##### 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, 2006o

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:
  Title of Each Class

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

Nasdaq Global 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
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  Item 1. Business.Item 1A. Risk Factors.Item 1B. Unresolved Staff Comments.Item 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market For Registrants Common Equity And Related Stockholder MattersItem 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 FIRMReport of Independent Registered Public Accounting FirmCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate Governance of the RegistrantItem 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 Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESAmendment No. 1 to Stock Compensation PlanConsent of BDO Seidman, LLPConsent of PricewaterhouseCoopers 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 Section 1350    Table of Contents   Explanatory
    Note
  Form 10-K three-for-two
 
  Item 1.
    Business.  General
         1




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##### Table of Contents



For the Year Ended December 31,2006


2005


2004% of





% of





% ofTotal





Total





Total(In thousands)Direct premiums written:Michigan

$
50,302



32.1%


$
53,489



28.8%


$
59,903



28.0%Illinois


48,421



30.9%



54,536



29.4%



55,439



25.9%Ohio


28,292



18.0%



31,234



16.8%



35,861



16.8%New Mexico


20,759



13.2%



21,667



11.7%



20,534



9.6%Kentucky


5,878



3.7%



10,337



5.6%



13,877



6.5%All Other


3,228



2.1%



3,799



2.1%



9,615



4.5%Total medical professional
    liability


156,880



100.0%



175,062



94.4%



195,229



91.3%Exited lines of business


(14
)


0.0%



2,057



1.1%



10,911



5.1%PIC-Florida(1)






0.0%



8,392



4.5%



7,805



3.6%Total direct premiums written

$
156,866



100.0%


$
185,511



100.0%


$
213,945



100.0%Net premiums earned:Medical professional liability

$
149,790



75.2%


$
160,256



75.3%


$
171,529



68.4%Exited lines of business


(102
)


−0.1%



713



0.3%



26,744



10.7%PIC-Florida(1)






0.0%



3,314



1.6%



2,306



0.9%Total net premiums earned


149,688



75.1%



164,283



77.2%



200,579



80.0%Investment income


45,253



22.7%



45,163



21.2%



47,373



18.9%Realized gains


3,310



1.7%



2,033



1.0%



1,551



0.6%Other income


1,031



0.5%



1,387



0.6%



1,177



0.5%Total revenue

$
199,282



100.0%


$
212,866



100.0%


$
250,680



100.0%     (1)
    
    In 2005 and 2004 the accounts of PIC-Florida were included in
    the Consolidated Financial Statements. In 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.
        Underwriting and Pricing.
     3




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Claims Management.
    Reserve for Unpaid Loss and Loss Adjustment
    Expenses.
       4




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##### Table of Contents



Reinsurance.
      % of 2006Amounts


2006 Total Ceded


AmountsA.M. Best


Recoverable From


Premiums


Recoverable FromReinsurer

Rating


Reinsurers


Written


Reinsurers(Dollars in thousands)Hannover Ruckversicherungs


A


$
45,419


$
2,951



40.0
%Munich Reins Amer


A



26,190



2,948



23.1
%Transatlantic Reinsurance Company


A
+


10,605



1,032



9.4
%Aspen Ins UK Ltd


A



5,904



(51
)


5.2
%     Capital and Surplus.
  Competition
   5




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##### Table of Contents



A.M. Best
    Company Rating
      Important
    Agency Relationship
      5-year
  Insurance
    Regulatory Matters
  General.
   6




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##### Table of Contents



Holding Company Regulation.
    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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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.
  available-for-sale
  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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##### Table of Contents




    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.
    Our
    exit from various markets and lines of business may prove more
    costly than originally anticipated.
      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.
   11




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments.   
  Item 2.
    Properties   
  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 And Related Stockholder
    Matters  three-for-two
  Sale PriceHigh


Low2006October 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



30.172005October 1 
    December 31, 2005

$
32.83


$
27.61July 1 
    September 30, 2005


33.70



23.96April 1  June 30,
    2005


24.83



19.45January 1 
    March 31, 2005


25.11



21.72  12




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##### Table of Contents



Equity Compensation PlansNumber of sharesremaining available forNumber of shares to





future issuance underbe issued upon


Weighted-average


equity compensationexercise of


exercise price of


plans (excluding sharesPlan Category

outstanding options


outstanding options


reflected in column (a))(a)


(b)


(c)Equity compensation plans approved
    by shareholders:


542,320


$
16.59



6,540Equity compensation plans not
    approved by shareholders:










     Total





Total Number of


Maximum Number (or Approximate DollarNumber of


Average


Shares Purchased


Value) of Shares that May Yet BeShares


Price Paid


as Part of Publicly


Purchased Under the Plans or ProgramsPurchased(a)


per Share


Announced Plans


Discretionary Plan(b)


Rule 10b5-1
    Plan(c)For the month ended
    October 31, 2006


57,000


$
34.36



57,000



404,804


$
7,044,496For the month ended
    November 30, 2006


68,650


$
36.56



68,650



354,804


$
6,355,464For the month ended
    December 31, 2006


65,000


$
39.88



65,000



289,804


$
6,355,464For the three months ended
    December 31, 2006


190,650


$
37.03



190,650



289,804


$
6,355,464For the year ended
    December 31, 2006


1,083,639


$
32.33



1,075,350



289,804


$
6,355,464     (a)
    
    In February 2006, a member of the Companys Board of
    Directors exercised 20,000 options. As permitted by the American
    Physicians Capital, Inc. Stock Compensation Plan, the Board
    member tendered 8,289 mature shares in lieu of a cash payment.(b)
    
    In November 2005, the Board of Directors authorized the purchase
    of an additional five percent of the Companys outstanding
    common shares, which represents approximately
    637,500 shares, at the discretion of 13




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##### Table of Contents



management as part of a repurchase program that began
    March 30, 2001 (referred to as the discretionary
    plan). This most recent authorization brings the total
    number of shares authorized to be repurchased under the
    discretionary plan to 6,060,659. The timing of the purchases and
    the number of shares to be bought at any time depend on market
    conditions and the Companys capital resources and
    requirements. The discretionary plan has no expiration date and
    may be terminated at any time.(c)
    
    In April 2006, the Company announced that its Board of Directors
    authorized an additional share repurchase of $20 million of
    its common shares, which would be repurchased under a newly
    adopted plan under
    Rule 10b5-1
    of the Securities Exchange Act of 1934. In August 2006, the
    Board of Directors authorized an additional share repurchase of
    $10 million under the
    Rule 10b5-1
    plan. The 2006
    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, 2006. The Company
    may terminate the plan at any time. On October 27, 2006,
    the Companys Board of Directors adopted a new stock
    repurchase plan for 2007 under
    Rule 10b5-1
    and authorized an additional share repurchase of
    $32 million of its common shares. In addition, the Board
    authorized the rollover into the 2007 plan of $6.4 million
    allocated to the 2006 10b5-1 plan that was unused at
    December 31, 2006. 14




