##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  Form 10-K
   FOR ANNUAL AND TRANSITION
    REPORTS PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2007o

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

38-3543910(State or other jurisdiction
    of

(IRS employerincorporation or
    organization)

identification
    number)   1301 North Hagadorn Road, East Lansing, Michigan 48823
 (Address of principal executive
    offices) (Zip Code)
  Registrants telephone number, including area code:
 (517) 351-1150
   Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, no par value
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon stock, no par value

Nasdaq Global Select Market    Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---





TABLE OF CONTENTS  Explanatory NoteItem 1. Business.GeneralItem 1A. Risk Factors.Item 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market For Registrants Common Equity, Related Stockholder Matters and issuer purchases of equity securitiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETS December 31, 2007 and 2006CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2007, 2006, and 2005CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME For the Years Ended December 31, 2007, 2006 and 2005CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2007, 2006, and 2005NOTES TO CONSOLIDATED FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMSCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESAmendment No. 1 Master Agency AgreementConsent of BDO Seidman, LLPCertification of Chief Executive Officer pursuant to Rule 13a-14(a)Certification of Chief Financial Officer pursuant to Rule 13a-14(a)Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350    Table of Contents  
  Explanatory
    Note
  Form 10-K
 
  Item 1.
    Business. 
  General
       1




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##### Table of Contents



For the Year Ended December 31,2007


2006


2005% of





% of





% ofTotal





Total





Total(In thousands)Direct premiums written:Michigan

$
47,583



35.1%


$
50,302



32.1%


$
53,489



28.8%Illinois


35,160



26.0%



48,421



30.9%



54,536



29.4%Ohio


25,751



19.0%



28,292



18.0%



31,234



16.8%New Mexico


19,061



14.1%



20,759



13.2%



21,667



11.7%Kentucky


5,053



3.7%



5,878



3.7%



10,337



5.6%All Other


2,807



2.1%



3,228



2.1%



3,799



2.0%Total medical professional liability

$
135,415



100.0%



156,880



100.0%



175,062



94.4%Exited lines of business






0.0%



(14
)


0.0%



2,057



1.1%PIC-Florida(1)






0.0%







0.0%



8,392



4.5%Total direct premiums written

$
135,415



100.0%


$
156,866



100.0%


$
185,511



100.0%Net premiums earned:Medical professional liability

$
138,917



75.9%


$
149,790



75.2%


$
160,256



75.3%Exited lines of business


6



0.0%



(102
)


−0.1%



713



0.3%PIC-Florida(1)






0.0%







0.0%



3,314



1.6%Total net premiums earned


138,923



75.9%



149,688



75.1%



164,283



77.2%Investment income


43,506



23.8%



45,253



22.7%



45,163



21.2%Realized (losses) gains


(111
)


−0.1%



3,310



1.7%



2,033



1.0%Other income


815



0.4%



1,031



0.5%



1,387



0.7%Total revenue

$
183,133



100.0%


$
199,282



100.0%


$
212,866



100.0%     (1)
    
    In 2005, the accounts of PIC-Florida were included in the
    Consolidated Financial Statements. In 2007 and 2006, PIC-Florida
    is no longer being consolidated, but rather is accounted for
    using the equity method of accounting. See Note 1 to the
    Consolidated Financial Statements for more information.    Products and Services.
 2




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Marketing.
  Item 1-
      Underwriting and Pricing.
      Claims Management.
 3




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##### Table of Contents



Reinsurance.
 4




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##### Table of Contents



% of 2007Amounts


2007 Total Ceded


AmountsA.M. Best

Recoverable From


Premiums


Recoverable FromReinsurer

Rating

Reinsurers


Written


Reinsurers(Dollars in thousands)Hannover Ruckversicherungs


A


$
41,678


$
1,301



38.3
%Munich Reins Amer


A+



26,023



252



23.9
%Transatlantic Reinsurance Company


A+



8,986



(13
)


8.3
%Aspen Ins UK Ltd


A



6,137



1,057



5.6
%       Capital and Surplus.
  Competition
    A.M. Best
    Company Rating
   5




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##### Table of Contents



Important
    Agency Relationship
      5-year
  Insurance
    Regulatory Matters
  General.
    Holding Company Regulation.
 6




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Change of Control.
  Risk-Based Capital Requirements.
    IRIS Requirements.
   7




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##### Table of Contents



Guaranty Fund.
  Employees
    Uncertainties
    Relating To Forward-Looking Statements
       
  Item 1A.
    Risk
    Factors.    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.
   8




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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.
   9




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##### Table of Contents



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 .
    
    place limitations on the types and amounts of our investments,
    review and approve or deny premium rate increases,
    set standards of solvency to be met and maintained,
    review reserve levels, 10




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
    review change in control transactions,
    limit the ability to pay dividends,
    prescribe the form and content of, and to examine, our
    statutory-basis financial statements, and
    place limitations on our ability to transact business with and
    between our affiliated insurance companies.    Our
    status as an insurance holding company with no direct operations
    could adversely affect our ability to meet our debt obligations
    and fund future share repurchases.
    Legislative
    or judicial changes in the tort system may have adverse or
    unintended consequences that could materially and adversely
    affect our results of operations and financial
    condition.
    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.
   
  Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties   11




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##### Table of Contents



Item 3.
    Legal
    Proceedings   
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   
  PART II
 
  Item 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and issuer purchases of equity securities    Sale PriceHigh


Low2007October 1  December 31, 2007

$
46.68


$
37.92July 1  September 30, 2007


42.00



31.25April 1  June 30, 2007


42.55



37.89January 1  March 31, 2007


40.88



35.272006October 1  December 31, 2006

$
41.70


$
31.69July 1  September 30, 2006


34.64



29.95April 1  June 30, 2006


35.06



29.25January 1  March 31, 2006


34.04



30.17      12




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##### Table of Contents



Total





Total Number of


DollarNumber of


Average


Shares Repurchased


Value of Shares that May Yet BeShares


Price Paid


as 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 October 31, 2007


37,600


$
41.43



37,600


$
25,019,926


$
40,278,251For the month ended November 30, 2007


204,400


$
41.93



204,400


$
17,261,579


$
39,466,671For the month ended December 31, 2007


234,521


$
43.94



234,521


$
7,018,625


$
39,403,644For the three months ended December 31, 2007


476,521


$
42.88



476,521


$
7,018,625


$
39,403,644For the year ended December 31, 2007


1,472,121


$
39.23



1,472,121


$
7,018,625


$
39,403,644     (a)
    
    On May 22, 2007, the Board of Directors authorized
    management to repurchase, at managements discretion,
    additional common shares with a cost of up to $15 million
    in the open market or in privately negotiated transactions
    during the Companys normal trading windows. On
    August 16, 2007, the Board of Directors authorized the
    repurchase of an additional $20 million under the
    discretionary plan. The timing of the purchases and the number
    of shares to be bought at any time depend on market conditions
    and the Companys capital resources and requirements. The
    discretionary plan has no expiration date and may be terminated
    or discontinued at any time or from time to time. In addition to
    the authorizations reflected in the table above, on
    February 7, 2008, the Board of Directors authorized an
    additional $25 million to repurchase its common shares
    under the Companys discretionary plan.(b)
    
    On October 27, 2006, the Companys Board of Directors
    adopted an additional stock repurchase plan for 2007 under
    Rule 10b5-1
    and authorized an additional share repurchase of
    $32 million of its common shares. On October 29, 2007,
    the Companys Board of Directors authorized the repurchase
    of an additional $20 million of its common shares in 2008
    pursuant to a plan under
    Rule 10b5-1.
    In addition, the Board authorized the rollover into the 2008
    Rule 10b5-1
    plan of any unused dollars allocated to the 2007
    Rule 10b5-1
    plan adopted by the Board in October 2006, which totaled
    $19.4 million. The
    Rule 10b5-1
    plan share repurchases are made pursuant to a formula in the
    plan and are expected to continue until the entire
    authorizations are utilized, subject to conditions specified in
    the plan, but not later than December 31, 2008. The Company
    may terminate the plan at any time. 13




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##### Table of Contents



Item 6.
    Selected
    Financial Data    For the Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Revenue:Direct premiums written

$
135,415


$
156,866


$
185,511


$
213,945


$
256,235Net premiums written

$
130,808


$
146,723


$
157,382


$
186,431


$
224,647Net premiums earned

$
138,923


$
149,688


$
164,283


$
200,579


$
224,590Investment income


43,506



45,253



45,163



47,373



43,294Net realized (losses) gains


(111
)


