25,928Other liabilities
    
    
    27,148
    
    
    
    22,069Total liabilities
    
    
    694,830
    
    
    
    707,474Commitments & ContingenciesShareholders EquityCommon stock, no par value, 50,000,000 shares
authorized: 9,339,087 and 9,986,187 shares outstanding
at June 30, 2010 and December 31, 2009, respectively
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    
    
    
    
    Retained earnings
    
    
    223,992
    
    
    
    226,952Accumulated other comprehensive income:Net unrealized appreciation on investments,
net of deferred federal income taxes
    
    
    11,338
    
    
    
    10,088Total shareholders equity
    
    
    235,330
    
    
    
    237,040Total liabilities and shareholders equity
    
    $
    930,160
    
    
    $
    944,514
  3




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AMERICAN PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net premiums written
    
    $
    25,095
    
    
    $
    23,389
    
    
    $
    51,130
    
    
    $
    52,109Change in net unearned premiums
    
    
    4,293
    
    
    
    4,993
    
    
    
    4,953
    
    
    
    5,579Net premiums earned
    
    
    29,388
    
    
    
    28,382
    
    
    
    56,083
    
    
    
    57,688Investment income
    
    
    6,298
    
    
    
    8,028
    
    
    
    12,664
    
    
    
    16,218Net realized gains
    
    
    
    
    
    
    
    
    
    
    326
    
    
    
    Other income
    
    
    282
    
    
    
    212
    
    
    
    531
    
    
    
    435Total revenues and other income
    
    
    35,968
    
    
    
    36,622
    
    
    
    69,604
    
    
    
    74,341Losses and loss adjustment expenses
    
    
    14,652
    
    
    
    13,113
    
    
    
    28,444
    
    
    
    28,725Underwriting expenses
    
    
    7,042
    
    
    
    7,319
    
    
    
    13,669
    
    
    
    14,451Investment expenses
    
    
    261
    
    
    
    215
    
    
    
    483
    
    
    
    539Interest expense
    
    
    305
    
    
    
    344
    
    
    
    602
    
    
    
    729General and administrative expenses
    
    
    1,138
    
    
    
    327
    
    
    
    1,457
    
    
    
    590Other expenses
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    (40
    )Total expenses
    
    
    23,398
    
    
    
    21,278
    
    
    
    44,655
    
    
    
    44,994Income before federal income taxes
    
    
    12,570
    
    
    
    15,344
    
    
    
    24,949
    
    
    
    29,347Federal income tax expense
    
    
    3,138
    
    
    
    4,354
    
    
    
    6,566
    
    
    
    8,270Net income
    
    $
    9,432
    
    
    $
    10,990
    
    
    $
    18,383
    
    
    $
    21,077Net income  per common shareBasic
    
    $
    1.00
    
    
    $
    0.99
    
    
    $
    1.91
    
    
    $
    1.85Diluted
    
    $
    0.98
    
    
    $
    0.97
    
    
    $
    1.88
    
    
    $
    1.82
  4




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AMERICAN PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Shareholders Equity (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherShares
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveOutstanding
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance, December 31, 2009
    
    
    9,986,187
    
    
    $
    
    
    
    $
    226,952
    
    
    $
    10,088
    
    
    $
    237,040Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    18,383
    
    
    
    
    
    
    
    18,383Other comprehensive income, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    1,250Total comprehensive income, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,633Quarterly cash dividends to
shareholders, $0.09 per share
    
    
    
    
    
    
    
    
    
    
    (1,723
    )
    
    
    
    
    
    
    (1,723
    )Purchase and retirement of common stock
    
    
    (647,100
    )
    
    
    
    
    
    
    (19,620
    )
    
    
    
    
    
    
    (19,620
    )Balance, June 30, 2010
    
    
    9,339,087
    
    
    $
    
    
    
    $
    223,992
    
    
    $
    11,338
    
    
    $
    235,330
 AccumulatedAdditional
    
    
    
    
    
    
    OtherShares
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveOutstanding
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance, December 31, 2008
    
    
    11,749,069
    
    
    $
    
    
    
    $
    246,173
    
    
    $
    7,864
    
    
    $
    254,037Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    21,077
    
    
    
    
    
    
    
    21,077Other comprehensive income, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    74Total comprehensive income, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,151Options exercised
    
    
    178,647
    
    
    
    2,056
    
    
    
    
    
    
    
    
    
    
    
    2,056Shares tendered/netted in connection
with option exercise
    
    
    (99,733
    )
    
    
    (3,384
    )
    
    
    
    
    
    
    
    
    
    
    (3,384
    )Quarterly cash dividends to
shareholders, $0.0825 per share
    
    
    
    
    
    
    
    
    
    
    (1,858
    )
    
    
    
    
    
    
    (1,858
    )Excess tax benefits from share-based
awards
    
    
    
    
    
    
    1,380
    
    
    
    
    
    
    
    
    
    
    
    1,380Purchase and retirement of common stock
    
    
    (1,090,000
    )
    
    
    (52
    )
    
    
    (33,121
    )
    
    
    
    
    
    
    (33,173
    )Balance, June 30, 2009
    
    
    10,737,983
    
    
    $
    
    
    
    $
    232,271
    
    
    $
    7,938
    
    
    $
    240,209
  5




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American
Physicians Capital, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    9,432
    
    
    $
    10,990
    
    
    $
    18,383
    
    
    $
    21,077Other comprehensive income:Unrealized appreciation on available-for-sale investment
securities arising during the period
    