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##### Table of Contents



Item 6.
    Selected
    Financial Data    For the Year Ended December 31,2006


2005


2004


2003


2002(a)(In thousands, except per share data)Revenue:Direct premiums written

$
156,866


$
185,511


$
213,945


$
256,235


$
266,260Net premiums written

$
146,723


$
157,382


$
186,431


$
224,647


$
238,417Net premiums earned

$
149,688


$
164,283


$
200,579


$
224,590


$
235,551Investment income


45,253



45,163



47,373



43,294



44,775Net realized gains (losses)


3,310



2,033



1,551



2,403



(163
)Other income


1,031



1,387



1,177



1,104



376Total revenues and other income


199,282



212,866



250,680



271,391



280,539Losses and expenses:Losses and loss adjustment expenses


100,458



127,124



177,786



252,742



242,028Underwriting expenses


30,521



33,080



42,681



51,104



48,593Investment expenses


845



1,411



2,460



2,940



2,515Interest expense(b)


3,057



2,518



1,895



1,498



373Amortization expense(b)






625



915



261



Other expenses


1,398



3,241



5,193



3,729



1,971Total losses and expenses


136,279



167,999



230,930



312,274



295,480Income (loss) before federal
    income tax (benefit) expense and minority interest and
    cumulative effect of a change in accounting principle


63,003



44,867



19,750



(40,883
)


(14,941
)Federal income tax expense
    (benefit)(c)


19,816



(27,952
)


(290
)


36,296



(5,529
)Income (loss) before minority
    interest and cumulative effect of a change in accounting
    principle


43,187



72,819



20,040



(77,179
)


(9,412
)Minority interest in net (income)
    loss of consolidated subsidiary






(453
)


(10
)


348



Income (loss) before cumulative
    effect of a change in accounting principle


43,187



72,366



20,030



(76,831
)


(9,412
)Cumulative effect of a change in
    accounting principle


















(9,079
)Net income (loss)

$
43,187


$
72,366


$
20,030


$
(76,831
)

$
(18,491
)Net income (loss) per
    share  basic

$
3.59


$
5.65


$
1.58


$
(6.01
)

$
(1.32
)Weighted average shares
    outstanding  basic


12,015



12,807



12,683



12,781



14,010Net income (loss) per
    share  diluted

$
3.52


$
5.53


$
1.53


$
(6.01
)

$
(1.32
)Weighted average shares
    outstanding  diluted(d)


12,274



13,094



13,082




(b)



(b)  15




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##### Table of Contents



(a)
    
    Net loss for the year ended December 31, 2002 includes a
    $9.1 million charge, net of tax, for the write-off of
    goodwill related to the adoption of Statement of Financial
    Accounting Standards No. 142
    (SFAS No. 142), Goodwill and Other
    Intangible Assets. In accordance with the transitional
    guidance given in SFAS No. 142, this write-off,
    related to the adoption of the standard, was treated as a
    cumulative effect of a change in accounting principle.(b)
    
    Debt issue cost amortization of $181,000, $181,000 and $128,000
    in 2005, 2004 and 2003, respectively, has been reclassified from
    amortization expense to interest expense to conform to the
    current year presentation.(c)
    
    Federal income tax expense includes (benefit) expense of
    ($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.(d)
    
    As the Company was in a net loss position for the years ended
    December 31, 2003 and 2002, 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 31,2006


2005


2004


2003


2002Balance Sheet Data:Total cash and investments

$
875,276


$
854,359


$
858,098


$
834,005


$
801,556Total assets


1,095,815



1,109,328



1,069,899



1,063,046



1,058,918Total liabilities


827,005



845,475



865,575



859,037



778,629Total GAAP shareholders
    equity(a)


268,810



261,212



202,124



201,808



280,289GAAP Ratios:Loss ratio


67.1
%


77.4
%


88.6
%


112.5
%


102.7
%Underwriting expense ratio


20.4



20.1



21.3



22.8



20.6Combined ratio


87.5



97.5



109.9



135.3



123.3Statutory DataLoss ratio


67.5
%


77.6
%


88.6
%


112.5
%


103.2
%Underwriting expense ratio(b)


22.3



22.7



23.8



23.3



20.9Combined ratio


89.8



100.3



112.4



135.8



124.1Surplus

$
248,929


$
240,135


$
210,874


$
150,270


$
190,216Ratio of statutory net premiums
    written to surplus


0.59
x


0.64
x


0.87
x


1.49
x


1.25x     (a)
    
    No dividends were paid during the periods presented.(b)
    
    The statutory underwriting expense ratio is calculated by
    dividing statutory underwriting expenses by net premiums written
    as opposed to the GAAP underwriting expense ratio, which uses
    net premiums earned as the denominator. 
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   16




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##### Table of Contents



Overview
        Critical
    Accounting Policies
    Unpaid
    Losses and Loss Adjustment Expenses
     17




---



##### Table of Contents



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
  Available-for-sale available-for-sale Held-to-maturity held-to-maturity held-to-maturity yield-to-maturity
 18




---



##### 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
    swing-rated.
    Income
    Taxes
           20




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##### Table of Contents



Deferred
    Policy Acquisition Costs
    Share-Based
    Compensation
      Description
    of Ratios Analyzed
    Loss
    Ratio
    Underwriting
    Expense Ratio
   21




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##### Table of Contents



Combined
    Ratio
      Results
    of Operations
  Consolidated
    Results of Operations
    2006 vs. 2005


Percentage





2005 vs. 2004


Percentage2006


2005


Change


Change


2004


Change


Change(Dollars in thousands)Direct premiums written

$
156,866


$
185,511


$
(28,645
)


−15.4
%

$
213,945


$
(28,434
)


−13.3
%Net premiums written

$
146,723


$
157,382


$
(10,659
)


−6.8
%

$
186,431


$
(29,049
)


−15.6
%Net earned premium

$
149,688


$
164,283


$
(14,595
)


−8.9
%

$
200,579


$
(36,296
)


−18.1
%Losses and loss adjustment expensesCurrent year losses


113,338



131,496



(18,158
)


−13.8
%


171,600



(40,104
)


−23.4
%Prior year losses


(12,880
)


(4,372
)


(8,508
)


−194.6
%


6,186



(10,558
)


170.7
%Total


100,458



127,124



(26,666
)


−21.0
%


177,786



(50,662
)


−28.5
%Underwriting expenses


30,521



33,080



(2,559
)


−7.7
%


42,681



(9,601
)


−22.5
%Total underwriting gain (loss)


18,709



4,079



14,630



358.7
%


(19,888
)


23,967



−120.5
%Other revenue (expense) itemsInvestment income


45,253



45,163



90



0.2
%


47,373



(2,210
)


−4.7
%Net realized gains


3,310



2,033



1,277



62.8
%


1,551



482



−31.1
%Other income


1,031



1,387



(356
)


−25.7
%


1,177



210



17.8
%Other expenses(1)


(5,300
)


(7,795
)


2,495



32.0
%


(10,463
)


2,668



25.5
%Total other revenue and expense
    items


44,294



40,788



3,506



8.6
%


39,638



1,150



2.9
%Income before federal income taxes
    and minority interest


63,003



44,867



18,136



40.4
%


19,750



25,117



127.2
%Federal income tax expense (benefit)


