United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[x]      Annual Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the fiscal year ended December 31, 2001
                                       or

[        ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the transition period from ____________to
         ___________

                         Commission file number 1-11983

                           FPIC Insurance Group, Inc.
             (Exact Name of Registrant as Specified in its Charter)

             Florida                                  59-3359111
(State or Other Jurisdiction of                (IRS Employer Identification No.)
Incorporation or Organization)

225 Water Street, Suite 1400, Jacksonville, Florida           32202
(Address of Principal Executive Offices)                    (Zip Code)

                                 (904) 354-2482
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:   None
Securities registered pursuant to Section 12(g) of the Act:   Common Stock,
                                                               $.10 par value


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes        X       No
   ---------------     -------------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the Registrant's Common Stock (its only voting
stock) held by non-affiliates of the Registrant as of March 30, 2002 was
approximately $113,959,643.

As of March 20, 2002, there were 9,389,462 shares of the Registrant's Common
Stock, $.10 Par Value, outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

            Document                                    Incorporated in
-------------------------------              -----------------------------------
Proxy Statement for Registrant's                           Part III
Annual Shareholders' Meeting to
be held on June 5, 2002





<PAGE>



                           FPIC Insurance Group, Inc.
                         2001 Annual Report on Form 10-K
                                      Index



                                                                            Page
                                                                            ----
                                     Part I

Item 1.    Business........................................................   3
Item 2.    Properties......................................................  16
Item 3.    Legal Proceedings...............................................  16
Item 4.    Submission of Matters to a Vote of Security Holders.............  16

                                     Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder
           Matters.........................................................  16
Item 6.    Selected Financial Data.........................................  17
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations...........................................  17
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk......  31
Item 8.    Financial Statements and Supplementary Data.....................  32
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure............................................  32

                                    Part III

Item 10.   Directors and Executive Officers of the Registrant..............  32
Item 11.   Executive Compensation..........................................  32
Item 12.   Security Ownership of Certain Beneficial Owners and Management..  32
Item 13.   Certain Relationships and Related Transactions..................  32

                                     Part IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.  33






<PAGE>

                                     Part I

Item 1.  Business
-----------------

Safe Harbor Disclosure
----------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Any written or oral statements made by or on
behalf of the Company may include forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere herein and in documents filed by the Company with the
Securities and Exchange Commission) include, but are not limited to, (i)
uncertainties relating to government and regulatory policies (such as subjecting
the Company to insurance regulation or taxation in additional jurisdictions or
amending, revoking or enacting any laws, regulations or treaties affecting the
Company's current operations), (ii) the occurrence of insured or reinsured
events with a frequency or severity exceeding the Company's estimates, (iii)
legal developments, (iv) the uncertainties of the loss reserving process, (v)
the actual amount of new and renewal business and market acceptance of expansion
plans, (vi) the loss of the services of any of the Company's executive officers,
(vii) changing rates of inflation and other economic conditions, (viii) the
ability to collect reinsurance recoverables, (ix) the competitive environment in
which the Company operates, related trends and associated pricing pressures and
developments, (x) the impact of mergers and acquisitions, including the ability
to successfully integrate acquired businesses and achieve cost savings,
competing demands for the Company's capital and the risk of undisclosed
liabilities, (xi) developments in global financial markets that could affect the
Company's investment portfolio and financing plans, (xii) risk factors
associated with financing and refinancing, including the willingness of credit
institutions to provide financing and the availability of credit generally and,
(xiii) developments in reinsurance markets that could affect the Company's
reinsurance program.

The words "believe," "anticipate," "foresee," "estimate," "project," "plan,"
"expect," "intend," "hope," "will likely result" or "will continue" and
variations thereof or similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

General
-------
FPIC Insurance Group, Inc. (the "Company") was formed in 1996 in connection with
a reorganization (the "Reorganization") pursuant to which it became the parent
company of Florida Physicians Insurance Company, Inc. ("Florida Physicians") and
McCreary Corporation ("McCreary"), a third party administrator. In connection
with the Reorganization, Florida Physicians' shareholders became the
shareholders of the Company and received five shares of the Company's common
stock for each of their shares of Florida Physicians common stock. In May 2001,
the Company changed the name of Florida Physicians to First Professionals
Insurance Company, Inc. ("First Professionals"). Effective January 1, 2002,
McCreary and its subsidiary, Employers Mutual, Inc. ("EMI") were consolidated by
legal entity merger, with EMI continuing as the surviving entity.