    
    1,454
    
    
    
    4,452
    
    
    
    2,330
    
    
    
    673Amortization of net unrealized appreciation on held-to-maturity
investment securities related to their transfer from the
available-for-sale category
    
    
    (90
    )
    
    
    (256
    )
    
    
    (407
    )
    
    
    (559
    )Other comprehensive income before tax
    
    
    1,364
    
    
    
    4,196
    
    
    
    1,923
    
    
    
    114Deferred federal income tax expense
    
    
    478
    
    
    
    1,469
    
    
    
    673
    
    
    
    40Other comprehensive income
    
    
    886
    
    
    
    2,727
    
    
    
    1,250
    
    
    
    74Comprehensive income
    
    $
    10,318
    
    
    $
    13,717
    
    
    $
    19,633
    
    
    $
    21,151
  6




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##### Table of Contents



American
Physicians Capital, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from (for) operating activitiesNet income
    
    $
    18,383
    
    
    $
    21,077Adjustments to reconcile net income to net cash
from operating activities:Depreciation and amortization
    
    
    3,336
    
    
    
    2,644Net realized gains
    
    
    (326
    )
    
    
    Deferred federal income taxes
    
    
    422
    
    
    
    997Current federal income taxes
    
    
    (657
    )
    
    
    812Excess tax benefits from share-based awards
    
    
    
    
    
    
    (1,380
    )(Income) loss on equity method investees
    
    
    (100
    )
    
    
    71Changes in:Unpaid loss and loss adjustment expenses
    
    
    (12,730
    )
    
    
    (8,599
    )Unearned premiums
    
    
    (4,993
    )
    
    
    (5,607
    )Other assets and liabilities
    
    
    (624
    )
    
    
    7,232Net cash from operating activities
    
    
    2,711
    
    
    
    17,247Cash flows from (for) investing activitiesPurchasesAvailable-for-sale  fixed income
    
    
    (72,374
    )
    
    
    (12,988
    )Held-to-maturity  fixed income
    
    
    (23,004
    )
    
    
    Other investments
    
    
    (2,097
    )
    
    
    (1,437
    )Property and equipment
    
    
    (101
    )
    
    
    (132
    )Proceeds from sales and maturitiesAvailable-for-sale  fixed income
    
    
    14,019
    
    
    
    452Held-to-maturity  fixed income
    
    
    61,876
    
    
    
    69,013Other
    
    
    8,907
    
    
    
    Net cash (for) from investing activities
    
    
    (12,774
    )
    
    
    54,908Cash flows from (for) financing activitiesCommon stock repurchased
    
    
    (19,620
    )
    
    
    (33,173
    )Excess tax benefits from share-based awards
    
    
    
    
    
    
    1,380Taxes paid in connection with net option exercise
    
    
    
    
    
    
    (1,448
    )Change in payable for shares repurchased
    
    
    (105
    )
    
    
    266Cash dividends paid
    
    
    (1,723
    )
    
    
    (1,858
    )Proceeds from stock options exercised
    
    
    
    
    
    
    120Net cash for financing activities
    
    
    (21,448
    )
    
    
    (34,713
    )Net (decrease) increase in cash and cash equivalents
    
    
    (31,511
    )
    
    
    37,442Cash and cash equivalents, beginning of period
    
    
    172,162
    
    
    
    101,637Cash and cash equivalents, end of period
    
    $
    140,651
    
    
    
    139,079
  7




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American Physicians Capital, Inc. and Subsidiaries
 
 Notes to unaudited Condensed Consolidated Financial Statements
 1. Significant Accounting Policies
 Basis of Consolidation and Reporting
    Use of Estimates
   8




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Nature of Business
  Stock Split
  2. Effects of New Accounting Pronouncements
 Fair Value Measurements 
 3. Income Per Share
  9




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share data)Numerator for basic and diluted income per
common share:Net income
    
    $
    9,432
    
    
    $
    10,990
    
    
    $
    18,383
    
    
    $
    21,077Denominator:Denominator for basic income per common
share  weighted average shares outstanding
    
    
    9,476
    
    
    
    11,108
    
    
    
    9,633
    
    
    
    11,380Effect of dilutive stock options and awards
    
    
    140
    
    
    
    167
    
    
    
    137
    
    
    
    184Denominator for diluted income per common
share  adjusted weighted average
shares outstanding
    
    
    9,616
    
    
    
    11,275
    
    
    
    9,770
    
    
    
    11,564Net income  basic
    
    $
    1.00
    
    
    $
    0.99
    
    
    $
    1.91
    
    
    $
    1.85Net income  diluted
    
    $
    0.98
    
    
    $
    0.97
    
    
    $
    1.88
    
    
    $
    1.82
  4. Investments
  June 30, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost/Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Available-for-saleStates and political subdivisions
    
    $
    207,862
    
    
    $
    11,055
    
    
    $
    (20
    )
    
    $
    218,897Corporate securities
    
    
    42,179
    
    
    
    2,016
    
    
    
    (89
    )
    
    
    44,106Mortgage-backed securities
    
    
    75
    
    
    
    5
    
    
    
    
    
    
    
    80Total fixed-income securities
    
    
    250,116
    
    
    
    13,076
    
    
    
    (109
    )
    
    
    263,083Equity securities (1)
    
    
    17,704
    
    
    
    4,070
    
    
    
