##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, 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 June 30, 2009o

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(State or other jurisdiction
    of
    incorporation or organization)

38-3543910(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
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 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


18Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


33Item 4.

Controls and Procedures


35PART II. OTHER INFORMATIONItem 1A.

Risk Factors


36Item 2.

Unregistered Sales of Equity Securities and Use
    of Proceeds


36Item 4.

Submission of Matters to a Vote of Security
    Holders


36Item 6.

Exhibits


36Signatures


37Exhibit Index


38EX-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 SUBSIDIARIESCondensed Consolidated Balance Sheets
  June 30,


December 31,2009


2008(Unaudited)(In thousands, except share data)ASSETSInvestments:Fixed-income securitiesAvailable-for-sale,
    at fair value

$
238,378


$
222,941Held-to-maturity,
    at amortized cost


411,383



481,750Other investments


22,754



24,320Total investments


672,515



729,011Cash and cash equivalents


139,079



101,637Premiums receivable


28,426



34,024Reinsurance recoverable


80,122



86,397Deferred federal income taxes


17,537



18,573Property and equipment, net of accumulated depreciation


8,350



8,678Other assets


26,180



27,503Total assets

$
972,209


$
1,005,823LIABILITIESUnpaid losses and loss adjustment expenses

$
635,796


$
644,396Unearned premiums


50,377



55,984Long-term debt


25,928



25,928Other liabilities


19,899



25,478Total liabilities


732,000



751,786Commitments & ContingenciesShareholders EquityCommon stock, no par value, 50,000,000 shares authorized:
    10,737,983 and 11,749,069 shares outstanding at
    June 30, 2009 and December 31, 2008, respectively
    (Note 2)






Additional
    paid-in-capital






Retained earnings


232,271



246,173Accumulated other comprehensive income:Net unrealized appreciation on investments, net of deferred
    federal income taxes


7,938



7,864Total shareholders equity


240,209



254,037Total liabilities and shareholders equity

$
972,209


$
1,005,823    3




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIESCondensed Consolidated Statements of
    Income
  Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008(Unaudited)(In thousands, except per share data)Net premiums written

$
23,389


$
25,499


$
52,109


$
57,674Change in net unearned premiums


4,993



5,921



5,579



5,393Net premiums earned


28,382



31,420



57,688



63,067Investment income


8,028



9,235



16,218



19,192Net realized gains (losses)






74







(708
)Other income


212



206



435



395Total revenues and other income


36,622



40,935



74,341



81,946Losses and loss adjustment expenses


13,113



17,667



28,725



33,865Underwriting expenses


7,319



6,623



14,451



13,639Investment expenses


215



241



539



503Interest expense


344



555



729



1,243General and administrative expenses


327



319



590



586Other expenses


(40
)






(40
)


Total expenses


21,278



25,405



44,994



49,836Income before federal income taxes


15,344



15,530



29,347



32,110Federal income tax expense


4,354



4,487



8,270



9,693Net income

$
10,990


$
11,043


$
21,077


$
22,417Net income  per common share (Note 2)Basic

$
0.99


$
0.85


$
1.85


$
1.71Diluted

$
0.97


$
0.83


$
1.82


$
1.68    4




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##### Table of Contents



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





OtherShares


Paid-in


Retained


ComprehensiveOutstanding(1)


Capital


Earnings


Income


Total(Unaudited)(In thousands, except share data)Balance, 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
)Cash dividends to shareholders, $0.0825 per share(1)










(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   AccumulatedAdditional





OtherShares


Paid-in


Retained


ComprehensiveOutstanding(1)


Capital


Earnings


Income


Total(Unaudited)(In thousands, except share data)Balance, December 31, 2007


13,503,653


$



$
257,502


$
6,055


$
263,557Comprehensive income:Net income










22,417







22,417Other comprehensive loss, net of taxes














(1,376
)


(1,376
)Total comprehensive income, net of taxes


















21,041Options exercised


14,613



168











168Shares tendered/netted in connection with option exercise


(1,930
)


(63
)










(63
)Cash dividends to shareholders, $0.075 per share(1)










(1,952
)