19,816



(27,952
)


47,768



170.9
%


(290
)


(27,662
)


−9538.6
%Income before minority interest


43,187



72,819



(29,632
)


−40.7
%


20,040



52,779



263.4
%Minority interest in income of
    consolidated subsidiary






(453
)


453



100.0
%


(10
)


(443
)


4430.0
%Net income

$
43,187


$
72,366


$
(29,179
)


−40.3
%

$
20,030


$
52,336



261.3
%Loss Ratio:Accident year


75.7
%


80.0
%


−4.3
%






85.6
%


−5.6
%Prior years


−8.6
%


−2.6
%


−6.0
%






3.0
%


−5.6
%Calendar year


67.1
%


77.4
%


−10.3
%






88.6
%


−11.2
%Underwriting expense ratio


20.4
%


20.1
%


0.3
%






21.3
%


−1.2
%Combined ratio


87.5
%


97.5
%


−10.0
%






109.9
%


−12.4
%     (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.  2006 Compared to 2005.
 22




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##### Table of Contents



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
%        23




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##### Table of Contents



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



541



21.5
%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
%    24




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##### Table of Contents



2005 Compared to 2004.
    For the Year Ended December 31,Change2005


2004


Dollar


Percentage(Dollars in thousands)Medical professional liability:Michigan

$
53,489


$
59,903


$
(6,414
)


−10.7
%Illinois


54,536



55,439



(903
)


−1.6
%Ohio


31,234



35,861



(4,627
)


−12.9
%New Mexico


21,667



20,534



1,133



5.5
%Kentucky


10,337



13,877



(3,540
)


−25.5
%All Other


3,799



9,615



(5,816
)


−60.5
%Subtotal


175,062



195,229



(20,167
)


−10.3
%Exited lines of business


2,057



10,911



(8,854
)


−81.1
%PIC-Florida


8,392



7,805



587



7.5
%Total direct premiums written

$
185,511


$
213,945


$
(28,434
)


−13.3
%        25




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##### Table of Contents



policies-in-force
          For the Year Ended December 31,Change2005


2004


Dollar


Percentage(Dollars in thousands)Other expensesInvestment expenses

$
1,411


$
2,460


$
(1,049
)


−42.6
%Interest expense


2,518



1,895



623



32.9
%Amortization expense


625



915



(290
)


−31.7
%General and administrative expenses


2,704



3,918



(1,214
)


−31.0
%Other


537



1,275



(738
)


−57.9
%Total

$
7,795


$
10,463


$
(2,668
)


−25.5
%   sub-lease
   26




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##### Table of Contents



Liquidity
    and Capital Resources
          12-18 months
    Year Ended December 31,2006


2005


2004Premiums received, net of
    reinsurance

$
148,291


$
165,391


$
190,882Net paid loss and loss adjustment
    expenses


(100,139
)


(136,798
)


(160,594
)Net premiums received in excess of
    loss payments

$
48,152


$
28,593


$
30,288     available-for-sale held-to-maturity
 27




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##### Table of Contents



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


Average PaidNumber


Number


Reserve


Claim perAt or For the Year Ended

of Reported


of Open


Per Open


Claim ClosedDecember 31,

Claims


Claims


Claim


With Payment2006


1,168



2,256


$
137,918


$
59,0612005


1,513



2,991


$
122,413


$
75,8982004


1,786



3,342


$
117,010


$
59,258  28




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##### Table of Contents



2006(In thousands)Balance, December 31, 2005

$
689,857Less, reinsurance recoverables


(107,692
)Net reserves, December 31,
    2005


582,165Deconsolidation of PIC-Florida


(2,418
)Incurred related toCurrent year


113,338Prior years


(12,880
)Total


100,458Paid related toCurrent year


3,168Prior years


96,971Total


100,139Net reserves, December 31,
    2006


580,066Plus, reinsurance recoverables


107,965Balance, December 31, 2006

$
688,031Development as a % of
    December 31, 2005 net reserves


−2.2
%      29




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##### Table of Contents



1996


1997


1998


1999


2000


2001


2002


2003(a)


2004(a)


2005(a)


2006Liability for unpaid losses and
    loss adjustment expenses net of reinsurance recoverable

$
346,455


$
352,836


$
371,982


$
393,582


$
413,954


$
505,555


$
542,026


$
574,281


$
590,342


$
579,747


$
580,066Cumulative net paid as of:End of year


69,750



86,703



85,290



95,471



124,479



161,770



181,658



142,633



130,793



96,971Two years later


134,184



152,656



146,497



182,541



236,653



293,852



295,350



260,178



219,013Three Years later


181,144



188,665



198,774



251,448



322,226



367,289



381,057



327,830Four years later


205,824



215,426



231,748



292,766



363,871



420,662



426,928Five Years later


219,944



232,323



251,810



312,968



390,450



443,256Six years later


227,840



243,012



262,260



326,266



402,808Seven Years later


234,429



248,282



271,563



333,843Eight years later


238,387



251,623



275,451Nine Years later


241,369



253,681Ten Years later


243,080Re-estimated Net Liability as of:End of year


324,233



327,542



350,114



383,004



435,069



511,185



585,469



580,466



585,019



566,867Two years later


302,696



314,613



334,827



373,400



449,871



538,980



590,665



583,246



572,569Three Years later


291,406



290,490



313,248



374,729



458,846



540,239



592,617



575,222Four years later


267,788



273,982



303,540



366,818



456,519



541,887



586,472Five Years later


258,838



268,754



296,834



359,753



455,208



538,483Six years later


254,272



266,546



291,144



359,400



458,062Seven Years later


251,718



263,160



292,253



363,802Eight years later


249,707



262,650



294,327Nine Years later


249,218



265,467Ten Years later


250,569Net cumulative (deficiency)
    redundancy


95,886



87,369



77,655



29,780



(44,108
)


(32,928
)


(44,446
)


(941
)


17,773



12,880Gross liability  end of
    year


392,626



407,746



422,987



457,072



483,273



597,046



637,494



672,495



690,825



685,714



688,031Reinsurance Recoverables


46,171



54,910



51,005



63,490



69,319



91,491



95,468



98,214



100,483



105,967



107,965Net Liability  end of
    year


346,455



352,836



371,982



393,582



413,954



505,555



542,026



574,281



590,342



579,747



580,066Gross re-estimated
    liability  latest


298,201



325,119



375,449



443,863



540,330



635,853



687,935



680,073



675,010



668,263Re-estimated reinsurance
    recoverables  latest


47,632



59,652



81,122



80,061



82,268



97,370



101,463



104,851



102,441



101,396Net re-estimated
    liability  latest


250,569



265,467



294,327



363,802



458,062



538,483



586,472



575,222



572,569



566,867Gross cumulative (deficiency)
    redundancy


94,425



82,627



47,538



13,209



(57,057
)


(38,807
)


(50,441
)


(7,578
)


15,815



17,451     (a)
    