3,310



2,033



1,551



2,403Other income


815



1,031



1,387



1,177



1,104Total revenues and other income


183,133



199,282



212,866



250,680



271,391Losses and expenses:Losses and loss adjustment expenses


69,428



100,458



127,124



177,786



252,742Underwriting expenses


30,141



30,521



33,080



42,681



51,104Investment expenses


910



845



1,411



2,460



2,940Interest expense


3,139



3,057



2,518



1,895



1,498Amortization expense










625



915



261Other expenses


1,362



1,398



3,241



5,193



3,729Total losses and expenses


104,980



136,279



167,999



230,930



312,274Income (loss) before federal income tax (benefit) expense and
    minority interest


78,153



63,003



44,867



19,750



(40,883
)Federal income tax expense (benefit)(a)


25,362



19,816



(27,952
)


(290
)


36,296Income (loss) before minority interest


52,791



43,187



72,819



20,040



(77,179
)Minority interest in net (income) loss of consolidated subsidiary










(453
)


(10
)


348Net income (loss)

$
52,791


$
43,187


$
72,366


$
20,030


$
(76,831
)Net income (loss) per share  basic

$
4.82


$
3.59


$
5.65


$
1.58


$
(6.01
)Weighted average shares outstanding  basic(b)


10,951



12,015



12,807



12,683



12,781Net income (loss) per share  diluted

$
4.73


$
3.52


$
5.53


$
1.53




(c)Weighted average shares outstanding  diluted(b)


11,163



12,274



13,094



13,082




(c)Cash dividends paid per share

$
0.20


$



$



$



$
      (a)
    
    Federal income tax expense includes (benefit) expense
    ($44.1) million, ($6.6) million and $50.7 million
    in 2005, 2004 and 2003, respectively, related to the reversal,
    change in or establishment of a deferred tax valuation allowance. 14




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##### Table of Contents



(b)
    
    Weighted average shares outstanding and the associated earnings
    per share amounts, both basic and diluted, have been
    retroactively adjusted to reflect a three-for-two stock split
    effective November 1, 2006.(c)
    
    As the Company was in a net loss position for the year ended
    December 31, 2003, the dilutive effect of options or other
    share-based awards was not calculated as the impact would have
    been anti-dilutive.  At or For the Year Ended December 31,2007


2006


2005


2004


2003(Dollars in thousands)Balance Sheet Data:Total cash and investments

$
858,947


$
875,276


$
854,359


$
858,098


$
834,005Total assets


1,057,462



1,095,815



1,109,328



1,069,899



1,063,046Total liabilities


793,905



827,005



845,475



865,575



859,037Total GAAP shareholders equity


263,557



268,810



261,212



202,124



201,808GAAP Ratios:Loss ratio


50.0
%


67.1
%


77.4
%


88.6
%


112.5
%Underwriting expense ratio


21.7



20.4



20.1



21.3



22.8Combined ratio


71.7



87.5



97.5



109.9



135.3Statutory DataLoss ratio


49.2
%


67.5
%


77.6
%


88.6
%


112.5
%Underwriting expense ratio(a)


23.7



22.3



22.7



23.8



23.3Combined ratio


72.9



89.8



100.3



112.4



135.8Surplus

$
221,595


$
248,929


$
240,135


$
210,874


$
150,270Ratio of statutory net premiums written to surplus


0.59 to 1



0.59 to 1



0.66 to 1



0.88 to 1



1.49 to 1     (a)
    
    The statutory underwriting expense ratio is calculated by
    dividing statutory underwriting expenses, which may differ from
    GAAP, by net premiums written. Whereas, the GAAP underwriting
    expense ratio uses underwriting expenses, determined in
    accordance with GAAP, as the numerator and net premiums earned
    as the denominator in the calculation. 
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations     15




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Critical
    Accounting Policies
    Unpaid
    Losses and Loss Adjustment Expenses
       16




---



##### Table of Contents




    paid development;


    incurred development;
    average loss; and
    Bornhuetter-Ferguson.   17




---



##### Table of Contents



Investments
         18




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##### Table of Contents




    Our ability and intent to retain the investment for a period of
    time sufficient to allow for an anticipated recovery in value;
    The recoverability of principal and interest related to the
    security;
    The duration and extent to which the fair value has been less
    than cost for equity securities, or amortized cost for fixed
    maturity securities;
    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.      Reserve
    for Extended Reporting Period Claims
    Revenue
    Recognition
   19




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Reinsurance
          Income
    Taxes
       20




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##### Table of Contents



Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement No. 109,
    Accounting for Income Taxes.
  Deferred
    Policy Acquisition Costs
    Overview
    of APCapital
     21




---



##### Table of Contents



Description
    of Ratios and Other Metrics Analyzed
    Underwriting Gain or Loss:
  Loss Ratio:
  Underwriting Expense Ratio:
  Combined Ratio:
  Investment Yield:
       22




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##### Table of Contents



Results
    of Operations
    2007 vs. 2006


Percentage





2006 vs. 2005


Percentage2007


2006


Change


Change(2)


2005


Change


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

$
135,415


$
156,866


$
(21,451
)


−13.7
%

$
185,511


$
(28,645
)


−15.4
%Net premiums written

$
130,808


$
146,723


$
(15,915
)


−10.8
%

$
157,382


$
(10,659
)


−6.8
%Net earned premium

$
138,923


$
149,688


$
(10,765
)


−7.2
%

$
164,283


$
(14,595
)


−8.9
%Losses and loss adjustment expenses Current year losses


103,673



113,338



(9,665
)


−8.5
%


131,496



(18,158
)


−13.8
%Prior year development


(34,245
)


(12,880
)


(21,365
)


165.9
%


(4,372
)


(8,508
)


194.6
%Total


69,428



100,458



(31,030
)


−30.9
%


127,124



(26,666
)


−21.0
%Underwriting expenses


30,141



30,521



(380
)


−1.2
%


33,080



(2,559
)


−7.7
%Total underwriting gain


39,354



18,709



20,645



110.3
%


4,079



14,630



358.7
%Investment income


43,506



45,253



(1,747
)


−3.9
%


45,163



90



0.2
%Net realized (losses) gains


(111
)


3,310



(3,421
)


−103.4
%


2,033



1,277



62.8
%Other income


815



1,031



(216
)


−21.0
%


1,387



(356
)


−25.7
%Other expenses(1)


(5,411
)


(5,300
)


(111
)


2.1
%


(7,795
)


2,495



−32.0
%Income before taxes and minority interest


78,153



63,003



15,150



24.0
%


44,867



18,136



40.4
%Federal income tax expense (benefit)


25,362



19,816



5,546



28.0
%


(27,952
)


47,768



170.9
%Income before minority interest


52,791



43,187



9,604



22.2
%


72,819



(29,632
)


−40.7
%Minority interest














0.0
%


(453
)


453



−100.0
%Net income

$
52,791


$
43,187


$
9,604



22.2
%

$
72,366


$
(29,179
)


−40.3
%Loss Ratio:Accident year


74.6
%


75.7
%


−1.1
%






80.0
%


−4.3
%Prior years


−24.6
%


−8.6
%


−16.0
%






−2.6
%


−6.0
%Calendar year


50.0
%


67.1
%


−17.1
%






77.4
%


−10.3
%Underwriting expense ratio


21.7
%


20.4
%


1.3
%






20.1
%


0.3
%Combined ratio


71.7
%


87.5
%


−15.8
%






97.5
%


−10.0
%Beginning GAAP Equity

$
268,810


$
261,212


$
7,598






$
202,124


$
59,088Return on Equity


19.6
%


16.5
%


3.1
%






35.8
%


−19.3
%     (1)
    
    Other expenses includes investment expenses, interest expense,
    amortization expense, general and administrative expenses and
    other expenses as reported in the Consolidated Statements of
    Income included elsewhere in this report.(2)
    
    A positive percentage change represents an increase, while a
    negative percentage change represents a decrease.  2007 Compared to 2006.
 23




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##### Table of Contents



Premiums
    For the Year Ended December 31,Change2007


2006


Dollar


Percentage(Dollars in thousands)Medical professional liability:Michigan

$
47,583


$
50,302


$
(2,719
)


−5.4
%Illinois


35,160



48,421



(13,261
)


−27.4
%Ohio


25,751



28,292



(2,541
)


−9.0
%New Mexico


19,061



20,759



(1,698
)


−8.2
%Kentucky


5,053



5,878



(825
)