    
    
    
    
    21,774Total available-for-sale securities
    
    $
    267,820
    
    
    $
    17,146
    
    
    $
    (109
    )
    
    $
    284,857
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December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost/Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Available-for-saleStates and political subdivisions
    
    $
    150,488
    
    
    $
    10,629
    
    
    $
    
    
    
    $
    161,117Corporate securities
    
    
    42,173
    
    
    
    2,117
    
    
    
    (418
    )
    
    
    43,872Mortgage-backed securities
    
    
    82
    
    
    
    2
    
    
    
    
    
    
    
    84Total fixed-income securities
    
    
    192,743
    
    
    
    12,748
    
    
    
    (418
    )
    
    
    205,073Equity securities (1)
    
    
    15,607
    
    
    
    2,377
    
    
    
    
    
    
    
    17,984Total available-for-sale securities
    
    $
    208,350
    
    
    $
    15,125
    
    
    $
    (418
    )
    
    $
    223,057
 
 (1)
    
    Available-for-sale equity securities are included in Other investments on the accompanying Condensed Consolidated Balance Sheets.  June 30, 2010Gross
    
    
    GrossUnrecognized
    
    
    UnrecognizedCarrying
    
    
    Holding
    
    
    Holding
    
    
    EstimatedValue
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Held-to-maturityStates and political subdivisions
    
    $
    240,500
    
    
    $
    13,753
    
    
    $
    (2
    )
    
    $
    254,251Corporate securities
    
    
    24,422
    
    
    
    599
    
    
    
    
    
    
    
    25,021Mortgage-backed securities
    
    
    63,806
    
    
    
    1,468
    
    
    
    (87
    )
    
    
    65,187Total held-to-maturity
fixed-income securities
    
    $
    328,728
    
    
    $
    15,820
    
    
    $
    (89
    )
    
    $
    344,459
 December 31, 2009Gross
    
    
    GrossUnrecognized
    
    
    UnrecognizedCarrying
    
    
    Holding
    
    
    Holding
    
    
    EstimatedValue
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Held-to-maturityStates and political subdivisions
    
    $
    225,069
    
    
    $
    12,808
    
    
    $
    
    
    
    $
    237,877Corporate securities
    
    
    34,467
    
    
    
    646
    
    
    
    (150
    )
    
    
    34,963Mortgage-backed securities
    
    
    109,315
    
    
    
    2,219
    
    
    
    (8
    )
    
    
    111,526Total held-to-maturity
fixed-income securities
    
    $
    368,851
    
    
    $
    15,673
    
    
    $
    (158
    )
    
    $
    384,366
 11




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June 30, 2010Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized or
    
    
    
    
    
    
    Unrealized or
    
    
    
    
    
    
    Unrealized orFair
    
    
    Unrecognized
    
    
    Fair
    
    
    Unrecognized
    
    
    Fair
    
    
    UnrecognizedDescription of Securities
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)Available-for-saleStates and political subdivisions
    
    $
    7,937
    
    
    $
    (21
    )
    
    $
    
    
    
    $
    
    
    
    $
    7,937
    
    
    $
    (21
    )Corporate securities
    
    
    6,445
    
    
    
    (55
    )
    
    
    3,966
    
    
    
    (33
    )
    
    
    10,411
    
    
    
    (88
    )Subtotal available-for-sale
    
    
    14,382
    
    
    
    (76
    )
    
    
    3,966
    
    
    
    (33
    )
    
    
    18,348
    
    
    
    (109
    )Held-to-maturityStates and political subdivisions
    
    $
    4,611
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    
    
    
    $
    4,611
    
    
    $
    (2
    )Corporate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    11,795
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    11,795
    
    
    
    (87
    )Subtotal held-to-maturity
    
    
    16,406
    
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    16,406
    
    
    
    (89
    )Total temporarily
impaired securities
    
    $
    30,788
    
    
    $
    (165
    )
    
    $
    3,966
    
    
    $
    (33
    )
    
    $
    34,754
    
    
    $
    (198
    )
 December 31, 2009Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized or
    
    
    
    
    
    
    Unrealized or
    
    
    
    
    
    
    Unrealized orFair
    
    
    Unrecognized
    
    
    Fair
    
    
    Unrecognized
    
    
    Fair
    
    
    UnrecognizedDescription of Securities
    

    Value
    
    



    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)Available-for-saleCorporate securities
    
    $
    
    
    
    $
    
    
    
    $
    10,082
    
    
    $
    (418
    )
    
    $
    10,082
    
    
    $
    (418
    )Subtotal available-for-sale
    
    
    
    
    
    
    
    
    
    
    10,082
    
    
    
    (418
    )
    
    
    10,082
    
    
    
    (418
    )Held-to-maturityCorporate securities
    
    $
    
    
    
    $
    
    
    
    $
    5,890
    
    
    $
    (150
    )
    
    $
    5,890
    
    
    $
    (150
    )Mortgage-backed securities
    
    
    4,564
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    4,564
    
    
    
    (8
    )Subtotal held-to-maturity
    
    
    4,564
    
    
    
    (8
    )
    
    
    5,890
    
    
    
    (150
    )
    
    
    10,454
    
    
    
    (158
    )Total temporarily
impaired securities
    
    $
    4,564
    
    
    $
    (8
    )
    
    $
    15,972
    
    
    $
    (568
    )
    