(1,952
)Excess tax benefits from share-based awards






101











101Fair value compensation of share-based awards






37











37Purchase and retirement of common stock


(554,666
)


(243
)


(17,644
)






(17,887
)Balance, June 30, 2008


12,961,670


$



$
260,323


$
4,679


$
265,002    (1)
    
    See Note 2   5




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AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of
    Comprehensive Income
 
  Three Months Ended June 30,


Six Months Ended June 30,2009


2008


2009


2008(Unaudited)(In thousands)Net income

$
10,990


$
11,043


$
21,077


$
22,417Other comprehensive income (loss):Unrealized appreciation (depreciation) on
    available-for-sale
    investment securities arising during the period


4,452



(4,015
)


673



(785
)Amortization of net unrealized appreciation on
    held-to-maturityinvestment securities related to their transfer from the
    available-for-sale
    category


(256
)


(303
)


(559
)


(505
)Adjustment for net realized gains (losses) on
    available-for-sale
    investment securities included in net income






31







(827
)Other comprehensive income (loss) before tax


4,196



(4,287
)


114



(2,117
)Deferred federal income tax expense (benefit)


1,469



(1,500
)


40



(741
)Other comprehensive income (loss)


2,727



(2,787
)


74



(1,376
)Comprehensive income

$
13,717


$
8,256


$
21,151


$
21,041    6




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash
    Flows
  Six Months EndedJune 30,2009


2008(Unaudited)(In thousands)Cash flows from (for) operating activitiesNet income

$
21,077


$
22,417Adjustments to reconcile net income to net cash from operating
    activities:Depreciation and amortization


2,644



1,948Net realized losses






708Deferred federal income taxes


997



1,340Current federal income taxes


812



953Excess tax benefits from share-based awards


(1,380
)


(101
)Share-based compensation






37Loss on equity method investees


71



Changes in:Unpaid loss and loss adjustment expenses


(8,599
)


(6,208
)Unearned premiums


(5,607
)


(5,305
)Other assets and liabilities


7,232



2,413Net cash from operating activities


17,247



18,202Cash flows from (for) investing activitiesPurchasesAvailable-for-sale 
    fixed income


(12,988
)


(15,478
)Held-to-maturity 
    fixed income






(96,766
)Other investments


(1,437
)


(3,364
)Property and equipment


(132
)


(2,136
)Proceeds from sales and maturitiesAvailable-for-sale 
    fixed income


452



44,878Held-to-maturity 
    fixed income


69,013



99,329Other






2,343Net cash from investing activities


54,908



28,806Cash flows from (for) financing activitiesCommon stock repurchased


(33,173
)


(17,887
)Excess tax benefits from share-based awards


1,380



101Taxes paid in connection with net option exercise


(1,448
)


Change in payable for shares repurchased


266



(2,803
)Cash dividends paid


(1,858
)


(1,952
)Proceeds from stock options exercised


120



105Net cash for financing activities


(34,713
)


(22,436
)Net increase in cash and cash equivalents


37,442



24,572Cash and cash equivalents, beginning of period


101,637



87,498Cash and cash equivalents, end of period

$
139,079


$
112,070    7




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes
    to Unaudited Condensed Consolidated Financial
    Statements
  1.
    Significant
    Accounting Policies  Basis
    of Consolidation and Reporting
    Form 10-Q Rule 10-01 Regulation S-X Form 10-Q
  Form 10-K
  Form 10-Q
  Reclassifications
    Use of
    Estimates
    other-than-temporarily
 8




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
   Nature
    of Business
    2.
    Stock
    Split  four-for-three
  3.
    Effects
    of New Accounting Pronouncements  SFAS No. 168
      SFAS Nos.
    167 and 166
       9




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
    SFAS No. 165
    4.
    Income
    Per Share    Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008(In thousands, except per share data)Numerator for basic and diluted income per common share:Net income

$
10,990


$
11,043


$
21,077


$
22,417Denominator:Denominator for basic income per common share 
    weighted average shares outstanding


11,108



12,970



11,380



13,096Effect of dilutive stock options and awards


167



268



184



263Denominator for diluted income per common share 
    adjusted weighted average shares outstanding