−14.0
%All Other


2,807



3,228



(421
)


−13.0
%Subtotal


135,415



156,880



(21,465
)


−13.7
%Exited lines of business






(14
)


14



−100.0
%Total direct premiums written

$
135,415


$
156,866


$
(21,451
)


−13.7
%         Loss
    and Loss Adjustment Expenses
   24




---



##### Table of Contents



For the Year EndedDecember 31,2007(Dollars in millions)Prior year development by accident year:2006

$
(5.7
)2005


(7.1
)2004


(8.9
)2003


(2.4
)2002


(6.4
)2001


(2.4
)2000 and prior


(1.3
)$
(34.2
)       Underwriting
    Expenses
   25




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##### Table of Contents



Investment
    Income
      Other
    Expenses
    For the Year Ended December 31,Change2007


2006


Dollar


Percentage(Dollars in thousands)Other expenses Investment expenses

$
910


$
845


$
65



7.7
%Interest expense


3,139



3,057



82



2.7
%General and administrative expenses


1,410



1,298



112



8.6
%Other


(48
)


100



(148
)


−148.0
%Total

$
5,411


$
5,300


$
111



2.1
%    26




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##### Table of Contents



Federal
    Income Taxes
    2006 Compared to 2005.
  Premiums
    For the Year Ended December 31,Change2006


2005


Dollar


Percentage(Dollars in thousands)Medical professional liability:Michigan

$
50,302


$
53,489


$
(3,187
)


−6.0
%Illinois


48,421



54,536



(6,115
)


−11.2
%Ohio


28,292



31,234



(2,942
)


−9.4
%New Mexico


20,759



21,667



(908
)


−4.2
%Kentucky


5,878



10,337



(4,459
)


−43.1
%All Other


3,228



3,799



(571
)


−15.0
%Subtotal


156,880



175,062



(18,182
)


−10.4
%Exited lines of business


(14
)


2,057



(2,071
)


−100.7
%PIC-Florida






8,392



(8,392
)


−100.0
%Total direct premiums written

$
156,866


$
185,511


$
(28,645
)


−15.4
%      27




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##### Table of Contents



Loss
    and Loss Adjustment Expenses
      Underwriting
    Expenses
    Investment
    Income
     28




---



##### Table of Contents



Other
    Expenses
    For the Year Ended December 31,Change2006


2005


Dollar


Percentage(dollars in thousands)Other expensesInvestment expenses

$
845


$
1,411


$
(566
)


−40.1%Interest expense


3,057



2,518



539



21.4%Amortization expense






625



(625
)


−100.0%General and administrative expenses


1,298



2,704



(1,406
)


−52.0%Other


100



537



(437
)


−81.4%Total

$
5,300


$
7,795


$
(2,495
)


−32.0%       Federal
    Income Taxes
    Liquidity
    and Capital Resources
     29




---



##### Table of Contents



30




---



##### Table of Contents



Year Ended December 31,2007


2006


2005(In thousands)Cash from (for):Premiums received

$
143,175


$
162,841


$
187,083Investment income collected


46,138



43,334



48,507Loss and loss adjustment expenses paid


(85,373
)


(95,690
)


(140,375
)Commissions and other acquisition cost


(12,134
)


(13,915
)


(15,229
)Net reinsurance impact


2,172



(4,381
)


(8,421
)Income taxes paid(1)


(16,852
)


(7,917
)


37Salaries and other employee costs


(18,448
)


(17,586
)


(18,245
)Other


(12,685
)


(10,702
)


(14,467
)Net cash flows from operations

$
45,993


$
55,984


$
38,962     (1)
    
    Income taxes paid do not equal the supplemental disclosures in
    the Consoldiated Statement of Cash Flows as a result of the
    excess tax benefits from share-based awards, which are reported
    as financing cash flows.          Financial
    Condition
   31




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##### Table of Contents



Statutory
    Capital and Surplus
    Reserves
    for Unpaid Losses and Loss Adjustment Expenses
    At or For the Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005Medical professional liability:Number of reported claims


952



1,168



1,513



−18.5%



−22.8%Number of open claims


1,741



2,256



2,991



−22.8%



−24.6%Number of IBNR claims(1)


1,584



1,882



1,954



−15.8%



−3.7%Average net case reserve per open claim

$
144,754


$
137,918


$
122,413



5.0%



12.7%Average net total reserve per open plus IBNR claim


160,399



133,449



110,063



20.2%



21.2%Average net paid loss per claim closed with payment


67,500



59,061



75,898



14.3%



−22.2%     (1)
    
    IBNR claim counts are estimates based on actuarial projections.   32




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##### Table of Contents



At or For the Year Ended December 31,


% Change


% Change2007


2006


2005


2007 vs. 2006


2006 vs. 2005(In thousands)Medical professional liability:Net case reserves

$
252,017


$
311,142


$
366,138



−19.0%



−15.0%Net IBNR reserves


281,310



241,069



178,123



16.7%



35.3%Total net reserves


533,327



552,211



544,261



−3.4%



1.5%Other lines total net reserves


26,142



27,855



35,486



−6.1%



−21.5%Total net reserves  all lines

$
559,469


$
580,066


$
579,747



−3.6%



0.1%Medical professional liability as a percentage of total


95.3
%


95.2
%


93.9
%    33




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##### Table of Contents



1997


1998


1999


2000


2001


2002


2003


2004


2005


2006


2007Liability for unpaid losses and loss adjustment expenses net of
    reinsurancerecoverable

$
352,836


$
371,982


$
393,582


$
413,954


$
505,555


$
542,026


$
574,281


$
590,342


$
579,747


$
580,066


$
559,469Cumulative net paid as of:End of year


86,703



85,290



95,471



124,479



161,770



181,658



142,633



130,793



96,971



87,326Two years later


152,656



146,497



182,541



236,653



293,852



295,350



260,178



219,013



176,778Three Years later


188,665



198,774



251,448



322,226



367,289



381,057



327,830



285,292Four years later


215,426



231,748



292,766



363,871



420,662



426,928



377,435Five Years later


232,323



251,810



312,968



390,450



443,256



455,880Six years later


243,012



262,260



326,266



402,808



458,853Seven Years later


248,282



271,563



333,843



411,337Eight years later


251,623



275,451



338,799Nine Years later


253,681



278,918Ten Years later


256,184Re-estimated Net Liability as of:End of year


327,542



350,114



383,004



435,069



511,185



585,469



580,466



585,019



566,867



545,821Two years later


314,613



334,827



373,400



449,871



538,980



590,665



583,246



572,569



538,466Three Years later


290,490



313,248



374,729



458,846



540,239



592,617



575,222



551,067Four years later


273,982



303,540



366,818



456,519



541,887



586,472



562,630Five Years later


268,754



296,834



359,753



455,208



538,483



576,292Six years later


266,546



291,144



359,400



458,062



534,753Seven Years later


263,160



292,253



363,802



456,751Eight years later


262,650



294,327



362,648Nine Years later


265,467



293,238Ten Years later


263,595Net cumulative (deficiency) redundancy


89,241



78,744



30,934



(42,797
)


(29,198
)


(34,266
)


11,651



39,275



41,281



34,245Gross liability  end of year


407,746



422,987



457,072



483,273



597,046



637,494



672,495



690,825



685,714



688,031



664,118Reinsurance Recoverables


54,910



51,005



63,490



69,319



91,491



95,468



98,214



100,483



105,967



107,965



104,649Net Liability  end of year


352,836



371,982



393,582



413,954



505,555



542,026



574,281



590,342



579,747



580,066



559,469Gross re-estimated liability  latest


322,237



372,810



441,193



537,866



628,770



673,060



660,759



647,619



637,114



652,978Re-estimated reinsurance recoverables  latest


58,642



79,572



78,545



81,115



94,017



96,768



98,129



96,552



98,648



107,157Net re-estimated liability  latest


263,595



293,238



362,648



456,751



534,753



576,292



562,630



551,067



538,466



545,821Gross cumulative (deficiency) redundancy


85,509



50,177



15,879



(54,593
)


(31,724
)


(35,566
)


11,736



43,206



48,600



35,053    34




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##### Table of Contents



Net Loss and LAE ReservesLow End


Recorded


High Endof Range


Reserves


of Range(In thousands)Medical Professional Liability

$
493,437


$
533,327


$
564,077Other Insurance Lines


24,347



26,142



27,872Total

$
517,784


$
559,469


$
591,949       Increase(Decrease) inPre-tax Income(In thousands)Low end of range