The Company has three main operating segments as follows: insurance, reciprocal
management and third party administration ("TPA"). The Company's primary sources
of revenue are management fees and dividends received from its subsidiaries. The
primary sources of revenue for these amounts are premiums earned and investment
income from the insurance segment and fee and commission income from the
reciprocal management and TPA segments.

Through the insurance segment, the Company specializes in professional liability
insurance products and services for physicians, dentists, other healthcare
providers and attorneys. The Company's reciprocal management segment provides
management services and brokerage and administration services for reinsurance
programs and the placement of annuities in structured settlements. In addition,
the Company's TPA segment markets and administers self-insured and fully insured
plans for both large and small employers, including group accident and health
insurance, workers' compensation and general liability and property insurance.



                                       3
<PAGE>

Acquisitions
------------
On July 1, 1995, First Professionals acquired the assets of McCreary for $2.0
million plus certain additional payments based on earnings. On January 17, 1997,
McCreary acquired all of the outstanding common stock of EMI for $1.3 million
plus certain additional payments based upon earnings. The acquisition agreements
specified additional payments, based upon earnings, to be made to the sellers
from the acquisition date through 2001. During 2000, the Company entered into
agreements with the sellers to fix the remaining payments, eliminating the
contingent terms under the previous agreements.

On July 1, 1998, the Company purchased all of the outstanding common stock of
Anesthesiologists Professional Assurance Company ("APAC"), a medical malpractice
insurance company, for $18.0 million. Additionally, $3.5 million was paid in
non-compete agreements and other fees to certain key employees. These amounts
are recorded as intangible assets in the consolidated balance sheet. APAC
insures over 1,200 anesthesiologists in sixteen states. Concurrent with the
purchase of APAC, the Company purchased a 9.9% interest in American Professional
Assurance Ltd., a Cayman Islands captive reinsurer, for $5.5 million.

Effective January 1, 1999, the Company purchased all of the outstanding common
stock of Administrators' for the Professions, Inc. ("AFP") and a 70% interest in
Professional Medical Administrators, LLC ("PMA") for aggregate consideration
equal to $56.3 million, paid in cash of $44.7 million and Company common stock.
AFP is the manager and attorney-in-fact for Physicians' Reciprocal Insurers
("PRI"), the second largest medical professional liability insurer for
physicians in the state of New York.

On March 17, 1999, First Professionals purchased all of the outstanding common
stock of The Tenere Group, Inc. ("Tenere") for $19.6 million in cash. Tenere,
headquartered in Springfield, Missouri, is a stock holding company, with two
primary insurance subsidiaries, Intermed Insurance Company ("Intermed") and
Interlex Insurance Company ("Interlex"). Intermed and Interlex market and
underwrite medical professional liability ("MPL") and legal professional
liability ("LPL") insurance, respectively.

Information about Segments
--------------------------
Presentation. The business segments presented in this document have been
determined in accordance with the provisions of Statement of Financial
Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and
Related Information." As indicated above, the Company has three reportable
segments, insurance, reciprocal management and third party administration.
Holding company operations are included within the insurance segment due to its
size and prominence and the substantial attention devoted to the segment.

Competition. Competitive forces in the property and casualty insurance and
reinsurance business are substantial. Results are a function of underwriting and
investment performance, direct costs associated with the delivery of insurance
products, including the costs of regulation, the frequency and severity of
medical claims, as well as inflation. Decisions made by insurers concerning
their mix of business (targeting certain types of coverage but declining to
write other types), their methods of operations and the quality and allocation
of their assets and their ratings will affect their competitive position. The
relative size and reputation of insurers may influence purchasing decisions of
present and prospective customers, thus contributing to both geographic and
industrial sector or specialty market penetration. Abundant capital has
historically had the effect of encouraging competition and depressing prices.
The Company's competitive position in the property and casualty insurance
industry is influenced by all of these factors. Additional competitive
information regarding individual segments is presented below.