11,275



13,238



11,564



13,359Net income  basic

$
0.99


$
0.85


$
1.85


$
1.71Net income  diluted

$
0.97


$
0.83


$
1.82


$
1.68    10




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
   5.
    Investments  available-for-sale
  June 30, 2009Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost/Cost


Gains


Losses


Fair Value(In thousands)Available-for-saleStates and political subdivisions

$
149,360


$
8,267


$



$
157,627Corporate securities


77,959



3,800



(1,083
)


80,676Mortgage-backed securities


90







(15
)


75Total fixed-income securities


227,409



12,067



(1,098
)


238,378Equity securities(1)


17,833



2,141



(2,188
)


17,786Total
    available-for-sale
    securities

$
245,242


$
14,208


$
(3,286
)

$
256,164   December 31, 2008Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost/Cost


Gains


Losses


Fair Value(In thousands)Available-for-saleStates and political subdivisions

$
150,098


$
5,844


$
(20
)

$
155,922Corporate securities


65,381



2,898



(1,339
)


66,940Mortgage-backed securities


99







(20
)


79Total fixed-income securities


215,578



8,742



(1,379
)


222,941Equity securities(1)


16,515



2,885







19,400Total
    available-for-sale
    securities

$
232,093


$
11,627


$
(1,379
)

$
242,341     (1)
    
    Available-for-sale
    equity securities are included in Other investments
    on the accompanying unaudited Condensed Consolidated Balance
    Sheets. 11




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
   held-to-maturity available-for-sale held-to-maturity held-to-maturity
  June 30, 2009Gross


GrossUnrecognized


UnrecognizedCarrying


Holding


Holding


EstimatedValue


Gains


Losses


Fair Value(In thousands)Held-to-maturityU.S. government obligations

$
14,952


$



$
(83
)

$
14,869States and political subdivisions


226,182



7,415



(35
)


233,562Corporate securities


37,102



809



(198
)


37,713Mortgage-backed securities


133,147



2,507



(7
)


135,647Total
    held-to-maturity
    fixed-income securities

$
411,383


$
10,731


$
(323
)

$
421,791   December 31, 2008Gross


GrossUnrecognized


UnrecognizedCarrying


Holding


Holding


EstimatedValue


Gains


Losses


Fair Value(In thousands)Held-to-maturityU.S. government obligations

$
64,458


$
676


$



$
65,134States and political subdivisions


228,685



4,567



(291
)


232,961Corporate securities


37,824



369



(409
)


37,784Mortgage-backed securities


150,783



1,435



(755
)


151,463Total
    held-to-maturity
    fixed-income securities

$
481,750


$
7,047


$
(1,455
)

$
487,342  12




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
  available-for-sale held-to-maturity
  June 30, 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

$
3,954


$
(47
)

$
5,464


$
(1,036
)

$
9,418


$
(1,083
)Mortgage-backed securities










75



(15
)


75



(15
)Subtotal fixed-income securities


3,954



(47
)


5,539



(1,051
)


9,493



(1,098
)Equity securities


4,320



(2,188
)










4,320



(2,188
)Subtotal
    available-for-sale
    securities


8,274



(2,235
)


5,539



(1,051
)


13,813



(3,286
)Held-to-maturityU.S. government obligations

$
14,869


$
(83
)

$



$



$
14,869


$
(83
)States and political subdivisions


6,583



(35
)










6,583



(35
)Corporate securities


5,847



(198
)










5,847



(198
)Mortgage-backed securities


4,231



(6
)


59



(1
)


4,290



(7
)Subtotal
    held-to-maturity


31,530



(322
)


59



(1
)


31,589



(323
)Total temporarily impaired securities

$
39,804


$
(2,557
)

$
5,598


$
(1,052
)

$
45,402


$
(3,609
)   December 31, 2008Less 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

$
3,168


$
(20
)

$



$



$
3,168


$
(20
)Corporate securities


9,241



(1,359
)










9,241



(1,359
)Subtotal
    available-for-sale


12,409



(1,379
)










12,409



(1,379
)Held-to-maturityStates and political subdivisions


56,445



(291
)










56,445



(291
)Corporate securities


14,244



(409
)










14,244



(409
)Mortgage-backed securities


27,763



(558
)