$
41,685High end of range

$
(32,480
)   Other
    Significant Balance Sheet Items
    December 31, 2007


December 31, 2006Carrying


% of


Carrying


% ofValue(1)


Portfolio


Value(1)


PortfolioU.S. government obligations

$
145,021



19.1
%

$
145,083



19.1
%Tax-exempt municipal securities


269,013



35.4
%


209,150



27.5
%Corporate securities


193,037



25.4
%


242,192



31.8
%Mortgage-backed securities


152,892



20.1
%


164,148



21.6
%Total fixed-income securities

$
759,963



100.0
%

$
760,573



100.0
%     (1)
    
    Carrying value for available-for-sale securities is fair value,
    whereas held-to-maturity securities are carried at amortized
    cost.   35




---



##### Table of Contents



trued-up
 36




---



##### Table of Contents



paid-in-capital
  Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due by PeriodLess Than


1 - 3


3 - 5


More ThanContractual Obligations

Total


1 Year


Years


Years


5 Years(In thousands)Reserves for unpaid loss and loss adjustment expenses(1)

$
664,117


$
110,682


$
189,898


$
127,933


$
235,604Operating leases


4,658



846



1,684



1,497



631Real estate assessments


324



86



162



76



Long-term debt(2)


33,928



33,928











Total

$
703,027


$
145,543


$
191,743


$
129,506


$
236,235     (1)
    
    The Companys reserves for unpaid loss and loss adjustment
    expenses are an estimate of future cash flows necessary to
    fulfill insurance obligations based on insured events that have
    already occurred, but the amount and timing of the cash outflow
    is uncertain.(2)
    
    The long-term debt is more fully described in Note 8 of the
    Notes to Consolidated Financial Statements. Amounts included
    herein assume $3 million of annual interest payments and
    anticipates that the debt will be repaid in 2008, the earliest
    date at which the debt may be retired. 37




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##### Table of Contents



Effects
    of New Accounting Pronouncements
   
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  General
      Qualitative
    Information About Market Risk
           38




---



##### Table of Contents



Quantitative
    Information About Market Risk
    December 31, 2007


December 31, 2006Portfolio


Change in


Modified


Portfolio


Change in


ModifiedChange in Rates

Value


Value


Duration


Value


Value


Duration(Dollars in thousands)


(Dollars in thousands)+2%

$
248,140


$
(14,161
)


2.74


$
239,943


$
(15,058
)


2.88+1%


255,182



(7,119
)


2.82



247,111



(7,890
)


2.890


262,301







3.06



255,001







3.16−1%


270,958



8,657



3.13



263,350



8,349



3.23−2%


279,652



17,351



3.20



272,152



17,151



3.33  39




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data 
  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Internal Control 
    Integrated Framework
  BDO
    SEIDMAN, LLP
      40




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
  CONSOLIDATED
    BALANCE SHEETS
    December 31, 2007 and 2006
  December 31,2007


2006In thousands,except share dataASSETSInvestments:Fixed-income securitiesAvailable-for-sale, at fair value

$
262,301


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


497,662



505,572Other investments


11,487



6,476Total investments


771,450



767,049Cash and cash equivalents


87,498



108,227Premiums receivable


35,542



43,068Reinsurance recoverable


106,961



109,013Deferred federal income taxes


22,439



32,795Federal income tax recoverable


1,076



Property and equipment, net


13,789



9,775Other assets


18,707



25,888Total assets

$
1,057,462


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

$
664,117


$
688,031Unearned premiums


60,080



70,744Long-term debt


30,928



30,928Federal income taxes payable






189Accrued expenses and other liabilities


38,780



37,113Total liabilities


793,905



827,005Shareholders EquityCommon stock, no par value, 50,000,000 shares authorized:10,127,740 and 11,556,575 shares outstanding at
    December 31, 2007 and 2006, respectively






Additional
    paid-in-capital






41,106Retained earnings


257,502



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


6,055



4,769Total shareholders equity


263,557



268,810Total liabilities and shareholders equity

$
1,057,462


$
1,095,815    41




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
  CONSOLIDATED
    STATEMENTS OF INCOME
    For the Years Ended December 31, 2007, 2006, and 2005
  Year Ended December 31,2007


2006


2005(In thousands, except per share data)Revenues and Other IncomeNet premiums written

$
130,808


$
146,723


$
157,382Change in unearned premiums


8,115



2,965



6,901Net premiums earned


138,923



149,688



164,283Investment income


43,506



45,253



45,163Net realized (losses) gains


(111
)


3,310



2,033Other income


815



1,031



1,387Total revenues and other income


183,133



199,282



212,866ExpensesLosses and loss adjustment expenses


69,428



100,458



127,124Underwriting expenses


30,141



30,521



33,080Investment expenses


910



845



1,411Interest expense


3,139



3,057



2,518Amortization expense










625General and administrative expenses


1,410



1,298



2,704Other (revenue) expenses


(48
)


100



537Total expenses


104,980



136,279



167,999Income before income taxes and minority interest


78,153



63,003



44,867Federal income tax expense (benefit)


25,362



19,816



(27,952
)Income before minority interest


52,791



43,187



72,819Minority interest in net income of consolidated subsidiary










(453
)Net income

$
52,791


$
43,187


$
72,366Earnings Per Share:Net incomeBasic

$
4.82


$
3.59


$
5.65Diluted

$
4.73


$
3.52


$
5.53Weighted Average Shares Outstanding:Basic


10,951



12,015



12,807Diluted


11,163



12,274



13,094    42




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
    AND COMPREHENSIVE INCOME
    For the Years Ended December 31, 2007, 2006 and 2005
  AccumulatedAdditional





OtherShares


Paid-in


Retained


ComprehensiveOutstanding(1)


Capital


Earnings


Income


Total(In thousands, except share and per share data)Balance, December 31, 2004


13,007,976


$
86,588


$
107,382


$
8,154


$
202,124Comprehensive incomeNet income










72,366







72,366Other comprehensive loss (Note 4)














(1,050
)


(1,050
)Total comprehensive income, net of taxes


















71,316Options exercised


146,304



1,719











1,719Amortization of restricted stock, net of tax






241











241Excess tax benefits from share-based awards






1,095











1,095Purchase and retirement of common stock


(650,250
)


(17,057
)










(17,057
)Forfeiture of restricted stock


(3,904
)


(29
)










(29
)Change in deferred tax valuation allowance






1,803











1,803Balance, December 31, 2005


12,500,126


$
74,360


$
179,748


$
7,104


$
261,212Comprehensive incomeNet income










43,187







43,187Other comprehensive loss (Note 4)














(2,335
)


(2,335
)Total comprehensive income, net of taxes


















40,852Options exercised


232,280



2,759











2,759Shares tendered/netted in connection with option exercise


(99,698
)


(3,913
)










(3,913
)Excess tax benefits from share-based awards






2,137











2,137SFAS No. 123R adoption






(46
)










(46
)Fair value compensation of share-based awards






571











571Purchase and retirement of common stock


(1,075,350
)


(34,762
)










(34,762
)Forfeiture of restricted stock


(764
)














Shares retired in connection with stock split


(19
)














Balance, December 31, 2006


11,556,575


$
41,106


$
222,935


$
4,769


$
268,810Comprehensive incomeNet income










52,791







52,791Other comprehensive income (Note 4)














1,286



1,286Total comprehensive income, net of taxes


















54,077Options exercised


81,020



976











976Shares tendered/netted in connection with option exercise


(37,734
)


(1,654
)










(1,654
)Excess tax benefits from share-based awards






1,031











1,031Cash dividends to shareholders, $0.20 per share










(2,097
)






(2,097
)Fair value compensation of share-based awards






160











160Purchase and retirement of common stock


(1,472,121
)


(41,619
)


(16,127
)






(57,746
)Balance, December 31, 2007


10,127,740


$



$
257,502


$
6,055


$
263,557     (1)
    
    Share amounts have been retroactively adjusted to reflect a
    three-for-two stock split effective November 1, 2006. See
    Note 1.   43




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
 
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    For the Years Ended December 31, 2007, 2006, and 2005
  Year Ended December 31,2007


2006


2005(In thousands)Cash flows from operating activitiesNet income

$
52,791


$
43,187


$
72,366Adjustments to reconcile net income to net cash from by
    operating activities Depreciation and amortization


3,128



3,010



4,888Net realized losses (gains)


111



(3,310
)


(2,033
)(Income) loss on equity method investees


(51
)


(788
)