Ratings. The Company and its insurance subsidiaries are rated by nationally
recognized insurance rating agencies. While the significance of individual
ratings vary among agencies, companies assigned ratings at the top end of the
range have, in the opinion of the rating agency, the strongest capacity for
payment of claims, while companies at the bottom end of the range have the
weakest capacity. Insurance specific ratings represent the opinion of the rating
agencies on the financial strength of a company and its capacity to meet the
obligations of insurance policies. These ratings are based on factors relevant
to policyholders, agents and intermediaries and are



                                       4
<PAGE>

not directed toward the protection of investors. Such ratings are not
recommendations to buy, sell, or hold securities.

A.M. Best Company ("A.M. Best") is the primary rating organization for the
Company's insurance subsidiaries. A.M. Best's ratings are based upon a
comprehensive review of a company's financial performance including interaction
with management and is supplemented by certain data, including responses to
questionnaires, quarterly National Association of Insurance Commissioners
("NAIC") filings, state insurance department examination reports, loss reserve
reports and reports filed with the Securities and Exchange Commission. A.M. Best
undertakes a quantitative evaluation based upon profitability, leverage and
liquidity and a qualitative evaluation based upon the composition of an
insurer's book of business or spread of risk, the amount, appropriateness and
soundness of reinsurance, the quality, diversification and estimated market
value of its assets, the adequacy of its loss reserves and policyholders'
surplus and the experience and competency of its management. The Company's
insurance subsidiaries carry an A.M. Best group rating of A- (Excellent).

Insurance Segment
-----------------
Principal Business. The Company, through First Professionals, APAC, Intermed and
Interlex, is a provider of MPL and other professional liability insurance
principally in Florida, Texas, Missouri and Pennsylvania. The premiums in Texas
and Pennsylvania are primarily written under fronting arrangements, whereby the
Company does not retain significant underwriting risks on the underlying
business. MPL insurance protects the physician, dentist, or other healthcare
provider against liabilities arising from the rendering of or failure to render
professional healthcare services. Under the typical MPL insurance policy, the
insurer also pays the legal costs of defending the claim. First Professionals
has the exclusive endorsement of both the Florida Medical Association ("FMA")
and the Florida Dental Association ("FDA").

The following table summarizes (in thousands) the insurance segment's direct
premiums written by state for the years ended December 31, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                     Direct Premiums Written by State
                         --------------------------------------------------------------------------------------
                              2001        % of Total        2000        % of Total       1999        % of Total
                         ---------------------------  ----------------------------  ---------------------------
<S>                   <C>                    <C>           <C>             <C>          <C>             <C>
Florida               $      127,479         57.3%          97,707         73.3%         94,583         80.7%
Texas                         26,318         11.8%          17,076         12.8%         11,499          9.8%
Missouri                      23,468         10.5%          13,014          9.8%          8,140          6.9%
Pennsylvania                  13,578          6.1%               4          0.0%              4          0.0%
Tennessee                      6,961          3.1%              11          0.0%             11          0.0%
Georgia                        6,303          2.8%           1,969          1.5%          1,251          1.1%
Kentucky                       4,493          2.0%              --          0.0%             --          0.0%
Kansas                         3,271          1.5%           1,497          1.1%            396          0.3%
Ohio                           3,039          1.4%              26          0.0%             27          0.0%
Alabama                        1,669          0.7%             817          0.6%            185          0.2%
Michigan                       1,436          0.6%              78          0.1%            361          0.3%
North Carolina                 1,385          0.6%              44          0.0%             60          0.1%
Maryland                       1,155          0.5%              14          0.0%             52          0.0%
All other                      2,085          0.9%           1,026          0.8%            625          0.5%
                         ----------------             -----------------             ----------------
    All states        $      222,640                       133,283                      117,194
                         ================             =================             ================
</TABLE>

As of December 31, 2001, the Company's insurance subsidiaries were also licensed
in Arizona, Arkansas, Delaware, Illinois, Indiana, Maine, Minnesota,
Mississippi, Montana, Utah, Virginia, Washington and West Virginia. The Company
has begun or will begin marketing in each of these states if and when it
determines an appropriate long-term opportunity exists to write profitable
business.