10,480



(197
)


38,243



(755
)Subtotal
    held-to-maturity


98,452



(1,258
)


10,480



(197
)


108,932



(1,455
)Total temporarily impaired securities

$
110,861


$
(2,637
)

$
10,480


$
(197
)

$
121,341


$
(2,834
)    13




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
          available-for-sale held-to-maturity
  EstimatedFair Value(In thousands)Available-for-saleLess than one year

$
One to five years


164,022Five to ten years


67,081More than ten years


7,200Mortgage-backed securities


75Total
    available-for-sale

$
238,378   Carrying


EstimatedValue


Fair Value(In thousands)Held-to-maturityLess than one year

$
12,328


$
12,523One to five years


50,174



51,933Five to ten years


161,478



166,249More than ten years


54,255



55,439Mortgage-backed securities


133,148



135,647Total
    held-to-maturity

$
411,383


$
421,791  14




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
   6.
    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.
    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
       15




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
     Available-for-sale
    equity securities available-for-sale
    June 30, 2009Total


Level 1


Level 2


Level 3(In thousands)Available-for-sale
    investments:Fixed-income securities

$
238,378


$



$
232,233


$
6,145Equity securities(1)


17,786



17,786







Total

$
256,164


$
17,786


$
232,233


$
6,145   December 31, 2008Total


Level 1


Level 2


Level 3(In thousands)Available-for-sale
    investments:Fixed-income securities

$
222,941


$



$
216,722


$
6,219Equity securities(1)


19,400



19,400







Total

$
242,341


$
19,400


$
216,722


$
6,219     (1)
    
    Included in other investments on the accompanying unaudited
    Condensed Consolidated Balance Sheets.      For the Three Months


For the Six MonthsEnded June 30,


Ended June 30,2009


2008


2009


2008(In thousands)


(In thousands)Available-for-sale
    fixed-income securitiesBeginning balance

$
6,206


$
7,064


$
6,219


$
6,911Principal paydowns


(53
)


(210
)


(69
)


(210
)Net unrealized appreciation included in other comprehensive
    income


(8
)


(130
)


(5
)


23Ending balance

$
6,145


$
6,724


$
6,145


$
6,724  16




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  Notes to
    Unaudited Condensed Consolidated Financial
    Statements  (Continued)
   Investment
    Measured at Fair Value on a Nonrecurring Basis
  Held-to-maturity
    fixed-income securities held-to-maturity available-for-sale other-than-temporarily held-to-maturity other-than-temporarily held-to-maturity other-than-temporarily
  Other
    Assets and Liabilities Measured at Fair Value on a Nonrecurring
    Basis
  and/or
  Fair
    Value of Financial Instruments
  held-to-maturity, held-to-maturity
 17




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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 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.
    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.
    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. 18




---



##### Table of Contents




    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 you.    Overview
    of APCapital
      Form 10-K.
  four-for-three Form 10-Q
  Description
    of Ratios and Other Metrics Analyzed
    Underwriting Gain or Loss:
  Loss Ratio:
 19




---



##### Table of Contents



Underwriting Expense Ratio:
  Combined Ratio:
  Investment Yield:
          Critical
    Accounting Policies
   20




---



##### Table of Contents



Form 10-K.
  Investments
  held-to-maturity available-for-sale available-for-sale held-to-maturity. available-for-sale held-to-maturity
  Available-for-sale available-for-sale Held-to-maturity held-to-maturity held-to-maturity yield-to-maturity
    available-for-sale
   21




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##### Table of Contents



security-by-security
  
    Few recent transactions
    Price quotations that are not based on current information
    Significant increases in implied liquidity risk premiums and
    yields
    Wide bid-ask spreads or a significant increase in bid-ask spreads
    Significant decline or absence of a market for new issuances
    Little publicly released information        
    The remaining payment terms of the security;
    Prepayment risk and speeds;
    The financial condition of the issuer;
    Expected defaults; and
    The value of any underlying collateral.   22