    $
    20,536
    
    
    $
    (576
    )
   12




---



##### Table of Contents



EstimatedFair Value(In thousands)Available-for-saleLess than one year
    
    $
    6,638One to five years
    
    
    172,188Five to ten years
    
    
    15,481More than ten years
    
    
    68,696Mortgage-backed securities
    
    
    80Total available-for-sale
    
    $
    263,083
 Carrying
    
    
    EstimatedValue
    
    
    Fair Value(In thousands)Held-to-maturityLess than one year
    
    $
    12,681
    
    
    $
    12,935One to five years
    
    
    66,977
    
    
    
    70,267Five to ten years
    
    
    150,976
    
    
    
    160,517More than ten years
    
    
    34,288
    
    
    
    35,554Mortgage-backed securities
    
    
    63,806
    
    
    
    65,186Total held-to-maturity
    
    $
    328,728
    
    
    $
    344,459
 5. Fair Values
  
    
    Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.
    
    Level 2: Significant observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active; or other inputs that are observable
or can be derived from or corroborated by observable market data by correlation or other
means.
 13




---



##### Table of Contents




    
    Level 3: Significant unobservable inputs that reflect a reporting entitys own
assumptions about the assumptions that market participants would use in pricing an asset
or liability.
  Valuation of Investments
  Investments Measured at Fair Value on a Recurring Basis
 Available-for-sale fixed-income securities
   14




---



##### Table of Contents




    
    How are other sources, such as Bloomberg, pricing this security?
    
    What have been the historic prices of the security?
    
    Is there any news which would affect the price of the security?
    
    How are similar securities being priced?
     15




---



##### Table of Contents



Available-for-sale equity securities
  June 30, 2010Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(in thousands)Available-for-sale investments:Fixed-income securities
    
    $
    263,083
    
    
    $
    
    
    
    $
    256,960
    
    
    $
    6,123Equity securities (1)
    
    
    21,774
    
    
    
    21,774
    
    
    
    
    
    
    
    Total
    
    $
    284,857
    
    
    $
    21,774
    
    
    $
    256,960
    
    
    $
    6,123
 December 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(in thousands)Available-for-sale investments:Fixed-income securities
    
    $
    205,073
    
    
    $
    
    
    
    $
    198,947
    
    
    $
    6,126Equity securities (1)
    
    
    17,984
    
    
    
    17,984
    
    
    
    
    
    
    
    Total
    
    $
    223,057
    
    
    $
    17,984
    
    
    $
    198,947
    
    
    $
    6,126
 
 (1)
    
    Included in other investments on the accompanying Condensed Consolidated Balance Sheets.   For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)
    
    
    (in thousands)Available-for-sale fixed-income securitiesBeginning balance
    
    $
    6,123
    
    
    $
    6,206
    
    
    $
    6,126
    
    
    $
    6,219Principal paydowns
    
    
    
    
    
    
    (53
    )
    
    
    (3
    )
    
    
    (69
    )Net unrealized appreciation included
in other comprehensive income
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (5
    )Ending balance
    
    $
    6,123
    
    
    $
    6,145
    
    
    $
    6,123
    
    
    $
    6,145
 16




---



##### Table of Contents



Investment Measured at Fair Value on a Nonrecurring Basis
 Held-to-maturity fixed-income securities
 Other Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  Fair Value of Financial Instruments
  17




---



##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount (1)
    
    
    Value
    
    
    Amount
    
    
    Value(in thousands)
    
    
    (in thousands)Financial assets:Stilwell Associates, L.P.
    
    $
    15,000
    
    
    $
    15,656
    
    
    $
    15,000
    
    
    $
    15,000Stilwell Value Partners I, L.P.
    
    
    7,500
    
    
    
    7,375
    
    
    
    7,500
    
    
    
    7,500Stilwell Value Partners VI, L.P.
    
    
    7,500
    
    
    
    7,129
    
    
    
    7,500
    
    
    
    7,500
 
 (1)
    
    Limited Partnerships are included in the Other Investments line of the accompanying balance sheet. 6. Unpaid Losses and Loss Adjustment Expenses
  Six MonthsEnded
    
    
    Year EndedJune 30, 2010
    
    
    December 31, 2009(in thousands)Beginning balance, gross
    
    $
    608,807
    
    
    $
    644,396Less, reinsurance recoverables
    
    
    (62,315
    )
    
    
    (81,546
    )Net reserves, beginning balance
    
    
    546,492
    
    
    
    562,850Incurred related toCurrent year
    
    
    44,841
    
    
    
    94,121Prior years
    
    
    (16,397
    )
    
    
    (36,559
    )28,444
    
    
    
    57,562Paid related toCurrent year
    
    
    (1,274
    )
    
    
    (3,733
    )Prior years
    
    
    (36,971
    )
    
    
    (70,187
    )(38,245
    )
    
    
    (73,920
    )Net reserves, ending balance
    
    
    536,691
    
    
    
    546,492Plus, reinsurance recoverables
    
    
    59,386
    
    
    
    62,315Ending balance, gross
    
    $
    596,077
    
    
    $
    608,807Development, annualized, as a % of
beginning net reserves
    
    
    -6.0
    %
    
    
    -6.5
    %
   18




---



##### Table of Contents



7. Subsequent Events
  19




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    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.
    
    Market illiquidity and volatility associated with the current financial crisis makes
the fair values of our investments increasingly difficult to estimate, and may have
other unforeseen consequences that we are currently unable to predict. 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.
    