                                       5
<PAGE>

Insurance Products. The Company's insurance subsidiaries offer a variety of
insurance products. The following table summarizes (in thousands) the direct and
assumed and net premiums written by product type for the years ended December
31, 2001, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                        2001              2000               1999
                                                                   ----------------  ----------------   ----------------
<S>                                                             <C>                      <C>                <C>
Direct and Assumed Premiums Written
    MPL for physicians                                          $      214,544           163,128            119,730
    Workers' compensation                                               14,352             1,018                802
    Group accident and health**                                          7,693            24,412             19,190
    MPL for dentists                                                     5,826             4,334              4,401
    LPL for attorneys                                                    2,659             2,372              1,178
    Investigation defense coverage                                         329             1,455              1,304
    Provider stop loss                                                      --               561              1,611
                                                                   ----------------  ----------------   ----------------
       All products                                             $      245,403           197,280            148,216
                                                                   ================  ================   ================

Net Premiums Written
    MPL for physicians                                          $      132,181           131,097             96,929
    Workers' compensation                                                  673               790                316
    Group accident and health**                                          7,235            23,118             18,219
    MPL for dentists                                                     4,686             3,697              4,153
    LPL for attorneys                                                    1,980             1,763                864
    Investigation defense coverage                                         329             1,210              1,185
    Provider stop loss                                                      --               256                767
                                                                   ----------------  ----------------   ----------------
       All products                                             $      147,084           161,931            122,433
                                                                   ================  ================   ================
    ** The Company exited this line of business in 2001.
</TABLE>

Medical Professional Liability. The principal product offered by the Company is
MPL insurance for physicians and dentists. MPL insurance is offered to
physicians and dentists in all types of settings, including individual and group
practices. MPL insurance provides coverage against the legal liability of an
insured for such things as injury caused by or as a result of treatment of a
patient, failure to treat a patient and failure to properly diagnose a patient.

The Company's MPL policies are issued substantially on a "claims-made" basis.
Coverage is provided for claims reported to the Company during the policy period
arising from incidents that occurred at any time the insured was covered by the
policy. The Company also offers "prior acts" coverage, which provides coverage
for a specified period preceding the initial claims-made policy period and "tail
coverage" for claims reported after the expiration of the policy for occurrences
during the coverage period. The price of tail coverage is based on the length of
time the insured has been covered under the Company's claims-made policy. In
addition, the Company provides free tail coverage for insured physicians who die
or become disabled during the coverage period of the policy and those who have
been insured by the Company for at least five consecutive years and retire
completely from the practice of medicine. MPL insurance policies offered by the
Company are issued with liability limits up to $5.0 million per incident and
$7.0 million in annual aggregate for physicians and $2.0 million per incident
and $5.0 million in annual aggregate for dentists.

Workers' Compensation. The Company began writing workers' compensation insurance
in 1998. Workers' compensation insurance covers the liability of an employer for
work-related injuries to employees, in accordance with the requirements of law.
The Company no longer writes this business on a direct basis; however it does
have agreements to front workers' compensation business for other insurance
carriers as noted below.

Legal Professional Liability. LPL insurance provides coverage for a wrongful act
committed by an insured while providing professional services as a lawyer,
notary public, arbitrator, or mediator. Coverage is written on a claims-made
basis with a single policy limit shared by all members of the insured firm.
Defense costs are included within the policy limit. Options to apply the
deductible to the defense costs are available. Limits up to



                                       6
<PAGE>

$1.0 million per incident and $3.0 million in annual aggregate are also
available. Higher limits are placed through semi-facultative reinsurance
agreements.