---



##### Table of Contents



available-for-sale held-to-maturity held-to-maturity
      
    Our ability and intent to retain the investment for a period of
    time sufficient to allow for an anticipated recovery in value;
    The duration and extent to which the fair value has been less
    than cost;
    The financial condition, near-term and long-term earnings and
    cash flow prospects of the issuer, including relevant industry
    conditions and trends, and implications of rating agency
    actions; and
    The specific reasons that a security is in a significant
    unrealized loss position, including market conditions that could
    affect access to liquidity.   23




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##### Table of Contents



Results
    of Operations  Three and Six Months Ended
    June 30, 2009 Compared to the Three and Six Months Ended
    June 30, 2008
    Three Months EndedJune 30,


Change2009


2008


Dollar


Percentage(2)(Dollars in thousands)Direct premiums written

$
24,245


$
26,444


$
(2,199
)


(8.3
)%Net premiums written

$
23,389


$
25,499


$
(2,110
)


(8.3
)%Net premiums earned

$
28,382


$
31,420


$
(3,038
)


(9.7
)%Losses and loss adjustment expensesCurrent year losses


23,200



24,670



(1,470
)


6.0
%Prior year losses


(10,087
)


(7,003
)


(3,084
)


44.0
%Total


13,113



17,667



(4,554
)


25.8
%Underwriting expenses


7,319



6,623



696



(10.5
)%Total underwriting gain


7,950



7,130



820



11.5
%Other revenue (expense) itemsInvestment income


8,028



9,235



(1,207
)


(13.1
)%Net realized losses






74



(74
)


100.0
%Other income


212



206



6



2.9
%Other expenses(1)


(846
)


(1,115
)


269



24.1
%Total other revenue and expense items


7,394



8,400



(1,006
)


(12.0
)%Income before federal income taxes


15,344



15,530



(186
)


(1.2
)%Federal income tax expense


4,354



4,487



(133
)


3.0
%Net income

$
10,990


$
11,043


$
(53
)


(0.5
)%Loss Ratio:Accident year


81.7
%


78.5
%






3.2
%Prior years


(35.5
)%


(22.3
)%






(13.2
)%Calendar year


46.2
%


56.2
%






(10.0
)%Underwriting expense ratio


25.8
%


21.1
%






4.7
%Combined ratio


72.0
%


77.3
%






(5.3
)%Pre-tax investment yield


3.97
%


4.38
%






(0.4
)%Return on beginning equity (annualized)


17.3
%


16.8
%






0.5
%     (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.(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.  24




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##### Table of Contents



Six Months EndedJune 30,


Change2009


2008


Dollar


Percentage(2)(Dollars in thousands)Direct premiums written

$
54,367


$
60,115


$
(5,748
)


(9.6
)%Net premiums written

$
52,109


$
57,674


$
(5,565
)


(9.6
)%Net premiums earned

$
57,688


$
63,067


$
(5,379
)


(8.5
)%Losses and loss adjustment expensesCurrent year losses


47,036



49,288



(2,252
)


4.6
%Prior year losses


(18,311
)


(15,423
)


(2,888
)


18.7
%Total


28,725



33,865



(5,140
)


15.2
%Underwriting expenses


14,451



13,639



812



(6.0
)%Total underwriting gain


14,512



15,563



(1,051
)


(6.8
)%Other revenue (expense) itemsInvestment income


16,218



19,192



(2,974
)


(15.5
)%Net realized losses






(708
)


708



100.0
%Other income


435



395



40



10.1
%Other expenses(1)


(1,818
)


(2,332
)


514



22.0
%Total other revenue and expense items


14,835



16,547



(1,712
)


(10.3
)%Income before federal income taxes


29,347



32,110



(2,763
)


(8.6
)%Federal income tax expense


8,270



9,693



(1,423
)


14.7
%Net income

$
21,077


$
22,417


$
(1,340
)


(6.0
)%Loss Ratio:Accident year


81.5
%


78.2
%






3.3
%Prior years


(31.7
)%


(24.5
)%






(7.2
)%Calendar year


49.8
%


53.7
%






(3.9
)%Underwriting expense ratio


25.1
%


21.6
%






3.5
%Combined ratio


74.9
%


75.3
%






(0.4
)%Pre-tax investment yield


3.97
%


4.53
%






(0.6
)%Return on beginning equity (annualized)


16.6
%


17.0
%






(0.4
)%     (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.  Overview
   25