    We cannot make any assurances that the proposed merger, which is subject to a number
of conditions, will be consummated.
 20




---



##### Table of Contents




    
    Failure to complete the TDC merger would result in the incurrence of costs, the
amounts of which could adversely impact our future business and financial results.
    
    Our common stock price and business prospects may be adversely affected if the
merger is not completed.
    
    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 subsidiary
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 cash dividends and
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.
    
    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 our shareholders.
  21




---



##### Table of Contents



Overview of APCapital
    Pending Transaction
  22




---



##### Table of Contents



Description of Ratios and Other Metrics Analyzed
  Underwriting Gain or Loss:
 Loss Ratio:
 Underwriting Expense Ratio:
 Combined Ratio:
 Investment Yield:
 Return on Equity:
 23




---



##### Table of Contents



Book Value per Share:
   Non-GAAP Financial Measures
 Accident Year Loss Ratio:
 24




---



##### Table of Contents



Critical Accounting Policies
   25




---



##### Table of Contents



Results of Operations ? Three and Six Months Ended June 30, 2010 Compared to the Three and Six
Months Ended June 30, 2009
  Three Months EndedJune 30,
    
    
    Change2010
    
    
    2009
    
    
    Dollar
    
    
    Percentage(2)(dollars in thousands)Direct premiums written
    
    $
    24,001
    
    
    $
    24,245
    
    
    $
    (244
    )
    
    
    -1.0
    %Net premiums written
    
    $
    25,095
    
    
    $
    23,389
    
    
    $
    1,706
    
    
    
    7.3
    %Net premiums earned
    
    $
    29,388
    
    
    $
    28,382
    
    
    $
    1,006
    
    
    
    3.5
    %Losses and loss adjustment expensesCurrent year losses
    
    
    22,928
    
    
    
    23,200
    
    
    
    (272
    )
    
    
    1.2
    %Prior year losses
    
    
    (8,276
    )
    
    
    (10,087
    )
    
    
    1,811
    
    
    
    -18.0
    %Total
    
    
    14,652
    
    
    
    13,113
    
    
    
    1,539
    
    
    
    -11.7
    %Underwriting expenses
    
    
    7,042
    
    
    
    7,319
    
    
    
    (277
    )
    
    
    3.8
    %Total underwriting gain
    
    
    7,694
    
    
    
    7,950
    
    
    
    (256
    )
    
    
    -3.2
    %Other revenue (expense) itemsInvestment income
    
    
    6,298
    
    
    
    8,028
    
    
    
    (1,730
    )
    
    
    -21.5
    %Net realized gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %Other income
    
    
    282
    
    
    
    212
    
    
    
    70
    
    
    
    33.0
    %Other expenses (1)
    
    
    (1,704
    )
    
    
    (846
    )
    
    
    (858
    )
    
    
    -101.4
    %Total other revenue and expense items
    
    
    4,876
    
    
    
    7,394
    
    
    
    (2,518
    )
    
    
    -34.1
    %Income before federal income taxes
    
    
    12,570
    
    
    
    15,344
    
    
    
    (2,774
    )
    
    
    -18.1
    %Federal income tax expense
    
    
    3,138
    
    
    
    4,354
    
    
    
    (1,216
    )
    
    
    27.9
    %Net income
    
    $
    9,432
    
    
    $
    10,990
    
    
    $
    (1,558
    )
    
    
    -14.2
    %Loss Ratio:Accident year
    
    
    78.0
    %
    
    
    81.7
    %
    
    
    
    
    
    
    -3.7
    %Prior years
    
    
    -28.1
    %
    
    
    -35.5
    %
    
    
    
    
    
    
    7.4
    %Calendar year
    
    
    49.9
    %
    
    
    46.2
    %
    
    
    
    
    
    
    3.7
    %Underwriting expense ratio
    
    
    24.0
    %
    
    
    25.8
    %
    
    
    
    
    
    
    -1.8
    %Combined ratio
    
    
    73.9
    %
    
    
    72.0
    %
    
    
    
    
    
    
    1.9
    %Pre-tax investment yield
    
    
    3.3
    %
    
    
    4.0
    %
    
    
    
    
    
    
    -0.7
    %Return on beginning equity (annualized)
    
    
    15.9
    %
    
    
    17.3
    %
    
    
    
    
    
    
    -1.4
    %
 
 (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.(2)
    
    The percentage change represents the items change relative to its impact on
net income. A
positive percentage change indicates a change in that line item representing
an increase to net
income, while a negative percentage change represents a decrease to net income. 26




---



##### Table of Contents



Six Months EndedJune 30,
    
    
    Change2010
    
    
    2009
    
    
    Dollar
    
    
    Percentage(dollars in thousands)Direct premiums written
    
    $
    51,297
    
    
    $
    54,367
    
    
    $
    (3,070
    )
    
    
    -5.6
    %Net premiums written
    
    $
    51,130
    
    
    $
    52,109
    
    
    $
    (979
    )
    
    
    -1.9
    %Net premiums earned
    
    $
    56,083
    
    
    $
    57,688
    
    
    $
    (1,605
    )
    
    
    -2.8
    %Losses and loss adjustment expensesCurrent year losses
    
    
    44,841
    
    
    
    47,036
    
    
    
    (2,195
    )
    
    
    -4.7
    %Prior year losses
    
    
    (16,397
    )
    
    
    (18,311
    )
    
    
    1,914
    
    
    