Investigation Defense Coverage. The Company also offers, in conjunction with
certain MPL policies coverage for the defense of investigations involving
medical licensing, the Occupational Safety and Health Administration, the Equal
Employment Opportunity Commission, and other agencies. This coverage includes
the defense for allegations of Medicare and Medicaid fraud and abuse and the
costs associated with the investigation of such allegations. Policy limits for
this coverage are $25 thousand per incident and $75 thousand in annual
aggregate. Physician and dentist investigation defense coverage limits vary in
other states.

Assumed Reinsurance. In addition to its direct business, the Company reinsures
risks underwritten by other insurers. As an assuming reinsurer, the Company
essentially acts as an insurer of the direct writer for a portion of its
insurance risks, as specified under the terms of the reinsurance agreement. The
Company's assumed reinsurance consists primarily of MPL business written on an
excess of loss and a quota share basis. Under excess of loss contracts, the
Company assumes risks over a certain limit on a per loss basis. Under the
Company's quota share agreements, it assumes a prorata portion of each
underlying risk, up to and including 100% in some cases. The Company's assumed
reinsurance contracts are treaty agreements whereby terms are set in advance and
the underlying individual insurance contracts of the ceding company are
automatically assumed as they are written.

During 2000, the Company's insurance subsidiaries entered into a 100% quota
share reinsurance agreement with PRI, whereby the Company assumed the death,
disability and retirement risks under PRI's claims-made insurance policies in
exchange for cash and investments.

Fronting Programs. Since 1997, the Company has entered into seven fronting
arrangements for MPL and workers' compensation insurance principally in Florida,
Texas, Pennsylvania, North Carolina, Virginia and Utah. The fronting programs
are intended to complement the Company's core insurance business. The Company's
primary source of revenue on these fronting arrangements is fee income for the
use of the Company's policy forms. While the Company does not retain significant
underwriting risks on the underlying business, the fronting arrangements do
possess other risks, primarily credit risks associated with the underlying ceded
reinsurance stemming from the Company's role as the primary carrier. The Company
has controls in place to address these risks, ranging from monitoring controls
over the performance and financial condition of the underlying business itself
to obtaining collateral. The Company has collateral in place on these programs
where such collateral is required under insurance regulations and in other
instances where it is deemed desirable from a business standpoint for good
measure. As each of the Company's fronting programs is unique, the controls in
place are tailored to fit the circumstances of the individual program.

Direct MPL business in Texas is written primarily under an agreement with a
Texas insurance exchange (the "Exchange") whereby the Company markets its
product through a managing general agent related to the Exchange and, in turn,
cedes 100% of the business to the Exchange. As noted above, the Company does not
retain the underlying insurance risks under this program but instead receives a
fee in exchange for its participation via use of its policy forms.

MPL business in Pennsylvania is written under an agreement between PMA and First
Professionals whereby PMA markets, underwrites and administers the policies
issued. In 2001, the agreement provided that First Professionals cede 90% of the
business written to PRI in return for a 5% fronting fee. Under the terms of the
2002 contract, First Professionals cedes 100% of the premiums written to PRI in
exchange for a 7% fronting fee. The Company's exposure under this program is
fully collateralized by trust agreements.

During 2001, the Company's subsidiary, APAC, entered into agreements with
certain insurance carriers to front workers compensation for three programs. The
Company's TPA, EMI, manages the programs, including issuing the policies,
accounting, and supervision of claims. EMI receives management fees and
consulting fees for these services.



                                       7
<PAGE>

Regulation. The Company and its insurance subsidiaries are subject to extensive
state regulatory oversight in Florida and Missouri, where its four insurance
subsidiaries are domiciled, and in the other jurisdictions in which they conduct
business. The insurance laws in each state regulate insurance holding company
structures, including the Company and its subsidiaries. Each insurance company
in a holding company structure is required to register with its domiciliary
Department of Insurance (the "DOI") and furnish information concerning the
operations of companies within the holding company structure that may materially
affect the operations, management or financial condition of the insurers within
the structure. Pursuant to these laws, the DOI may examine the Company, and/or
First Professionals, APAC, Intermed, and Interlex, at any time and require
disclosure of and/or approval of material transactions involving any insurance
subsidiary of the Company, such as extraordinary dividends. All transactions
within the holding company structure affecting the Company's insurance
subsidiaries must be fair and reasonable.