    Excludes previously reported reserves, payments and development
    related to PIC-Florida, which was deconsolidated effective
    January 1, 2006.    Reserve
    Ranges
    Net Loss and LAE ReservesLow End


Recorded


High Endof Range


Reserves


of Range(In thousands)$
537,820


$
580,066


$
617,173  30




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##### Table of Contents



Increase(Decrease) inPre-Tax Income(In thousands)Low end of range

$
42,246High end of range

$
(37,107
)     Other
    Significant Balance Sheet Items
  available-for-sale held-to-maturity,
             31




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##### 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)

$
688,031


$
128,114


$
208,269


$
128,232


$
223,416Operating leases


5,699



948



1,684



1,641



1,426Long-term debt(2)


35,053



3,000



32,053







Total

$
728,783


$
132,062


$
242,006


$
129,873


$
224,842     (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
    that the debt will be repaid in May 2008, the earliest date at
    which the debt may be retired.   32




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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
  available-for-sale
  available-for-sale held-to-maturity,
    held-to-maturity held-to-maturity
    Quantitative
    Information About Market Risk
  available-for-sale available-for-sale
 33




---



##### Table of Contents



December 31, 2006


December 31, 2005Portfolio


Change in


Modified


Portfolio


Change in


ModifiedChange in Rates

Value


Value


Duration


Value


Value


Duration(Dollars in thousands)


(Dollars in thousands)+2%

$
239,943


$
(15,058
)


2.88


$
215,014


$
(9,087
)


1.89+1%


247,111



(7,890
)


2.89



219,173



(4,928
)


2.160


255,001







3.16



224,101







2.27−1%


263,350



8,349



3.23



228,991



4,890



2.36−2%


272,152



17,151



3.33



234,917



10,816



2.50  34




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data 
  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            Internal Control  Integrated Framework
  BDO
    SEIDMAN, LLP
      35




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  
      
 36




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 December 31,
    2006 and 2005
  December 31,2006


2005In thousands,except share dataASSETSInvestments:Fixed-income securitiesAvailable-for-sale,
    at fair value

$
255,001


$
224,101Held-to-maturity,
    at amortized cost


505,572



345,702Other investments


6,476



11,568Total investments


767,049



581,371Cash and cash equivalents


108,227



272,988Premiums receivable


43,068



50,729Reinsurance recoverable


109,013



109,368Deferred federal income taxes


32,795



44,039Property and equipment, net


9,775



11,157Other assets


25,888



39,676Total assets

$
1,095,815


$
1,109,328LIABILITIESUnpaid losses and loss adjustment
    expenses

$
688,031


$
689,857Unearned premiums


70,744



82,098Long-term debt


30,928



30,928Federal income taxes payable


189



762Accrued expenses and other
    liabilities


37,113



41,830Total liabilities


827,005



845,475Commitments and
    ContingenciesMinority Interest in
    Consolidated Subsidiary






2,641Shareholders
    EquityCommon stock, no par value,
    50,000,000 shares authorized:11,556,575 and
    12,500,126 shares outstanding at December 31, 2006 and
    2005, respectively






Additional
    paid-in-capital


41,106



74,360Retained earnings


222,935



179,748Accumulated other comprehensive
    income:Net unrealized gains on
    investments, net of deferred federal income taxes


4,769



7,104Total shareholders equity


268,810



261,212Total liabilities and
    shareholders equity

$
1,095,815


$
1,109,328    37




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
 For the
    Years Ended December 31, 2006, 2005, and 2004
  Year Ended December 31,2006


2005


2004(In thousands, except per share data)Revenues and Other
    IncomeNet premiums written

$
146,723


$
157,382


$
186,431Change in unearned premiums


2,965



6,901



14,148Net premiums earned


149,688



164,283



200,579Investment income


45,253



45,163



47,373Net realized gains


3,310



2,033



1,551Other income


1,031



1,387



1,177Total revenues and other income


199,282



212,866



250,680ExpensesLosses and loss adjustment expenses


100,458



127,124



177,786Underwriting expenses


30,521



33,080



42,681Investment expenses


845



1,411



2,460Interest expense


3,057



2,518



1,895Amortization expense






625



915General and administrative expenses


1,298



2,704



3,918Other expenses


100



537



1,275Total expenses


136,279



167,999



230,930Income before income taxes and
    minority interest


63,003



44,867



19,750Federal income tax expense
    (benefit)


19,816



(27,952
)


(290
)Income before minority interest


43,187



72,819



20,040Minority interest in net income of
    consolidated subsidiary






(453
)


(10
)Net income

$
43,187


$
72,366


$
20,030Earnings Per Share:Net incomeBasic

$
3.59


$
5.65


$
1.58Diluted

$
3.52


$
5.53


$
1.53Weighted Average
    Shares Outstanding:Basic


12,015



12,807



12,683Diluted


12,274



13,094



13,082    38




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
    AND COMPREHENSIVE INCOME
    For the Years Ended December 31, 2006, 2005 and
    2004
  AccumulatedAdditional





OtherShares


Paid-in


Retained


ComprehensiveOutstanding(1)


Capital


Earnings


Income


Total(In thousands, except share data)Balance, December 31, 2003


12,668,711



84,849



87,352



29,607



201,808Comprehensive lossNet income










20,030







20,030Other comprehensive income
    (Note 4)














(21,453
)


(21,453
)Total comprehensive loss, net of
    taxes


















(1,423
)Options exercised


547,896



6,788











6,788Amortization of restricted stock,
    net of tax






262











262Excess tax benefits from
    share-based awards






1,775











1,775Restricted stock grants


45,000



181











181Unrestricted stock grants


1,500



27











27Shares tendered in connection with
    option exercise


(249,026
)


(5,454
)










(5,454
)Forfeiture of restricted stock


(6,105
)


(37
)










(37
)Change in deferred tax valuation
    allowance






(1,803
)










(1,803
)Balance, December 31, 2004


13,007,976


$
86,588


$
107,382


$
8,154


$
202,124Comprehensive incomeNet income










72,366







72,366Other comprehensive income
    (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 income
    (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


$
268,810     (1)
    
    Share amounts have been retroactively adjusted to reflect a
    three-for-two
    stock split effective November 1, 2006. See Note 1.   39




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the
    Years Ended December 31, 2006, 2005, and 2004
  Year Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activitiesNet income

$
43,187


$
72,366


$
20,030Adjustments to reconcile net income
    to net cash provided by operating activitiesDepreciation and amortization


3,010



4,888



7,903Net realized gains


(3,310
)


(2,033
)


(1,551
)(Income) loss on equity method
    investees


(788
)


100



342Change in fair value of derivatives






1,095



338Deferred federal income taxes


12,202



(30,246
)


Excess tax benefits from
    share-based awards


(2,137
)


(1,095
)


(1,775
)Stock based compensation


571



371



403Minority interest in net income of
    consolidated subsidiary






453



10Federal income taxes
    recoverable/payable


1,834



3,426



(596
)Changes in:Premiums receivable


4,736



3,885



10,748Reinsurance recoverable


(1,460
)


(6,056
)


340Unpaid losses and loss adjustment
    expenses


2,317



(3,773
)