    -10.5
    %Total
    
    
    28,444
    
    
    
    28,725
    
    
    
    (281
    )
    
    
    -1.0
    %Underwriting expenses
    
    
    13,669
    
    
    
    14,451
    
    
    
    (782
    )
    
    
    -5.4
    %Total underwriting gain
    
    
    13,970
    
    
    
    14,512
    
    
    
    (542
    )
    
    
    -3.7
    %Other revenue (expense) itemsInvestment income
    
    
    12,664
    
    
    
    16,218
    
    
    
    (3,554
    )
    
    
    -21.9
    %Net realized losses
    
    
    326
    
    
    
    
    
    
    
    326
    
    
    
    0.0
    %Other income
    
    
    531
    
    
    
    435
    
    
    
    96
    
    
    
    22.1
    %Other expenses (1)
    
    
    (2,542
    )
    
    
    (1,818
    )
    
    
    (724
    )
    
    
    39.8
    %Total other revenue and expense items
    
    
    10,979
    
    
    
    14,835
    
    
    
    (3,856
    )
    
    
    -26.0
    %Income before federal income taxes
    
    
    24,949
    
    
    
    29,347
    
    
    
    (4,398
    )
    
    
    -15.0
    %Federal income tax expense
    
    
    6,566
    
    
    
    8,270
    
    
    
    (1,704
    )
    
    
    -20.6
    %Net income
    
    $
    18,383
    
    
    $
    21,077
    
    
    $
    (2,694
    )
    
    
    -12.8
    %Loss Ratio:Accident year
    
    
    80.0
    %
    
    
    81.5
    %
    
    
    
    
    
    
    -1.5
    %Prior years
    
    
    -29.3
    %
    
    
    -31.7
    %
    
    
    
    
    
    
    2.4
    %Calendar year
    
    
    50.7
    %
    
    
    49.8
    %
    
    
    
    
    
    
    0.9
    %Underwriting expense ratio
    
    
    24.4
    %
    
    
    25.1
    %
    
    
    
    
    
    
    -0.7
    %Combined ratio
    
    
    75.1
    %
    
    
    74.9
    %
    
    
    
    
    
    
    0.2
    %Pre-tax investment yield
    
    
    3.2
    %
    
    
    4.0
    %
    
    
    
    
    
    
    -0.7
    %Return on beginning equity (annualized)
    
    
    15.5
    %
    
    
    16.6
    %
    
    
    
    
    
    
    -1.1
    %
 
  27




---



##### Table of Contents



Overview
  Premiums Written and Earned
  For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,Change
    
    
    
    
    
    
    
    
    
    
    Change2010
    
    
    2009
    
    
    Dollar
    
    
    Percentage
    
    
    2010
    
    
    2009
    
    
    Dollar
    
    
    Percentage(dollars in thousands)
    
    
    (dollars in thousands)Direct premiums writtenMichigan
    
    $
    8,599
    
    
    $
    8,883
    
    
    $
    (284
    )
    
    
    -3.2
    %
    
    $
    16,367
    
    
    $
    17,552
    
    
    $
    (1,185
    )
    
    
    -6.8
    %Illinois
    
    
    7,722
    
    
    
    6,988
    
    
    
    734
    
    
    
    10.5
    %
    
    
    15,821
    
    
    
    15,335
    
    
    
    486
    
    
    
    3.2
    %Ohio
    
    
    3,393
    
    
    
    4,077
    
    
    
    (684
    )
    
    
    -16.8
    %
    
    
    8,199
    
    
    
    9,950
    
    
    
    (1,751
    )
    
    
    -17.6
    %New Mexico
    
    
    3,234
    
    
    
    3,378
    
    
    
    (144
    )
    
    
    -4.3
    %
    
    
    7,585
    
    
    
    8,187
    
    
    
    (602
    )
    
    
    -7.4
    %Other
    
    
    1,053
    
    
    
    919
    
    
    
    134
    
    
    
    14.6
    %
    
    
    3,325
    
    
    
    3,343
    
    
    
    (18
    )
    
    
    -0.5
    %Total
    
    $
    24,001
    
    
    $
    24,245
    
    
    $
    (244
    )
    
    
    -1.0
    %
    
    $
    51,297
    
    
    $
    54,367
    
    
    $
    (3,070
    )
    
    
    -5.6
    %Net premiums written
    
    $
    25,095
    
    
    $
    23,389
    
    
    $
    1,706
    
    
    
    7.3
    %
    
    $
    51,130
    
    
    $
    52,109
    
    
    $
    (979
    )
    
    
    -1.9
    %Ratio of net premiums
written to direct
    
    
    104.6
    %
    
    
    96.5
    %
    
    
    
    
    
    
    8.1
    %
    
    
    99.7
    %
    
    
    95.8
    %
    
    
    
    
    
    
    3.9
    %
    28




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands)Net premiums written
    
    $
    25,095
    
    
    $
    23,389
    
    
    $
    51,130
    
    
    $
    52,109Addback:Experience rated reinsurance adjustments
    
    
    (1,980
    )
    
    
    
    
    
    
    (1,980
    )Net premiums written  comparative basis
    
    $
    23,115
    
    
    $
    23,389
    
    
    $
    49,150
    
    
    $
    52,109Direct premiums written
    
    $
    24,001
    
    
    $
    24,245
    
    
    $
    51,297
    
    
    $
    54,367Ratio of net premiums written to direct
    
    
    96.3
    %
    
    
    96.5
    %
    
    
    95.8
    %
    
    
    95.8
    %
 Loss and Loss Adjustment Expenses
  29




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30
    
    
    June 302010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands)Current accident year losses
    