---



##### Table of Contents



Premiums
    Written and Earned
  year-to-date
  For the Three Months Ended June 30,


For the Six Months Ended June 30,Change








Change2009


2008


Dollar


Percentage


2009


2008


Dollar


Percentage(Dollars in thousands)


(Dollars in thousands)Direct premiums writtenMichigan

$
8,883


$
9,409


$
(526
)


(5.6
)%

$
17,552


$
19,249


$
(1,697
)


(8.8
)%Illinois


6,988



7,252



(264
)


(3.6
)%


15,335



15,806



(471
)


(3.0
)%Ohio


4,077



4,830



(753
)


(15.6
)%


9,950



12,277



(2,327
)


(19.0
)%New Mexico


3,378



3,952



(574
)


(14.5
)%


8,187



9,024



(837
)


(9.3
)%Kentucky


524



574



(50
)


(8.7
)%


2,387



2,711



(324
)


(12.0
)%Other


395



427



(32
)


(7.5
)%


956



1,048



(92
)


(8.8
)%Total

$
24,245


$
26,444


$
(2,199
)


(8.3
)%

$
54,367


$
60,115


$
(5,748
)


(9.6
)%Net premiums written

$
23,389


$
25,499


$
(2,110
)


(8.3
)%

$
52,109


$
57,674


$
(5,565
)


(9.6
)%Ratio of net premiums written to direct


96.5
%


96.4
%






0.1
%


95.8
%


95.9
%






(0.1
)%   year-to-date
    year-to-date
  year-to-date
  Loss
    and Loss Adjustment Expenses
   26




---



##### Table of Contents



Form 10-K.
  Underwriting
    Expenses
  year-to-date
  Investment
    Income
  year-to-date
 27




---



##### Table of Contents



Net
    Realized Losses
  year-to-date
  Other
    Expenses
    Income
    Taxes
  year-to-date
  Liquidity
    and Capital Resources
      Parent
    Company
  Form 10-K.
   28




---



##### Table of Contents



Form 10-Q,
    Consolidated
      For the Six Months Ended June 30,2009


2008(Dollars in thousands)Cash from (for):Premiums received

$
60,040


$
64,253Investment income collected


18,398



20,734Loss and loss adjustment expenses paid


(29,573
)


(35,129
)Commissions and other acquisition costs


(5,295
)


(6,021
)Net reinsurance impact


891



585Income taxes paid


(7,843
)


(7,501
)Salaries and other employee costs


(12,337
)


(11,873
)Other


(7,034
)


(6,846
)Net cash flows from operations

$
17,247


$
18,202   available-for-sale held-to-maturity held-to-maturity
 29




---



##### Table of Contents



Financial
    Condition
    Statutory
    Capital and Surplus
    Reserves
    for Unpaid Losses and Loss Adjustment Expenses
      June 30,


December 31,2009


2008


Change


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

$
240,817


$
236,093


$
4,724



2.0
%Number of open claims


1,349



1,418



(69
)


(4.9
)%Average net case reserve per open claim

$
178,515


$
166,497


$
12,018



7.2
%Net IBNR reserves

$
291,253


$
303,856


$
(12,603
)


(4.1
)%Total net reserves

$
532,070


$
539,949


$
(7,879
)


(1.5
)%      30




---



##### Table of Contents



Six MonthsEnded


Year EndedJune 30, 2009


December 31, 2008(In thousands)Beginning balance, gross

$
644,396


$
664,117Less, reinsurance recoverables


(81,546
)


(104,648
)Net reserves, beginning balance


562,850



559,469Incurred related toCurrent year


47,036



97,490Prior years


(18,311
)


(32,179
)28,725



65,311Paid related toCurrent year


(1,101
)


(3,012
)Prior years


(34,131
)


(58,918
)(35,232
)


(61,930
)Net reserves, ending balance


556,343



562,850Plus, reinsurance recoverables


79,453



81,546Ending balance, gross

$
635,796


$
644,396Development as a % of beginning net reserves


(3.3
)%


(5.8
)%    31




---



##### Table of Contents



Investments
    June 30, 2009


December 31, 2008Carrying


% of


Carrying


% ofValue(1)