20,025Unearned premiums


(6,890
)


(7,942
)


(13,766
)Accrued expenses and other
    liabilities


(3,055
)


325



(3,210
)Other assets


5,767



3,198



2,871Net cash from operating
    activities


55,984



38,962



42,112Cash flows (for) from investing
    activitiesPurchasesAvailable-for-sale 
    fixed maturities


(126,979
)


(22,046
)


(267,853
)Held-to-maturity 
    fixed maturities


(188,188
)


(112,912
)


Available-for-sale 
    equity securities






(606
)


(50,034
)Other investments


(386
)


(7,579
)


Property and equipment


(306
)


(1,089
)


(1,120
)Sales and maturitiesAvailable-for-sale 
    fixed maturities


87,457



144,591



285,019Held-to-maturity 
    fixed maturities


26,314



62,014



Available-for-sale 
    equity securities


9,737



1,531



55,928Other investments


2,531



3,536



19,519Property and equipment


6



32



35Deconsolidation of PIC-Florida


(2,941
)






Cash from miscellaneous sources






2,707



Pending securities transactions


5,383



(12,846
)


8,143Net cash (for) from investing
    activities


(187,372
)


57,333



49,637Cash flows for financing
    activitiesPrincipal payment on note payable










(6,000
)Common stock repurchased


(34,762
)


(17,057
)


Excess tax benefits from
    share-based awards


2,137



1,095



1,775Taxes paid in connection with net
    option exercise


(1,714
)






Proceeds from stock options
    exercised


560



1,719



1,334Other


406







27Net cash for financing
    activities


(33,373
)


(14,243
)


(2,864
)Net (decrease) increase in cash
    and cash equivalents


(164,761
)


82,052



88,885Cash and cash equivalents,
    beginning of period


272,988



190,936



102,051Cash and cash equivalents, end of
    period

$
108,227


$
272,988


$
190,936Supplemental disclosures of cash
    flow informationFederal income taxes of
    $5,780,000, $(1,132,000), and $308,000, net, were paid
    (received) during 2006, 2005 and
    2004,     respectively.Interest payments of
    $2,855,000, $2,200,000, and $1,672,000 were made during 2006,
    2005 and 2004, respectively.    40




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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
  three-for-two
  Use of
    estimates
     41




---



##### 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
        Investments
  Fixed-Income
    and Equity Investment Securities
  held-to-maturity available-for-sale available-for-sale held-to-maturity. available-for-sale held-to-maturity
  available-for-sale held-to-maturity
  Available-for-sale available-for-sale Held-to-maturity held-to-maturity
  yield-to-maturity available-for-sale held-to-maturity
 42




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    available-for-sale held-to-maturity
    Other
    Investments
    Derivative
    financial instruments
     43




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)   Cash
    and cash equivalents
    Premiums
    written and receivable and related credit risk
    Deferred
    policy acquisition costs
    Property,
    equipment and depreciation
    Unpaid
    losses and loss adjustment expense reserves
     44




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Reserve
    for extended reporting period claims
    Revenue
    recognition
    Reinsurance
     45




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    taxes
      paid-in-capital
  available-for-sale
    Share-based
    awards
    Minority
    interests
   46




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   1.
    Significant
    Accounting Policies (continued)         2.
    Effects
    of New Accounting Pronouncements     47




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Effects
    of New Accounting Pronouncements (continued)           48




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments  available-for-sale
  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   2005Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost/Cost


Gains


Losses


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

$
3,752


$
55


$
(19
)

$
3,788States and political subdivisions


16,106



145







16,251Corporate securities


197,926



6,028



(230
)


203,724Mortgage-backed securities


287



57



(6
)


338Total
    available-for-sale
    fixed-income securities


218,071



6,285



(255
)


224,101Equity securities


208











208Total
    available-for-sale
    securities

$
218,279


$
6,285


$
(255
)

$
224,309  49




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)  held-to-maturity held-to-maturity
  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   2005Gross


GrossUnrecognized


UnrecognizedCarrying


Holding


Holding


EstimatedValue


Gains


Losses


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

$
82,628


$



$
(1,638
)

$
80,990States and political subdivisions


2,879







(28
)


2,851Corporate securities


69,681



173



(1,572
)


68,282Mortgage-backed securities


190,514



51



(3,753
)


186,812Total
    held-to-maturity
    fixed-income securities

$
345,702


$
224


$
(6,991
)

$
338,935  50




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)  available-for-sale held-to-maturity
  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



(221
)


15,969



(227
)Subtotal fixed income


22,897



(33
)


10,034



(221
)


32,931



(254
)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



(1,909
)


54,766



(3,293
)Mortgage-backed securities


13







156,910



(3,768
)


156,923



(3,768
)Subtotal fixed income


64,269



(1,468
)


280,652



(7,801
)


344,921



(9,269
)Total temporarily impaired
    securities

$
87,166


$
(1,501
)

$
290,686


$
(8,022
)

$
377,852


$
(9,523
)   51




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)  December 31, 2005Less 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

$



$
(19
)

$



$



$



$
(19
)Corporate securities


3,974



(76
)


6,230



(154
)


10,204



(230
)Mortgage-backed securities


1



(6
)










1



(6
)Subtotal fixed income


3,975



(101
)


6,230



(154
)


10,205



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

$
80,990


$
(1,638
)

$



$



$
80,990


$
(1,638
)States and political subdivisions


2,852



(28
)










2,852



(28
)Corporate securities


48,246



(1,572
)










48,246



(1,572
)Mortgage-backed securities


179,981



(3,753
)










179,981



(3,753
)Subtotal fixed income


312,069



(6,991
)










312,069



(6,991
)Available-for-sale
    equity securities






















Total temporarily impaired
    securities

$
316,044


$
(7,092
)

$
6,230


$
(154
)

$
322,274


$
(7,246
)    52




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    Investments
    (continued)     2006


2005


2004(In thousands)Interest income

$
44,155


$
44,451


$
46,108Dividend income


428



60



160Other investment income


670



652



1,105Total investment income


45,253



45,163



47,373Investment expenses


(845
)


(1,411
)


(2,460
)Net investment income

$
44,408


$
43,752


$
44,913Gross realized gains on disposalFixed income

$
148


$
3,065


$
7,639Equity securities


2,166



121



3,374Other invested assets


1,474







651Total gross realized gains


3,788



3,186



11,664Gross realized losses on disposalFixed income


(146
)


(329
)


(1,406
)Equity securities


(7
)


(68
)


(2,072
)Other invested assets


(16
)


(66
)


(1,709
)Property and equipment


(131
)


(47
)


(94
)Total gross realized losses on
    disposal


(300
)


(510
)


(5,281
)Other than temporary impairments


(178
)


(643
)


(4,832
)Net realized gains

$
3,310


$
2,033


$
1,551   available-for-sale held-to-maturity
  EstimatedFair Value(In thousands)Available-for-saleLess than one year

$
40,088One to five years


111,468Five to ten years


95,016More than ten years


8,250Mortgage-backed securities


179Total
    available-for-sale

$
255,001   53




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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