100Change in fair value of derivatives










1,095Deferred federal income taxes


9,669



12,202



(30,246
)Federal income taxes recoverable/payable


(235
)


1,834



3,426Excess tax benefits from share-based awards


(1,031
)


(2,137
)


(1,095
)Share based compensation


160



571



371Minority interest in net income of consolidated subsidiary










453Changes in:Premiums receivable


7,526



4,736



3,885Reinsurance recoverable


2,052



(1,460
)


(6,056
)Unpaid losses and loss adjustment expenses


(23,914
)


2,317



(3,773
)Unearned premiums


(10,664
)


(6,890
)


(7,942
)Accrued expenses and other liabilities


(730
)


(3,055
)


325Other assets


7,181



5,767



3,198Net cash from operating activities


45,993



55,984



38,962Cash flows (for) from investing activitiesPurchasesAvailable-for-sale  fixed maturities


(56,234
)


(126,979
)


(22,046
)Held-to-maturity  fixed maturities


(5,312
)


(188,188
)


(112,912
)Other investments


(6,848
)


(386
)


(8,185
)Property and equipment


(5,070
)


(306
)


(1,089
)Sales and maturitiesAvailable-for-sale  fixed maturities


50,339



87,457



144,591Held-to-maturity  fixed maturities


11,049



26,314



62,014Other investments


2,425



12,268



5,067Property and equipment


22



6



32Deconsolidation of PIC-Florida






(2,941
)


Cash from miscellaneous sources










2,707Pending securities transactions






5,383



(12,846
)Net cash (for) from investing activities


(9,629
)


(187,372
)


57,333Cash flows for financing activitiesCommon stock repurchased


(57,746
)


(34,762
)


(17,057
)Excess tax benefits from share-based awards


1,031



2,137



1,095Taxes paid in connection with net option exercise


(785
)


(1,714
)


Cash dividends paid


(2,097
)






Proceeds from stock options exercised


107



560



1,719Other


2,397



406



Net cash for financing activities


(57,093
)


(33,373
)


(14,243
)Net (decrease) increase in cash and cash equivalents


(20,729
)


(164,761
)


82,052Cash and cash equivalents, beginning of period


108,227



272,988



190,936Cash and cash equivalents, end of period

$
87,498


$
108,227


$
272,988Supplemental disclosures of cash flow informationFederal income taxes of $15,821,000, $5,780,000, and
    $(1,132,000), net, were paid (received) during 2007,
    2006     and 2005, respectively.Interest payments of $2,906,000, $2,855,000, and
    $2,200,000 were made during 2007, 2006 and
    2005,     respectively.    44




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Significant
    Accounting Policies  Basis
    of consolidation and reporting
      Reclassifications
    and adjustments
    Stock
    split
    Use of
    estimates
     45




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)  Nature
    of business and segment reporting
        Cash
    and Investments
  Fixed-Income
    Investment Securities
       46




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)      Other
    Investments
    Derivative
    financial instruments
      Cash
    and cash equivalents
    Premiums
    written and receivable and related credit risk
   47




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)    Deferred
    policy acquisition costs
    Property,
    equipment and depreciation
    No. 98-1 (SOP 98-1), Accounting for Costs of Computer Software Developed or
    Obtained for Internal Use. SOP 98-1
  Unpaid
    losses and loss adjustment expense reserves
     48




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)      Reserve
    for extended reporting period claims
    Revenue
    recognition
    Reinsurance
       49




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)    Income
    taxes
      paid-in-capital
      Share-based
    awards
    2.
    Effects
    of New Accounting Pronouncements  Fair Value Measurements FAS 157-2. 157-2
 50




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Effects
    of New Accounting Pronouncements (continued)    The
    Fair Value Option for Financial Assets and Financial
    Liabilities  including an amendment of
    FAS 115
  No. 06-11, Accounting for Income Tax Benefits of Dividends on
    Share-Based Payment Awards No. 06-11 EITF 06-11 EITF 06-11
  Business Combinations Business
    Combinations
  Non-controlling Interests in Consolidated Financial
    Statements  an amendment of Accounting Research
    Bulletin No. 51
 51




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Investments    2007Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost/Cost


Gains


Losses


Fair Value(In thousands)Available-for-saleU.S. government obligations

$
2,500


$
11






$
2,511States and political subdivisions


132,223



2,938







135,161Corporate securities


121,594



3,084



(174
)


124,504Mortgage-backed securities


119



6







125Total fixed-income securities


256,436



6,039



(174
)


262,301Equity securities


5,901



615







6,516Total available-for-sale securities

$
262,337


$
6,654


$
(174
)

$
268,817   2006Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost/Cost


Gains


Losses


Fair Value(In thousands)Available-for-saleU.S. government obligations

$
2,499


$
20


$
(2
)

$
2,517States and political subdivisions


79,027



204



(25
)


79,206Corporate securities


169,734



3,593



(228
)


173,099Mortgage-backed securities


168



11







179Total available-for-sale securities

$
251,428


$
3,828


$
(255
)

$
255,001  52




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)    2007Gross


GrossUnrecognized


UnrecognizedCarrying


Holding


Holding


EstimatedValue


Gains


Losses


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

$
142,510


$
778


$
(14
)

$
143,274States and political subdivisions


133,851



2,160







136,011Corporate securities


68,534



713



(1,283
)


67,964Mortgage-backed securities


152,767



192



(3,597
)


149,362Total held-to-maturity fixed-income securities

$
497,662


$
3,843


$
(4,894
)

$
496,611   2006Gross


GrossUnrecognized


UnrecognizedCarrying


Holding


Holding


EstimatedValue


Gains


Losses


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

$
142,566


$
178


$
(2,132
)

$
140,612States and political subdivisions


129,944



356



(76
)


130,224Corporate securities


69,093



41



(3,294
)


65,840Mortgage-backed securities


163,969



18



(3,768
)


160,219Total held-to-maturity fixed-income securities

$
505,572


$
593


$
(9,270
)

$
496,895  53




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)    December 31, 2007Less 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

$
11,781


$
(141
)

$
6,088


$
(33
)

$
17,869


$
(174
)Subtotal available-for-sale


11,781



(141
)


6,088



(33
)


17,869



(174
)Held-to-maturityU.S. government obligations










18,002



(14
)


18,002



(14
)Corporate securities


13,088



(51
)


18,615



(1,232
)


31,703



(1,284
)Mortgage-backed securities


13



(1
)


80,252



(3,596
)


80,265



(3,596
)Subtotal held-to-maturity


13,101



(52
)


116,869



(4,842
)


129,970



(4,894
)Total temporarily impaired securities

$
24,882


$
(193
)

$
122,957


$
(4,875
)

$
147,839


$
(5,068
)   54




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)  December 31, 2006Less 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-saleU.S. government obligations

$
998


$
(2
)

$



$



$
998


$
(2
)States and political subdivisions


15,964



(25
)










15,964



(25
)Corporate securities


5,935



(6
)


10,034



(222
)


15,969



(228
)Subtotal available-for-sale


22,897



(33
)


10,034



(222
)


32,931



(255
)Held-to-maturityU.S. government obligations


29,961



(39
)


80,473



(2,093
)


110,434



(2,132
)States and political subdivisions


20,794



(45
)


2,004



(31
)


22,798



(76
)Corporate securities


13,501



(1,384
)


41,265



(1,910
)


54,766



(3,294
)Mortgage-backed securities


13







156,910



(3,768
)


156,923



(3,768
)Subtotal held-to-maturity


64,269



(1,468
)


280,652



(7,802
)


344,921



(9,270
)Total temporarily impaired securities

$
87,166


$
(1,501
)

$
290,686


$
(8,024
)

$
377,852


$
(9,525
)    55




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)    2007


2006


2005(In thousands)Interest income

$
43,275


$
44,155


$
44,451Dividend income


8



428



60Other investment income


223



670



652Total investment income


43,506



45,253



45,163Investment expenses


(910
)


(845
)


(1,411
)Net investment income

$
42,596


$
44,408


$
43,752Gross realized gains on disposalFixed-income

$
118


$
148


$
3,065Equity securities






2,166



121Other invested assets






1,474



Total gross realized gains


118



3,788



3,186Gross realized losses on disposalFixed-income


(134
)


(146
)


(329
)Equity securities


(90
)


(7
)


(68
)Other invested assets






(16
)


(66
)Property and equipment


(5
)


(131
)


(47
)Total gross realized losses


(229
)


(300
)


(510
)Other than temporary impairments






(178
)


(643
)Net realized gains

$
(111
)