    $
    22,928
    
    
    $
    23,200
    
    
    $
    44,841
    
    
    $
    47,036Net premiums earned (NPE), as reported
    
    $
    29,388
    
    
    $
    28,382
    
    
    $
    56,083
    
    
    $
    57,688Adjustment to NPE due to experience rated
reinsurance adjustments
    
    
    (1,980
    )
    
    
    
    
    
    
    (1,980
    )
    
    
    Adjusted NPE
    
    $
    27,408
    
    
    $
    28,382
    
    
    $
    54,103
    
    
    $
    57,688Accident year loss ratio, as reported
    
    
    78.0
    %
    
    
    81.7
    %
    
    
    80.0
    %
    
    
    81.5
    %Accident year loss ratio, adjusted
    
    
    83.7
    %
    
    
    81.7
    %
    
    
    82.9
    %
    
    
    81.5
    %
    .
 30




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##### Table of Contents



Underwriting Expenses
  Investment Income
  Net Realized Losses
  Other Expenses
  31




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##### Table of Contents



Income Taxes
  Liquidity and Capital Resources
   Parent Company
  32




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Consolidated
    33




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##### Table of Contents



Financial Condition
  Statutory Capital and Surplus
  Reserves for Unpaid Losses and Loss Adjustment Expenses
   34




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##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    Change
    
    
    % Change(In thousands, except claim and per claim data)Net case reserves
    
    $
    262,087
    
    
    $
    236,244
    
    
    $
    25,843
    
    
    
    10.9
    %Number of open claims
    
    
    1,416
    
    
    
    1,290
    
    
    
    126
    
    
    
    9.8
    %Average net case reserve
per open claim
    
    $
    185,090
    
    
    $
    183,135
    
    
    $
    1,955
    
    
    
    1.1
    %Net IBNR reserves
    
    $
    250,434
    
    
    $
    285,373
    
    
    $
    (34,939
    )
    
    
    -12.2
    %Total net reserves
    
    $
    512,521
    
    
    $
    521,617
    
    
    $
    (9,096
    )
    
    
    -1.7
    %
    35




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##### Table of Contents



Investments
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    % of
    
    
    Carrying
    
    
    % ofValue (1)
    
    
    Portfolio
    
    
    Value (1)
    
    
    PortfolioTax-exempt municipal securities
    
    $
    458,872
    
    
    
    77.5
    %
    
    $
    385,111
    
    
    
    67.1
    %Corporate securities
    
    
    69,053
    
    
    
    11.7
    %
    
    
    79,414
    
    
    
    13.8
    %Mortgage-backed securities
    
    
    63,886
    
    
    
    10.8
    %
    
    
    109,399
    
    
    
    19.1
    %Total fixed-income securities
    
    $
    591,811
    
    
    
    100.0
    %
    
    $
    573,924
    
    
    
    100.0
    %
 
 (1)
    
    Carrying value for available-for-sale securities is fair value, whereas
held-to-maturity securities are carried at
amortized cost.  36




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    % of
    
    
    Carrying
    
    
    % ofRating
    
    Value (1)
    
    
    Total
    
    
    Value (1)
    
    
    TotalAAA
    
    $
    235,140
    
    
    
    39.7
    %
    
    $
    250,783
    
    
    
    43.7
    %AA
    
    
    278,212
    
    
    
    47.0
    %
    
    
    227,576
    
    
    
    39.7
    %A
    
    
    54,474
    
    
    
    9.2
    %
    
    
    67,672
    
    
    
    11.8
    %BBB
    
    
    11,417
    
    
    
    1.9
    %
    
    
    15,650
    
    
    
    2.6
    %BB
    
    
    6,445
    
    
    
    1.1
    %
    
    
    6,117
    
    
    
    1.1
    %585,688
    
    
    
    99.0
    %
    
    
    567,798
    
    
    
    98.9
    %Private Placement
    
    
    6,123
    
    
    
    1.0
    %
    
    
    6,126
    
    
    
    1.1
    %Total
    
    $
    591,811
    
    
    
    100.0
    %
    
    $
    573,924
    
    
    
    100.0
    %Average Rating
    
    AA+
    
    
    
    
    
    AA+
 
 (1)
    
    Carrying value is fair value for available-for-sale securities and amortized cost
for held-to-maturity securities.   Other Significant Balance Sheet Items
   37




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##### Table of Contents



Contractual Obligations and Off-Balance Sheet Arrangements
  Effects of New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 General
   38




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##### Table of Contents



Qualitative Information About Market Risk
     Quantitative Information About Market Risk
 Interest Rate Risk
  39




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009Portfolio
    
    
    Change in
    
    
    Modified
    
    
    Portfolio
    
    
    Change in
    
    
    ModifiedChange in Rates
    
    Value
    
    
    Value
    
    
    Duration
    
    
    Value
    
    
    Value
    
    
    Duration(dollars in thousands)
    
    
    (dollars in thousands)+2%
    
    $
    249,036
    
    
    $
    (14,047
    )
    
    
    2.71
    
    
    $
    195,468
    
    
    $
    (9,605
    )
    
    
    2.31+1%
    
    
    255,779
    
    
    
    (7,304
    )
    