78,547



76,280Five to ten years


184,192



182,455More than ten years


78,865



77,941Mortgage-backed securities


163,968



160,219Total
    held-to-maturity

$
505,572


$
496,895         4.
    Other
    Comprehensive Income  available-for-sale held-to-maturity
    December 31,2006


2005(In thousands)Net unrealized gains on
    available-for-sale
    securities

$
3,573


$
6,030Net unamortized unrealized gains
    on
    held-to-maturity
    securities


3,781



4,865Deferred federal income taxes


(2,574
)


(3,813
)Effect of minority interests and
    equity method investees, net of deferred taxes


(11
)


22Total net unrealized gains

$
4,769


$
7,104  54




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Other
    Comprehensive Income (continued)  available-for-sale held-to-maturity
  2006


2005


2004(In thousands)Unrealized gains (losses) arising
    during the period:Available-for-sale:Fixed maturities

$
(2,455
)

$
(9,350
)

$
(14,855
)Equity securities


1,950



(31
)


437Held-to-maturity
    amortization


(1,084
)


(1,021
)


Reclassification adjustments


(1,952
)


(2,789
)


(7,046
)Other comprehensive loss before
    taxes, minority interests and equity method investees


(3,541
)


(13,191
)


(21,464
)Deferred federal income taxes


1,239



4,617



7,512Change in deferred tax valuation
    allowance






7,512



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


(33
)


12



11Other comprehensive income

$
(2,335
)

$
(1,050
)

$
(21,453
)    5.
    Deferred
    Acquisition Costs    2006


2005


2004(In thousands)Balance, January 1

$
7,877


$
8,082


$
10,461Additions


16,927



18,782



20,670Amortization


(17,160
)


(18,987
)


(22,749
)Recoverability write-offs










(300
)Balance, December 31

$
7,644


$
7,877


$
8,082      55




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Property
    and Equipment, Net    2006


2005(In thousands)Land

$
571


$
571Building (occupied by the Company)


10,499



10,499Computer equipment and software


11,456



11,974Furniture and leasehold
    improvements


3,967



4,05026,493



27,094Accumulated depreciation


(16,718
)


(15,937
)$
9,775


$
11,157     7.
    Unpaid
    Losses and Loss Adjustment Expenses    2006


2005


2004(In thousands)Balance, beginning of year

$
689,857


$
693,630


$
673,605Less, reinsurance recoverables


(107,692
)


(101,791
)


(98,958
)Net balance, beginning of year


582,165



591,839



574,647Deconsolidation of PIC-Florida


(2,418
)






Incurred related toCurrent year


113,338



131,496



171,600Prior years


(12,880
)


(4,372
)


6,186Total incurred


100,458



127,124



177,786Paid related toCurrent year


3,168



5,054



17,961Prior years


96,971



131,744



142,633Total paid


100,139



136,798



160,594Net balance, end of year


580,066



582,165



591,839Plus, reinsurance recoverables


107,965



107,692



101,791Balance, end of period

$
688,031


$
689,857


$
693,630Prior year development as a
    percentage of beginning of the year net reserves


−2.2
%


−0.7
%


1.1
%    56




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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        9.
    Reinsurance   57




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Reinsurance
    (continued)    2006


2005


2004Written


Earned


Written


Earned


Written


Earned(In thousands)Direct

$
156,866


$
163,746


$
185,511


$
192,437


$
213,945


$
227,528Ceded


(10,097
)


(14,022
)


(25,587
)


(26,628
)


(30,482
)


(30,100
)Assumed


(46
)


(36
)


(2,542
)


(1,526
)


2,968



3,151Net

$
146,723


$
149,688


$
157,382


$
164,283


$
186,431


$
200,579Assumed as a percentage of net


0.0
%


0.0
%


−1.6
%


−0.9
%


1.6
%


1.6
%         December 31,2006


2005(In thousands)Hannover Ruckversicherungs

$
45,419


$
46,948Munich Reins Amer


26,190



25,297Transatlantic Reinsurance Company


10,605



11,587Aspen Re


5,904



6,000Lloyds of London


4,113



4,007General Reinsurance Corporation


3,146



3,398PMA Capital Insurance Corporation


2,886



2,568Montpelier


2,629



2,671Others


12,558



17,754$
113,450


$
120,230     December 31,2006


2005(In thousands)Reinsurance recoverable

$
109,013


$
109,368Prepaid reinsurance premium
    (included in other assets)


4,437



10,862Amounts recoverable from reinsurers

$
113,450


$
120,230    58




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   9.
    Reinsurance
    (continued)    10.
    Income
    Taxes    2006


2005


2004(In thousands)Current provision (benefit)

$
7,614


$
2,294


$
(2,680
)Deferred provision


12,202



13,805



9,011Deferred tax valuation allowance






(44,051
)


(6,621
)Total provision (benefit)

$
19,816


$
(27,952
)

$
(290
)     2006


2005


2004(In thousands)Income before income taxes

$
63,003






$
44,867






$
19,750Tax at statutory rate

$
22,051



35.0
%

$
15,694



35.0
%

$
6,913



35.0
%Tax effect of:Tax exempt interest


(2,091
)


−3.3
%


(217
)


−0.5
%


(338
)


−1.7
%Other items, net


(144
)


−0.2
%


622



1.4
%


(244
)


−1.2
%Valuation allowance






0.0
%


(44,051
)


−98.2
%


(6,621
)


−33.5
%$
19,816



31.5
%

$
(27,952
)


−62.3
%

$
(290
)


−1.4
%  59




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Income
    Taxes (continued)    2006


2005(In thousands)Deferred tax assets arising from:Losses and loss adjustment expenses

$
21,010


$
23,378Net operating loss carryforwards


1,209



7,447Unearned and advanced premiums


6,027



6,383Minimum tax credits


6,185



8,761Realized losses on investments


613



820Goodwill


3,790



4,170Other


863



1,478Total deferred tax assets


39,697



52,437Deferred tax liabilities arising
    from:Deferred policy acquisition costs


2,675



2,757Net unrealized gains on securities


2,574



3,813Other


1,653



1,828Total deferred tax liabilities


6,902



8,398Net deferred tax asset before
    valuation allowance


32,795



44,039Valuation allowance






Net deferred tax asset

$
32,795


$
44,039       2005


2004Valuation allowance balance,
    January 1

$
(53,366
)

$
(50,672
)Change in valuation allowance
    allocated to:Federal income tax benefit from
    operations


51,563



6,621Reclass benefit from continuing
    operations to other comprehensive income


(7,512
)


Unrealized depreciation on
    investment securities allocated to other comprehensive income


7,512



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


1,775



(1,775
)Other items allocated to
    shareholders equity


28



(28
)Valuation allowance balance,
    December 31

$



$
(53,366
)  60




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Income
    Taxes (continued)    11.
    Shareholders
    Equity    Discretionary PlanInception