$
3,310


$
2,033     EstimatedFair Value(In thousands)Available-for-saleLess than one year

$
57,675One to five years


119,858Five to ten years


76,589More than ten years


8,054Mortgage-backed securities


125Total available-for-sale

$
262,301   56




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)  Carrying


EstimatedValue


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

$



$
One to five years


95,680



95,378Five to ten years


177,681



179,569More than ten years


71,534



72,302Mortgage-backed securities


152,767



149,362Total held-to-maturity

$
497,662


$
496,611         4.
    Other
    Comprehensive Income      December 31,2007


2006(In thousands)Net unrealized gains on available-for-sale securities

$
6,480


$
3,573Net unamortized unrealized gains on held-to-maturity securities


2,836



3,781Deferred federal income taxes


(3,261
)


(2,574
)Effect of equity method investees, net of deferred taxes






(11
)Total net unrealized gains, net of deferred federal income taxes

$
6,055


$
4,769  57




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Other
    Comprehensive Income (continued)    2007


2006


2005(In thousands)Unrealized gains (losses) arising during the period:Available-for-sale:Fixed maturities

$
2,350


$
(2,455
)

$
(9,350
)Equity securities


615



1,950



(31
)Held-to-maturity amortization


(945
)


(1,084
)


(1,021
)Reclassification adjustments


(58
)


(1,952
)


(2,789
)Other comprehensive income (loss) before taxes, minority
    interests and equity method investees


1,962



(3,541
)


(13,191
)Deferred federal income taxes


(687
)


1,239



4,617Change in deferred tax valuation allowance










7,512Minority interests and equity method investees, net of deferred
    taxes


11



(33
)


12Other comprehensive income (loss)

$
1,286


$
(2,335
)

$
(1,050
)   5.
    Deferred
    Acquisition Costs    2007


2006


2005(In thousands)Balance, January 1

$
7,644


$
7,877


$
8,082Additions


14,708



16,927



18,782Amortization


(15,826
)


(17,160
)


(18,987
)Recoverability write-offs










Balance, December 31

$
6,526


$
7,644


$
7,877    58




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Property
    and Equipment, Net    December 31,2007


2006(In thousands)Land

$
571


$
571Building (occupied by the Company)


10,499



10,499Computer equipment and software


11,865



11,456Software developed or obtained for internal use


4,539



Furniture and leasehold improvements


3,726



3,96731,200



26,493Accumulated depreciation


(17,411
)


(16,718
)$
13,789


$
9,775     7.
    Unpaid
    Losses and Loss Adjustment Expenses    2007


2006


2005(In thousands)Balance, beginning of year

$
688,031


$
689,857


$
693,630Less, reinsurance recoverables


(107,965
)


(107,692
)


(101,791
)Net balance, beginning of year


580,066



582,165



591,839Deconsolidation of PIC-Florida






(2,418
)


Incurred related toCurrent year


103,673



113,338



131,496Prior years


(34,245
)


(12,880
)


(4,372
)Total incurred


69,428



100,458



127,124Paid related toCurrent year


2,699



3,168



5,054Prior years


87,326



96,971



131,744Total paid


90,025



100,139



136,798Net balance, end of year


559,469



580,066



582,165Plus, reinsurance recoverables


104,648



107,965



107,692Balance, end of period

$
664,117


$
688,031


$
689,857Prior year development as a percentage of beginning of the year
    net reserves


−5.9
%


−2.2
%


−0.7
%    59




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Unpaid
    Losses and Loss Adjustment Expenses (continued)      8.
    Long-Term
    Debt       60




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Reinsurance    2007


2006


2005Written


Earned


Written


Earned


Written


Earned(In thousands)Direct

$
135,415


$
146,078


$
156,866


$
163,746


$
185,511


$
192,437Ceded


(4,619
)


(7,167
)


(10,097
)


(14,022
)


(25,587
)


(26,628
)Assumed


12



12



(46
)


(36
)


(2,542
)


(1,526
)Net

$
130,808


$
138,923


$
146,723


$
149,688


$
157,382


$
164,283Assumed as a percentage of net


0.0
%


0.0
%


0.0
%


0.0
%


−1.6
%


−0.9
%         December 31,2007


2006(In thousands)Hannover Ruckversicherungs

$
41,678


$
45,419Munich Reins Amer


26,023



26,190Transatlantic Reinsurance Company


8,986



10,605Aspen Re


6,137



5,904Lloyds of London


4,003



4,113General Reinsurance Corporation


2,243



3,146Montpelier


2,466



2,629Others


17,314



15,444$
108,850


$
113,450     December 31,2007


2006(In thousands)Reinsurance recoverable

$
106,961


$
109,013Prepaid reinsurance premium (included in other assets)


1,889



4,437Amounts recoverable from reinsurers

$
108,850


$
113,450  61




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Income
    Taxes    2007


2006


2005(In thousands)Current provision

$
15,693


$
7,614


$
2,294Deferred provision


9,669



12,202



13,805Deferred tax valuation allowance










(44,051
)Total provision (benefit)

$
25,362


$
19,816


$
(27,952
)     2007


2006


2005(In thousands)Income before income taxes

$
78,153






$
63,003






$
44,867Tax at statutory rate


27,354



35.0
%


22,051



35.0
%


15,694



35.0
%Tax effect of:Tax exempt interest


(2,773
)


−3.5
%


(2,091
)


−3.3
%


(217
)


−0.5
%Other items, net


781



1.0
%


(144
)


−0.2
%


622



1.4
%Valuation allowance






0.0
%






0.0
%


(44,051
)


−98.2
%$
25,362



32.5
%

$
19,816



31.5
%

$
(27,952
)


−62.3
%     2007


2006(In thousands)Deferred tax assets arising from:Losses and loss adjustment expenses

$
19,548


$
21,010Net operating loss carryforwards


889



1,209Unearned and advanced premiums


5,472



6,027Minimum tax credits


0



6,185Realized losses on investments


724



613Goodwill


3,367



3,790Other


1,031



863Total deferred tax assets


31,031



39,697Deferred tax liabilities arising from:Deferred policy acquisition costs


2,284



2,675Net unrealized gains on securities


3,261



2,574Other


3,047



1,653Total deferred tax liabilities


8,592



6,902Net deferred tax asset

$
22,439


$
32,795    62




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Income
    Taxes (continued)    2005Valuation allowance balance, January 1

$
(53,366
)Change in valuation allowance allocated to:Federal income tax benefit from operations


51,563Reclass benefit from continuing operations to other
    comprehensive income


(7,512
)Unrealized depreciation on investment securities allocated to
    other comprehensive income


7,512Incremental tax benefit from stock based compensation allocated
    to additional
    paid-in-capital


1,775Other items allocated to shareholders equity


28Valuation allowance balance, December 31

$
     11.
    Shareholders
    Equity    Discretionary PlanInceptionto Date


For the Year Ended December 31,Totals


2007


2006


2005(Dollars in thousands, except per share amounts)Number of shares repurchased


6,745,176



974,321



325,000



650,250Cost of shares repurchased

$
127,351


$
38,795


$
11,117


$
17,057Average cost per share repurchased

$
18.88


$
39.82


$
34.21


$
26.23   Rule 10b5-1 Rule 10b5-1 Rule 10b5-1
 63




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   11.
    Shareholders
    Equity (continued)  Rule 10b5-1 Rule 10b5-1 Rule 10b5-1 Rule 10b5-1 Rule 10b5-1
  Rule 10b5-1 PlanInceptionto Date


For the Year Ended December 31,Totals


2007


2006(Dollars in thousands, except per share amounts)Number of shares repurchased


1,248,150



497,800



750,350Cost of shares repurchased

$
42,597


$
18,952


$
23,645Average cost per share repurchased

$
34.13


$
38.07


$
31.51     12.
    Fair
    Value of Financial Instruments      13.
    Restructuring
    Charges and Exit Costs  Termination
    Benefits
    2007


2006


2005(In thousands)Balance, January 1

$
118


$
97


$
101Employee separation costs


8



32



65Payments


(126
)


(11
)


(69
)Balance, December 31

$



$
118


$
97  64




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Restructuring
    Charges and Exit Costs (continued)  Contract
    Termination Costs
      2007


2006


2005(In thousands)Balance, January 1

$
1,068


$
1,120


$
921Payments


(177
)


(181
)


(334
)Contract termination costs










345Changes in estimated cash flows


(52
)