Florida insurance laws provide that no person may acquire, directly or
indirectly, five percent or more of the voting securities of a domiciled
insurance company unless such person has obtained the prior written approval of
the Florida DOI for such acquisition. Any purchaser of five percent or more of
the Company's outstanding common stock will generally be presumed to have
acquired control of the insurance company. In lieu of obtaining such prior
approval, a purchaser owning less than ten percent of the outstanding shares of
the Company, First Professionals, or APAC may file a disclaimer of affiliation
and control with the Florida DOI.

Missouri insurance laws generally provide that no person may acquire, directly
or indirectly, ten percent or more of the voting securities of Intermed or
Interlex unless such person has obtained the prior written approval of the
Missouri DOI for such acquisition.

Since First Professionals, APAC, Intermed, and Interlex are insurance companies,
the DOI in Florida and Missouri are their principal supervisors and regulators.
However, these companies are also subject to supervision and regulation in the
other states where they transact business in relation to numerous aspects of
their business and financial condition. The primary purpose of such supervision
and regulation is to insure the financial stability of the insurance companies
for the protection of policyholders. Insurance companies are required to file
detailed annual reports with the supervisory agencies in each state in which
they do business, and their business and accounts are subject to examination by
such agencies at any time. The laws of the various states establish insurance
departments with broad regulatory powers relative to granting and revoking
licenses to transact business, regulating trade practices, required statutory
financial statements and prescribing the types and amount of investments
permitted. Although premium rate regulations vary among states and lines of
insurance, such regulations require approval by each state regulator of the
rates and policies to be used in its state.

In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (the "Codification") as the NAIC supported basis of accounting.
Codification affects all statutory financial statements issued after January 1,
2001 and was approved with a provision allowing for discretion by each state's
DOI in determining appropriate statutory accounting for insurers. Accordingly,
such discretion will continue to allow prescribed or permitted accounting
practices that may differ from state to state and from company to company. The
Codification does not affect the Company's consolidated financial statements,
which have been prepared in accordance with GAAP.

The insurance subsidiaries of the Company are subject to assessment by the
financial guaranty associations in the states in which they conduct business for
the provision of funds necessary for the settlement of covered claims under
certain policies of insolvent insurers. Generally, these associations can assess
member insurers on the basis of written premiums in their particular states.

The Gramm-Leach-Bliley Act of 1999 (the "Act") established a comprehensive
framework to permit affiliations among commercial banks, insurance companies,
securities firms and other financial service providers by revising and expanding
the Federal Bank Holding Company Act framework to permit a bank holding company
to engage in a full range of financial activities, including insurance, through
a new entity known as a "financial holding company." Generally, the Act (i)
repeals historical restrictions on, and eliminates many federal and state law
barriers to, affiliations among commercial banks, securities firms, insurance
companies, and other financial service providers; (ii) provides a uniform
framework for the functional regulation of commercial banks, insurance



                                       8
<PAGE>

companies and securities firms; (iii) broadens the activities that may be
conducted by national banks (and derivatively, state banks), banking
subsidiaries of bank holding companies, and their financial subsidiaries; and
(iv) addresses a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of insurance companies and other
financial institutions.

The insurance industry is under continuous review by Congress, state
legislatures and state and federal regulatory agencies. From time to time,
various regulatory and legislative changes have been proposed for the insurance
industry, some of which could have an adverse effect on individual insurers or
reinsurers. Among the many proposals that have been, or are currently being,
considered are the possible introduction of limits on non-economic damages for
medical malpractice claims, patient rights, as well as federal regulation in
addition to, or in lieu of, the current system of state regulation of insurers.
The Company is unable to predict whether any of these proposals will be adopted,
the form in which any such proposals would be adopted, or the impact, if any,
such adoption would have on its various operations.