For the Year Ended December 31,to Date Totals


2006


2005


2004(Dollars in thousands, except per share amounts)Number of shares repurchased


5,770,855



325,000



650,250



Cost of shares repurchased

$
88,557


$
11,117


$
17,057


$
Average cost per share repurchased

$
15.35


$
34.21


$
26.23


$
   Rule 10b5-1 Rule 10b5-1
  Rule 10b5-1
    PlanInceptionto Date


For the Year Ended December 31,Totals


2006


2005


2004(Dollars in thousands, except per share amounts)Number of shares repurchased


750,350



750,350







Cost of shares repurchased

$
23,645


$
23,645


$



$
Average cost per share repurchased

$
31.51


$
31.51


$



$
   Rule 10b5-1 Rule 10b5-1 Rule 10b5-1 Rule 10b5-1
 61




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   11.
    Shareholders
    Equity (continued)     12.
    Fair
    Value of Financial Instruments    held-to-maturity, held-to-maturity
  13.
    Restructuring
    Charges and Exit Costs  Termination
    Benefits
      2006


2005


2004(In thousands)Balance, January 1

$
97


$
101


$
727Employee separation costs


32



65



185Payments


(11
)


(69
)


(811
)Balance, December 31

$
118


$
97


$
101   Contract
    Termination Costs
   62




---



##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    Restructuring
    Charges and Exit Costs (continued)     2006


2005


2004(In thousands)Balance, January 1

$
1,120


$
921


$
Payments


(181
)


(334
)


(170
)Contract termination costs






345



1,091Changes in estimated cash flows


61



127



Discount accretion


68



61



Balance, December 31

$
1,068


$
1,120


$
921       14.
    Related
    Party Transactions      15.
    Employee
    Benefit Plans    16.
    Share-Based
    Compensation  Equity
    Compensation Plans
     63




---



##### Table of Contents



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


Weighted


Average


Aggregateof


Average


Remaining


IntrinsicOptions


Exercise Price


Term


Value(In years)


(In thousands)Options outstanding at
    January 1, 2006


776,100


$
15.20Granted during the period






Exercised during the period


(232,280
)

$
11.88Canceled during the period


(1,500
)

$
26.50Options outstanding at
    December 31, 2006


542,320


$
16.59



6.45


$
12,718Options exercisable at
    December 31, 2006


396,571


$
14.51



5.84


$
10,125   in-the-money
   64




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Share-Based
    Compensation (continued)     WeightedNumber of


AverageNon-vested


Grant DateShares


Fair ValueNon-vested shares outstanding at
    January 1, 2006


24,119


$
11.47Granted during the period






Vested during the period


(11,882
)

$
11.47Forfeited during the period


(765
)

$
11.47Non-vested shares outstanding at
    December 31, 2006


11,472


$
11.47       Impact
    of the Adoption of SFAS No. 123(R)
    paid-in-capital.
  additional-paid-in-capital.
   65




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Share-Based
    Compensation (continued)      For the Year Ended December 31,2005


2004(In thousands, except per share data)Net income, as reported

$
72,366


$
20,030Add: Stock-based employee
    compensation expense included in reported net income, net of
    related tax effects


227



260Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards granted since 2000, net of related tax effects


(563
)


(921
)Pro forma net income

$
72,030


$
19,369Basic net income per shareAs reported

$
5.65


$
1.58Pro forma

$
5.63


$
1.53Diluted net income per shareAs reported

$
5.53


$
1.53Pro forma

$
5.50


$
1.48Basic Weighted Average Shares


12,807



12,683Diluted Weighted Average Shares


13,094



13,082   Valuation
    Assumptions
    2005

2004(Binomial Lattice)

(Black-Scholes)Risk-free interest rate

4.44%

3.12%Dividend yield

0%

0%Expected volatility

10%  25%

40%Weighted average volatility

20%

40%Expected term (years)

4.0

5.0Weighted average estimated grant
    date fair value

$4.85

$5.70    66




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Share-Based
    Compensation (continued)    17.
    Earnings
    Per Share      2006


2005


2004(In thousands, except per share amounts)Numerator for basic and diluted
    income per common share:Net income

$
43,187


$
72,366


$
20,030Denominator:Denominator for basic income per
    common share  weighted average shares outstanding


12,015



12,807



12,683Effect of dilutive stock options
    and awards


259



287



399Denominator for diluted income per
    common share  adjusted weighted average shares
    outstanding


12,274



13,094



13,082Income per common
    share:Net income Basic

$
3.59


$
5.65


$
1.58Diluted

$
3.52


$
5.53


$
1.53    18.
    Commitments
    and Contingencies  97-3,
   67




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   18.
    Commitments
    and Contingencies (continued)       19.
    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.
    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 DD&R 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 DD&R 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.    68




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##### Table of Contents



AMERICAN
    PHYSICIANS CAPITAL, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   19.
    GAAP and
    Statutory Reporting (continued)  2006


2005


2004(In thousands)Statutory surplus, December 31

$
248,929


$
240,135


$
210,874Statutory net income for the year
    ended December 31

$
54,470


$
48,953


$
19,216   12-month
  20.
    Quarterly
    Financial Data (Unaudited)    Net IncomeIncome





Per CommonTotal


Before Taxes and


Net


Share AssumingRevenues


Minority Interest


Income


Dilution(In thousands, except per share data)20061st Quarter

$
49,035


$
13,172


$
8,863


$
0.702nd Quarter


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


$
43,18720051st Quarter

$
54,703


$
7,591


$
7,332


$
0.552nd Quarter(a)


51,843



9,767



47,782



3.633rd Quarter


50,717



10,561



6,825



0.534th Quarter


55,603



16,948



10,427



0.81$
212,866


$
44,867


$
72,366     (a)
    
    Net income in the second quarter of 2005 includes a
    $41.6 million federal income tax benefit related to the
    reversal of a deferred tax valuation allowance. 69




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Form 10-K
    BDO
    SEIDMAN, LLP
    70




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##### Table of Contents



SCHEDULE II 
    SUPPLEMENTARY INSURANCE INFORMATION
    AMERICAN PHYSICIANS CAPITAL, INC. (PARENT COMPANY)
  CONDENSED
    BALANCE SHEETS
    December 31, 2006 and 2005
  December 31,2006


2005(In thousands)ASSETSInvestments in subsidiaries

$
279,099


$
280,823Equity securities


928



928Cash and cash equivalents


17,497



5,337Deferred federal income taxes


197



1,787Federal income taxes recoverable
    from affiliates


4,316



3,247Other assets


247



855Total assets

$
302,284


$
292,977LIABILITIESLong-term debt

$
30,928


$
30,928Accrued expenses and other
    liabilities


2,546



837Total liabilities


33,474



31,765Shareholders
    EquityCommon stock, no par value,
    50,000,000 shares authorized, 12,500,126 and
    11,556,575 shares outstanding at December 31, 2006 and
    2005, respectively Additional paid-in capital


41,106



74,360Retained earnings


222,935



179,748Accumulated other comprehensive
    income, net of deferred federal income taxes


4,769



7,104Total shareholders equity


268,810



261,212Total liabilities and
    shareholders equity

$
302,284


$
292,977    71




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##### Table of Contents



SCHEDULE II 
    SUPPLEMENTARY INSURANCE INFORMATION
    AMERICAN PHYSICIANS CAPITAL, INC. (PARENT COMPANY)
  CONDENSED
    STATEMENTS OF OPERATIONS
    Years Ended December 31, 2006, 2005 and 2004
  Year Ended December 31,2006