61



127Discount accretion


60



68



61Balance, December 31

$
899


$
1,068


$
1,120       14.
    Employee
    Benefit Plans    15.
    Share-Based
    Compensation  Equity
    Compensation Plans
     65




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Share-Based
    Compensation (continued)      WeightedNumber


Weighted


Average


Aggregateof


Average


Remaining


IntrinsicOptions


Exercise Price


Term


Value(In years)


(In thousands)Options outstanding at January 1, 2007


542,320


$
16.59Granted during the period






Exercised during the period


(81,020
)

$
12.05Canceled during the period


(3,045
)

$
26.50Options outstanding at December 31, 2007


458,255


$
17.33



5.75


$
11,059Options exercisable at December 31, 2007


413,060


$
16.32



5.55


$
10,383           Transition Election Related to
    Accounting for the Tax Effects of Share-Based Payment Awards.
  Impact of the Adoption of SFAS No. 123(R)
   66




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Share-Based
    Compensation (continued)      For the Year EndedDecember 31, 2005(In thousands, exceptper share data)Net income, as reported

$
72,366Add: Stock-based employee compensation expense included in
    reported net income, net of related tax effects


227Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards granted
    since 2000, net of related tax effects


(563
)Pro forma net income

$
72,030Basic net income per shareAs reported

$
5.65Pro forma

$
5.63Diluted net income per shareAs reported

$
5.53Pro forma

$
5.50Basic Weighted Average Shares


12,807Diluted Weighted Average Shares


13,094   Valuation
    Assumptions
    2005(Binomial Lattice)Risk-free interest rate

4.44%Dividend yield

0%Expected volatility

10%  25%Weighted average volatility

20%Expected term (years)

4.0Weighted average estimated grant date fair value

$4.85  67




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Share-Based
    Compensation (continued)    16.
    Earnings
    Per Share    2007


2006


2005(In thousands, except per share amounts)Numerator for basic and diluted income per common share:Net income

$
52,791


$
43,187


$
72,366Denominator:Denominator for basic income per common share - weighted average
    shares outstanding


10,951



12,015



12,807Effect of dilutive stock options and awards


212



259



287Denominator for diluted income per common share - adjusted
    weighted average shares outstanding


11,163



12,274



13,094Income per common share:Net incomeBasic

$
4.82


$
3.59


$
5.65Diluted

$
4.73


$
3.52


$
5.53     17.
    Commitments
    and Contingencies  97-3,
 68




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    Commitments
    and Contingencies (continued)            18.
    GAAP and
    Statutory Reporting    
    Deferred policy acquisition costs are charged against operations
    as incurred for statutory accounting purposes.  
    Assets designated as nonadmitted assets are charged
    directly to surplus for statutory accounting purposes.
    Bonds and U.S. government securities are generally carried
    at amortized cost for statutory accounting purposes. 69




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   18.
    GAAP and
    Statutory Reporting (continued)   
    Unpaid losses and loss adjustment expenses and unearned premiums
    are reported net of the impact of reinsurance for statutory
    accounting purposes.
    Deferred federal income taxes applicable to operations are
    recorded in income for GAAP, whereas deferred federal income
    taxes are recorded in surplus for statutory accounting purposes.
    A valuation allowance is required under GAAP when it is
    determined that gross deferred tax assets cannot be realized, in
    whole or in part. For statutory accounting purposes, the
    valuation allowance is replaced with a more objective admitted
    asset test, which is intended to serve the same purpose as the
    GAAP valuation allowance. This more quantitative approach under
    statutory accounting can sometimes result in differing amounts
    of deferred tax assets being carried for GAAP and statutory
    accounting purposes.
    The reserve associated with DDR coverage benefits is included as
    a component of unpaid loss and loss adjustment expense reserves
    for GAAP. Any change in the estimate of the liability associated
    with such coverage is charged or credited to the incurred loss
    and loss adjustment expenses in the GAAP Statement of
    Income. Statutory accounting principles require that the reserve
    for DDR benefits be included as a component of unearned premium
    reserves, with any change in the estimated reserve treated as an
    adjustment to earned premium in the period of change.
    Subsidiaries that would be required to be consolidated in
    accordance with GAAP, are accounted for using the equity method
    with the equity in the earnings of such subsidiaries being
    credited directly to surplus for statutory accounting purposes.    2007

2006

2005(In thousands)Statutory surplus, December 31

$
221,595


$
248,929


$
240,135Statutory net income for the year ended December 31

$
63,725


$
54,470


$
48,953   12-month
 70




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  19.
    Quarterly
    Financial Data (Unaudited)    Net IncomeIncome





Per CommonTotal


Before Federal


Net


Share AssumingRevenues


Income Taxes


Income


Dilution(In thousands, except per share data)20071st Quarter

$
46,420


$
15,402


$
10,505


$
0.902nd Quarter


46,159



24,303



16,333



1.443rd Quarter


46,366



19,497



13,281



1.214th Quarter


44,188



18,951



12,672



1.19$
183,133


$
78,153


$
52,79120061st Quarter

$
49,035


$
13,172


$
8,863


$
0.702nd Quarter(a)


50,475



15,617



10,712



0.863rd Quarter


49,408



16,187



11,025



0.914th Quarter


50,364



18,027



12,587



1.06$
199,282


$
63,003


$
43,187   71




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Form 10-K
    BDO
    SEIDMAN, LLP
    72




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##### Table of Contents



SCHEDULE I  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
    AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)
  CONDENSED
    BALANCE SHEETS
    December 31, 2007 and 2006
  December 31,2007


2006(In thousands)ASSETSInvestments in subsidiaries

$
253,058


$
279,099Equity securities


928



928Cash and cash equivalents


41,434



17,497Deferred federal income taxes


250



197Federal income taxes recoverable from affiliates


1,991



4,316Other assets


591



247Total assets

$
298,252


$
302,284LIABILITIESLong-term debt

$
30,928


$
30,928Accrued expenses and other liabilities


3,767



2,546Total liabilities


34,695



33,474Shareholders EquityCommon stock, no par value, 50,000,000 shares authorized,
    10,127,740 and 11,556,575 shares outstanding at
    December 31, 2007 and 2006, respectivelyAdditional paid-in capital






41,106Retained earnings


257,502



222,935Accumulated other comprehensive income, net of deferred federal
    income taxes


6,055



4,769Total shareholders equity


263,557



268,810Total liabilities and shareholders equity

$
298,252


$
302,284    73




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##### Table of Contents



SCHEDULE I  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
    AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)  CONDENSED
    STATEMENTS OF OPERATIONS
    Years Ended December 31, 2007, 2006 and 2005
  Year Ended December 31,2007


2006


2005(In thousands)RevenuesInvestment income

$
1,619


$
637


$
107Net realized losses






(212
)


Other income


31



1,600



Total revenues


1,650



2,025



107ExpensesInvestment expense


15







Interest expense


3,073



2,986



2,455Amortization expense










313General and administrative expenses


1,410



1,310



2,561Total expenses


4,498



4,296



5,329Loss before income taxes and equity in net income of subsidiaries


(2,848
)


(2,271
)


(5,222
)Federal income tax (benefit) expense


(1,017
)


(635
)


2,853Loss before equity in net income of subsidiaries


(1,831
)


(1,636
)


(8,075
)Equity in net income of subsidiaries


54,622



44,823



80,441Net income

$
52,791


$
43,187


$
72,366    74




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##### Table of Contents



SCHEDULE I  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
    AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)
  CONDENSED
    STATEMENTS OF CASH FLOWS
    Years Ended December 31, 2007, 2006 and 2005
  Year Ended December 31,2006


2005


2004(In thousands)Cash flows from (for) operating activitiesNet income

$
52,791


$
43,187


$
72,366Adjustments to reconcile net income to net cash used in
    operating activities:Equity in undistributed income of subsidiaries


(54,622
)


(44,823
)


(80,441
)Dividends from subsidiaries


81,950



43,000



17,300Amortization










291Net realized losses






212



Stock based compensation


160



571



371Excess tax benefits from share-based awards


(1,031
)


(2,137
)


(1,095
)Deferred federal income taxes


(53
)


1,545



(122
)Changes in:Federal or intercompany income taxes recoverable/payable


3,356



1,068



7,588Accrued expenses and other liabilities


(1,177
)


1,303



(1,673
)Other assets


(344
)


608



764Net cash from operating activities


81,030



44,534



15,349Cash flows from (for) investing activitiesLiquidation of APIndemnity






999



Net cash from investing activities






999



Cash flows from (for) financing activitiesCommon stock repurchased


(57,746
)


(34,762
)