    
    2.62
    
    
    
    200,063
    
    
    
    (5,010
    )
    
    
    2.300
    
    
    263,083
    
    
    
    
    
    
    
    2.87
    
    
    
    205,073
    
    
    
    
    
    
    
    2.61-1%
    
    
    270,688
    
    
    
    7,605
    
    
    
    2.93
    
    
    
    210,490
    
    
    
    5,417
    
    
    
    2.63-2%
    
    
    277,242
    
    
    
    14,159
    
    
    
    3.00
    
    
    
    214,889
    
    
    
    9,816
    
    
    
    2.69
 Equity Price Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   40




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  41




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  Our business could be adversely affected by the loss of one or more key employees.
  APCapital cannot make any assurances that the proposed merger will be consummated.
  Failure to complete the TDC merger would result in the incurrence of costs, the amounts of which
could adversely impact APCapitals future business and financial results.
  42




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##### Table of Contents




 
 
  APCapitals common stock price and business prospects may be adversely affected if the merger is
not completed.
  43




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  Total NumberTotal
    
    
    
    
    
    
    of Shares
    
    
    Maximum DollarNumber of
    
    
    Average
    
    
    Repurchased as
    
    
    Value of Shares that May Yet BeShares
    
    
    Price Paid
    
    
    Part of Publicly
    
    
    Repurchased Under the Plans or ProgramsRepurchased
    
    
    per Share
    
    
    Announced Plans
    
    
    Discretionary Plan(a)
    
    
    Rule 10b5-1 Plan (b)For the month ended April 30, 2010
    
    
    76,200
    
    
    $
    32.67
    
    
    
    76,200
    
    
    $
    15,572,159
    
    
    $
    12,742,045For the month ended May 31, 2010
    
    
    85,300
    
    
    $
    31.66
    
    
    
    85,300
    
    
    $
    15,572,159
    
    
    $
    10,041,612For the month ended June 30, 2010
    
    
    99,800
    
    
    $
    31.04
    
    
    
    99,800
    
    
    $
    15,572,159
    
    
    $
    6,944,273For the three months ended June 30, 2010 (c)
    
    
    261,300
    
    
    $
    31.72
    
    
    
    261,300
    
    
    $
    15,572,159
    
    
    $
    6,944,273
 
 (a)
    
    On February 7, 2008, the Board of Directors authorized the repurchase of additional common shares with a cost of up to $25 million at managements
discretion. The timing of the repurchases 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 or discontinued at any time or from time to time.(b)
    
    On December 4 and 11, 2008, the Board authorized the repurchase of an additional $10 million and $20 million of the Companys common shares pursuant
to the Rule 10b5-1 plan in 2008, as well as the rollover of any unused authorization into 2009. On June 23, October 2 and December 3, 2009 the Board
authorized the repurchase of an addtional $20 million, $10 million and $20 million of the Companys common shares pursuant to the Rule 10b5-1 plan in
2009, as well as the rollover of any unused authorization into 2010.The Rule 10b5-1 plan share repurchases will continue to be made pursuant to a formula
in the plan, and the plan will expire when all of the allocated dollars in the plan have been used. The Company may terminate the Rule 10b5-1 plan at any
time.(c)
    
    In accordance with the terms of the Agreement and Plan of Merger between and among, The Doctors Company and APCapital, concurrent with the
announcement of the purchase of the Company by TDC, on July 8, 2010, all share repurchase activities were terminated. 
 Item 4. Submission of Matters to a Vote of Security Holders
  Number of VotesNominee
    
    For
    
    
    Against
    
    
    WithheldStephen H. Haynes, M.D.
    
    
    8,597,327
    
    
    
    
    
    
    
    155,651Mitchell A. Rinek, M.D.
    
    
    8,597,309
    
    
    
    
    
    
    
    155,669
 Number of VotesFor
    
    
    Against
    
    
    AbstainProposal to ratify appointment of BDO Seidman,
LLP as the Companys independent registered
public accountants
    
    
    9,318,899
    
    
    
    3,406
    
    
    
    3,235
 
 Item 6. Exhibits
 Exhibits.
  44




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##### Table of Contents



SIGNATURES
   AMERICAN PHYSICIANS CAPITAL, INC.By:
    /s/ R. Kevin ClintonR. Kevin ClintonIts: President and Chief Executive OfficerBy:
    /s/ Frank H. FreundFrank H. FreundIts: Executive Vice President, Treasurerand Chief
Financial Officer 45




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.
    
    Exhibit Description2.1
    
    Agreement and Plan of Merger by and among American Physicians
Capital, Inc., The Doctors Company and Red Hawk Acquisition Corp.
dated as of July 7, 2010 (APCapitals Current Report on form 8-K
dated July 8, 2010)2.2
    
    Amendment No. 1, dated as of July 13, 2010, to Agreement and Plan of
Merger by and among The Doctors Company, Red Hawk Acquisition Corp.
and American Physicians Capital, Inc. (APCapitals Current Report on
Form 8-K dated July 14, 2010).10.59
    
    Form of Amendment No. 2 to Executive
Employment Agreement dated February 23, 2005, by and between
American Physicians Assurance Corporation and each of R. Kevin
Clinton, Frank H. Freund and Annette E. Flood.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 1934.32.1
    
    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 1934.99.1
    
    Fixed-Income Security Detail of American Physicians Capital, Inc.
and Subsidiaries Investment Portfolio as of March 31, 2010.
 46