2005


2004(In thousands)RevenuesInvestment income

$
637


$
107


$
36Net realized losses


(212
)






Other income


1,600







Total revenues


2,025



107



36ExpensesInterest expense


2,986



2,455



1,896Amortization expense






313



312General and administrative expenses


1,310



2,561



3,732Total expenses


4,296



5,329



5,940Loss before income taxes and
    equity in undistributed income of subsidiaries


(2,271
)


(5,222
)


(5,904
)Federal income tax (benefit)
    expense


(635
)


2,853



(8,736
)(Loss) income before equity in
    undistributed income of subisidiaries


(1,636
)


(8,075
)


2,832Equity in net income of
    subsidiaries


44,823



80,441



17,198Net income

$
43,187


$
72,366


$
20,030      72




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##### Table of Contents



SCHEDULE II 
    SUPPLEMENTARY INSURANCE INFORMATION
    AMERICAN PHYSICIANS CAPITAL, INC. (PARENT COMPANY)
  CONDENSED
    STATEMENTS OF CASH FLOWS
    Years Ended December 31, 2006, 2005 and 2004
  Year Ended December 31,2006


2005


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

$
43,187


$
72,366


$
20,030Adjustments to reconcile net
    income to net cash used in operating activities:Equity in net income of
    subsidiaries


(44,823
)


(80,441
)


(17,198
)Dividends from subsidiaries


43,000



17,300



Amortization






291



288Net realized losses


212







Stock based compensation


571



371



403Excess tax benefits from
    share-based awards


(2,137
)


(1,095
)


(1,775
)Deferred federal income taxes


1,545



(122
)


Changes in:Federal or intercompany income
    taxes recoverable/payable


1,068



7,588



(9,740
)Accrued expenses and other
    liabilities


1,303



(1,673
)


1,402Other assets


608



764



112Net cash from (for) operating
    activities


44,534



15,349



(6,478
)Cash flows from (for) investing
    activitiesLiquidation of APIndemnity


999







Net contributions to subsidiaries










(20,200
)Net cash from (for) investing
    activities


999







(20,200
)Cash flows (for) from financing
    activitiesCommon stock repurchased


(34,762
)


(17,057
)


Excess tax benefits of share-based
    awards


2,137



1,095



1,775Stock options exercised


560



1,719



1,334Taxes paid in connection with net
    option exercise


(1,714
)






Other


406







27Net cash (for) from financing
    activities


(33,373
)


(14,243
)


3,136Net increase (decrease) in cash
    and cash equivalents


12,160



1,106



(23,542
)Cash and cash equivalents,
    beginning of year


5,337



4,231



27,773Cash and cash equivalents, end of
    year

$
17,497


$
5,337


$
4,231      73




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##### Table of Contents



SCHEDULE II 
    SUPPLEMENTARY INSURANCE INFORMATION
    AMERICAN PHYSICIANS CAPITAL, INC. (PARENT COMPANY)
  NOTES TO
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    Year Ended December 31, 2005
  (1)  Description
    of Business
                    (2)  Long
    Term Debt
    (3)  Federal
    Income Taxes
    American Physicians

ICAAPSpecialty

Alpha Advisors, Inc.     (4)  Dividends
    Received
     74




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##### Table of Contents



(5)  Stock
    Split
  three-for-two
  (6)  Share
    Repurchases
  Rule 10b5-1
 75




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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.
 76




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
            BDO
    SEIDMAN, LLP
    77




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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 of the
    Registrant   
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   
  Item 14.
    Principal
    Accountant Fees and Services   
  PART IV
 
  Item 15.
    Exhibits and
    Financial Statement Schedules    Financial
    Statements:
         78




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##### Table of Contents



Financial
    Statement Schedules:
    Regulation S-X
   79




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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,
    Chief Financial Officer (principal financial
    and principal accounting officer)/s/  Thomas
    R.
    Berglund, M.D.Thomas
    R. Berglund, M.D.

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

Director/s/  Daniel
    L. GormanDaniel
    L. Gorman

Director/s/  AppaRao
    Mukkamala, M.D.AppaRao
    Mukkamala, M.D.

Director/s/  D.
    Joseph
    Olson, J.D.D.
    Joseph Olson, J.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  80




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##### Table of Contents



EXHIBIT INDEX
  000-32057.
  ExhibitNumber

Description2.1

Plan of Conversion, dated
    June 28, 2000, as amended September 22, 2000(2)3.1

Articles of Incorporation(2)3.2

Amended and Restated Bylaws, as
    amended January 26, 2005(10)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)10.5

American Physicians/SCW Sales
    Agency Agreement (Medical Professional Liability 
    Michigan Only), dated January 1, 2000(2)10.6

KMIC Insurance Company Agency
    Agreement, dated October 13, 1998(2)10.12

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

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

Form of Stock Option Agreement
    with Executives, dated December 5, 2000(4)*10.20

Form of Restricted Stock Award
    with Directors, dated December 5, 2000(4)*10.21

Form of Restricted Stock Award
    with Executives, 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(5)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)10.37

Standstill Agreement, dated
    April 7, 2004 between the company and Daniel L. Gorman(8)10.41

Standstill Agreement, dated
    November 10, 2004, between the Company, Stilwell Value
    Partners, L.P. and various affiliated entities and individuals(9)*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(11)10.45

Amendment No. 1, dated
    May 9, 2005, to the Standstill Agreement, dated
    April 7, 2004, between the Company and Daniel L. Gorman(13)10.46

Summary of Incentive Compensation
    Plan as of March 2006(14)10.47

Amendment No. 1 to American
    Physicians Capital, Inc. Stock Compensation Plan(1)21.1

Subsidiaries of APCapital(7) 81




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##### Table of Contents



ExhibitNumber

Description23.1

Consent of BDO Seidman, LLP(1)23.2

Consent of PricewaterhouseCoopers
    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)99.1

Stock Pledge Agreement, dated as
    of December 31, 2004 between Daniel R. ONeal and
    American Physicians Assurance Corporation(12)99.2

Promissory Note from Daniel R.
    ONeal to American Physicians Assurance Corporation, dated
    December 31, 2004 (12)     *
    
    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 2002 Annual Report on
    Form 10-K
    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 Current Report on
    Form 8-K
    dated April 7, 2004 and incorporated herein by reference.(9)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated November 15, 2004 and incorporated herein by
    reference.(10)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated January 31, 2005 and incorporated herein by reference.(11)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated February 28, 2005 and incorporated herein by
    reference.(12)
    
    Filed as an exhibit to APCapitals 2004 Annual Report on
    Form 10-K,
    as amended, and incorporated herein by reference.(13)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated May 9, 2005 and incorporated herein by reference.(14)
    
    Filed as an exhibit to APCapitals Current Report on
    Form 8-K
    dated March 15, 2006 and incorporated herein by reference. 82