Portfolio


Value(1)


PortfolioU.S. government obligations

$
14,952



2.3
%

$
64,458



9.2
%Tax-exempt municipal securities


382,735



58.9
%


383,547



54.4
%Corporate securities


118,852



18.3
%


105,824



15.0
%Mortgage-backed securities


133,222



20.5
%


150,862



21.4
%Total fixed-income securities

$
649,761



100.0
%

$
704,691



100.0
%     (1)
    
    Carrying value for
    available-for-sale
    securities is fair value, whereas
    held-to-maturity
    securities are carried at amortized cost.      June 30, 2009


December 31, 2008Carrying


% of


Carrying


% ofRating

Value(1)


Total


Value(1)


TotalAAA

$
303,005



46.7
%

$
377,392



53.6
%AA


247,063



38.0
%


234,543



33.3
%A


65,303



10.1
%


63,723



9.0
%BBB


28,246



4.3
%


22,812



3.2
%643,617



99.1
%


698,470



99.1
%Private Placement


6,144



0.9
%


6,221



0.9
%Total

$
649,761



100.0
%

$
704,691



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.   32




---



##### Table of Contents



Form 10-Q,
    Other
    Significant Balance Sheet Items
        Contractual
    Obligations and Off-Balance Sheet Arrangements
  Form 10-K Form 10-Q,
  Effects
    of New Accounting Pronouncements
    Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  General
    available-for-sale held-to-maturity,
   33




---



##### Table of Contents



Qualitative
    Information About Market Risk
  available-for-sale held-to-maturity,
      held-to-maturity held-to-maturity
  Quantitative
    Information About Market Risk
  Interest
    Rate Risk
  available-for-sale available-for-sale
  June 30, 2009


December 31, 2008Portfolio


Change in


Modified


Portfolio


Change in


ModifiedChange in Rates

Value


Value


Duration


Value


Value


Duration(Dollars in thousands)


(Dollars in thousands)+2%

$
224,850


$
(13,528
)


2.86


$
209,579


$
(13,362
)


3.22+1%


231,482



(6,896
)


2.88



216,320



(6,621
)


3.160


238,378







3.13



222,941







3.43-1%


246,119



7,741



3.19



231,609



8,668



3.50-2%


253,981



15,603



3.25



239,957



17,016



3.57   Equity
    Price Risk
  available-for-sale
 34




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
      Changes
    in Internal Control Over Financial Reporting
   35




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds.    Maximum Dollar Value ofTotal Number


Shares that May Yet BeTotal





of Shares


Repurchased Under the Plans orNumber of


Average


Repurchased as


ProgramsShares


Price Paid


Part of Publicly


Discretionary


Rule 10b5-1Repurchased


per Share


Announced Plans


Plan(a)


Plan(b)For the month ended April 30, 2009


170,533


$
31.07



170,533


$
17,148,519


$
13,458,774For the month ended May 31, 2009


285,467


$
29.17



285,467


$
17,148,519


$
5,132,541For the month ended June 30, 2009


240,400


$
30.09



240,400


$
15,955,191


$
19,092,646For the three months ended June 30, 2009


696,400


$
29.95



696,400


$
15,955,191


$
19,092,646     (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,
    respectively, 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. Such unused
    Rule 10b5-1
    authorizations totalled $26,811,583 at December 31, 2008.
    The December 2008 authorizations were fully utilized in June
    2009 and on June 23, 2009, the Board authorized the
    repurchase of an additional $20 million of the
    Companys common shares pursuant to the
    Rule 10b5-1
    plan in 2009. 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.  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Number of VotesNominee

For


WithheldBilly B. Baumann, M.D.


10,258,660



319,085R. Kevin Clinton


10,258,668



319,077Larry W. Thomas


10,254,836



322,909   Number of Votes


BrokerFor


Against


Abstain


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


10,560,544



14,064



3,135



2   Item 6.
    Exhibits  Exhibits.
   36




---



##### Table of Contents



SIGNATURES
      By:
    /s/  R.
    Kevin Clinton     By:
    /s/  Frank
    H. Freund       37




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Exhibit Description31
.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
    June 30, 2009.  38