(17,057
)Excess tax benefits from share-based awards


1,031



2,137



1,095Taxes paid in connection with net option exercise


(785
)






Cash dividends paid


(2,097
)


560



1,719Proceeds from stock options exercised


107



(1,714
)


Other


2,397



406



Net cash for financing activities


(57,093
)


(33,373
)


(14,243
)Net increase in cash and cash equivalents


23,937



12,160



1,106Cash and cash equivalents, beginning of year


17,497



5,337



4,231Cash and cash equivalents, end of year

$
41,434


$
17,497


$
5,337    75




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##### Table of Contents



SCHEDULE I  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
    AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)
  NOTES TO
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
  (1)
    Basis of
    Presentation                    (2)
    Long Term
    Debt    (3)
    Federal
    Income Taxes    American Physicians

ICAAPSpecialty

Alpha Advisors, Inc.    76




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##### Table of Contents



SCHEDULE 1  CONDENSED
    FINANCIAL INFORMATION OF REGISTRANT
    AMERICAN PHYSICIANS CAPITAL, INC. (REGISTRANT ONLY)
  NOTES TO
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (Continued)
  (4)
    Dividends
    Received        (5)
    Stock
    Split    (6)
    Share
    Repurchases  Rule 10b5-1
 77




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Rule 13a-15(b).
  Managements
    Report on Internal Control Over Financial Reporting
    Internal Control 
    Integrated Framework Internal
    Control  Integrated Framework
 78




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
            BDO
    SEIDMAN, LLP
    79




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
   
  Item 9B.
    Other
    Information   
  PART III
 
  Item 10.
    Directors,
    Executive Officers and Corporate Governance   
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      Equity Compensation PlansNumber of SharesRemaining Available forFuture Issuance UnderNumber of Shares to be


Weighted-Average


Equity CompensationIssued Upon Exercise of


Exercise Price of


Plans (Excluding SharesOutstanding Options


Outstanding Options


Reflected in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by shareholders:


458,255


$
17.33



9,585Equity compensation plans not approved by shareholders:










  
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   
  Item 14.
    Principal
    Accounting Fees and Services   80




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##### Table of Contents



PART IV
 
  Item 15.
    Exhibits and
    Financial Statement Schedules    Financial
    Statements:
              Financial
    Statement Schedules:
    Regulation S-X
   81




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##### Table of Contents



SIGNATURES
    American Physicians
    Capital, Inc.
  By:
    /s/  R.
    Kevin Clinton   President and Chief Executive Officer
    Signature

Title/s/  R.
    Kevin ClintonR.
    Kevin Clinton

President, Chief Executive Officer and Director
    (principal executive officer)/s/  Frank
    H. FreundFrank
    H. Freund

Executive Vice President, Treasurer and Chief Financial Officer
    
    (principal accounting officer)/s/  AppaRao
    Mukkamala, M.D.AppaRao
    Mukkamala, M.D.

Director and Chairman of the Board/s/  Billy
    B. Baumann, M.D.Billy
    B. Baumann, M.D.

Director/s/  Spencer
    L. Schneider, J.D.Spencer
    L. Schneider, J.D

Director/s/  Joseph
    StilwellJoseph
    Stilwell

Director/s/  Larry
    W. ThomasLarry
    W. Thomas

Director/s/  Stephen
    H. Haynes, M.D.Stephen
    H. Haynes, M.D.

Director/s/  Mitchell
    A. Rinek, M.D.Mitchell
    A. Rinek, M.D.

Director  82




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##### Table of Contents



EXHIBIT INDEX
  000-32057
  Exhibit

Description3.1

Articles of Incorporation(2)3.2

Amended and Restated Bylaws, as amended January 26, 2005(9)4.1

Indenture relating to Floating Rate Junior Subordinated
    Deferrable Interest Debentures Dated as of May 15, 2003(6)4.2

Indenture relating to Floating Rate Junior Subordinated Debt
    Securities Dated as of May 22, 2003(6)*10.1

American Physicians Capital, Inc. Stock Compensation Plan(3)10.14

MSMS/American Physicians Marketing Support Agreement, effective
    January 1, 2000, and American Physicians(2)*10.18

Form of Nonqualified Stock Option Agreement (Directors Version),
    dated December 5, 2000(4)*10.19

Form of Nonqualified Stock Option Agreement (Employee Version),
    dated December 5, 2000(4)*10.20

Form of Restricted Stock Award Agreement (Director Version),
    dated December 5, 2000(4)*10.21

Form of Restricted Stock Award Agreement (Employee Version),
    dated December 5, 2000(4)10.26

Amended And Restated Declaration Of Trust Dated As Of May 15,
    2003 by and among U.S. Bank National Association, American
    Physicians Capital, Inc., William B. Cheeseman and Frank H.
    Freund(6)10.27

Amended And Restated Declaration Of Trust Dated As Of May 22,
    2003 of APCapital Trust II(6)10.28

Placement Agreement, dated April 25, 2003 between the Company,
    American Physicians Capital Statutory Trust I, FTN
    Financial Capital Markets and Keefe Bruyette & Woods,
    Inc.(6)10.29

Placement Agreement, Dated As Of May 13, 2003, with Sandler
    ONeill & Partners L.P.(6)10.30

Guarantee Agreement Dated As Of May 15, 2003 by and between U.S.
    Bank National Association and American Physicians Capital,
    Inc.(6)10.31

Guarantee Agreement Dated As Of May 22, 2003 by and between
    Wilmington Trust Company and American Physicians Capital, Inc.(6)**10.35

Master Agency Agreement between American Physicians Assurance
    Corporation and SCW Agency Group, Inc., effective January 1,
    2004(7)*10.42

Form of 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(10)*10.47

Amendment No. 1 to American Physicians Capital, Inc. Stock
    Compensation Plan(13)*10.48

Summary of Incentive Compensation Plan as of March 2007(5)*10.49

Amendment No. 2, dated October 25, 2007 to American Physicians
    Capital, Inc. Stock Compensation Plan. (8)*10.50

Form of Amendment No. 1 to Form of 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.(8)*10.51

Amendment No. 1, dated October 1, 2007, to the Incentive
    Compensation Plan as of March 2007.(8)**10.52

Amendment No. 1, dated October 1, 2007, to Master Agency
    Agreement between American Physicians Assurance Corporation and
    SCW Agency Group, Inc., as of January 2004.(1)21.1

Subsidiaries of APCapital(7)23.1

Consent of BDO Seidman, LLP(1)31.1

Certification of Chief Executive Officer pursuant to Rule
    13a-14(a) under the Securities Exchange Act of 1934.(1)31.2

Certification of Chief Financial Officer pursuant to Rule
    13a-14(a) under the Securities Exchange Act of 1934.(1)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.(1)  83




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##### Table of Contents



*
    
    Current management contracts or compensatory plans or
    arrangements.**
    
    Portions of this exhibit have been omitted pursuant to
    APCapitals request to the Secretary of the Securities and
    Exchange Commission for confidential treatment pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934, as amended.(1)
    
    Filed herewith.(2)
    
    Filed as an exhibit to APCapitals Registration Statement
    on
    Form S-1
    (no. 333-41136),
    as amended, and incorporated herein by reference.(3)
    
    Filed as an exhibit to APCapitals Registration Statement
    on
    Form S-8
    (no. 333-56428)
    and incorporated herein by reference.(4)
    
    Filed as an exhibit to APCapitals 2000 Annual Report on
    Form 10-K
    and incorporated herein by reference.(5)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated March 14, 2007 and incorporated herein by reference.(6)
    
    Filed as an exhibit to APCapitals Quarterly Report on
    Form 10-Q,
    as amended, for the quarterly period ended June 30, 2003
    and incorporated herein by reference.(7)
    
    Filed as an exhibit to APCapitals 2003 Annual Report on
    Form 10-K,
    as amended, and incorporated herein by reference.(8)
    
    Filed as an exhibit to APCapitals Quarterly Report on
    Form 10-Q
    dated November 9, 2007 and incorporated herein by reference.(9)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated January 31, 2005 and incorporated herein by reference.(10)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated February 28, 2005 and incorporated herein by
    reference.(11)
    
    Filed as an exhibit to APCapitals 2004 Annual Report on
    Form 10-K,
    as amended, and incorporated herein by reference.(12)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated May 9, 2005 and incorporated herein by reference.(13)
    
    Filed as an exhibit to APCapitals 2006 Annual Report on
    Form 10-K
    and incorporated herein by reference. 84