Competition. The MPL insurance markets in Florida and Missouri are highly
competitive from the perspective of pricing and the number of competitors
writing business. In addition, more competitors may enter the Company's markets
in the future. The Company believes that the number of healthcare entities that
insure their affiliated physicians through self-insurance may begin to increase
and affect both its Florida and Missouri based operations. Many other insurers
that might enter the Company's markets, and several existing MPL insurers are
larger and have considerably greater resources than the Company. Additionally,
some of these insurers have received A.M. Best ratings that are higher than the
Company's insurance subsidiaries' ratings of "A- (Excellent)." In addition,
because a substantial portion of the Company's products are marketed through
independent insurance agencies, all of which represent more than one company,
the Company faces competition within each agency in its own agency system. The
Company competes within this environment on the basis of its leadership position
in its core markets and its relationships with the medical and professional
communities it serves. In Florida, name recognition, service reputation, medical
society endorsements, physician board of directors, agency force and program
development have all contributed to helping the Company retain and grow its
number of insureds. Furthermore, the Company believes it has been successful in
underwriting groups and specialties that exhibit better than average risks and
believes that its marketing success has allowed it to improve the quality and
profitability of its overall business.

The Company believes that the principal competitive factors affecting its
business in Florida are service, name recognition, and price, and that it is
competitive in Florida in all of these areas. The Company enjoys strong name
recognition in Florida by virtue of having been organized by, and operated for
the benefit of, Florida physicians. The services offered to insureds of the
Company, as well as the healthcare community in general, are intended to promote
name recognition and to maintain and improve loyalty among the insureds of the
Company. MPL insurance offered by First Professionals has the exclusive
endorsement of both the FMA and the FDA, and is also endorsed by various county
and state medical societies.

In both Missouri and Kansas, Intermed and Interlex compete with regional and
national companies. In 2000, the last year for which statistics were available
from the Missouri Department of Insurance, there were fifty companies writing
MPL insurance for physicians and surgeons in the state. The top five writers had
75.0% of the market. The largest market share was 22.5%. Intermed was the second
largest writer in the state in 2000 and had a market share of 16.6%.

During 2000, seventeen companies wrote LPL insurance in the state of Missouri
according to the latest statistics available from the Missouri Department of
Insurance. At December 31, 2000, one company, sponsored by the Missouri Bar
Association, had a market share of 70%. Interlex, which commenced operations in
October 1994, had a market share of 18% and is the second largest writer for
business in Missouri. Interlex currently writes LPL insurance in Missouri and
Kansas and, will begin writing LPL insurance in Florida during 2002.

A number of hospitals in Missouri have purchased the medical practices of
fee-for-service physicians and hired the physicians as employees of the hospital
or a corporate entity affiliated with the hospital. A number of such physicians
formerly purchased their own professional liability insurance through smaller
insurance companies



                                       9
<PAGE>

such as Intermed. As a result of industry consolidation, many of the hospitals
purchasing the practices of physicians have become self-insured or sought
professional liability insurance from professional liability carriers with
capital and surplus greater than that of Intermed and at premiums lower than
those currently offered by Intermed.

In general, local carriers that have been able to maintain strong customer
loyalty dominate the MPL market in other states and the same targeted specialty
and claims-free approach developed in Florida is being used in these other
states. The Company is recruiting and developing an agency force to expand into
new markets, provide service, and develop name recognition.

Marketing. The Company markets its MPL policies primarily through independent
agencies. The Company also sells insurance products directly through its
subsidiary, FPIC Insurance Agency, Inc. An integral part of the Company's
marketing strategy is targeting sectors of the MPL industry that it believes
will generate above average operating profits. The Company has identified
certain medical specialties and "claims-free" physicians as sectors in which it
wishes to increase its market share.

The Company markets its LPL policies primarily through a direct sales force.
In October 1999, the Company signed an agreement with an independent agency to
serve as the state administrator for the marketing and underwriting functions of
LPL policies in the state of Kansas. During 2001, the direct sales force
produced approximately 81% of LPL premiums written.

The Company also provides comprehensive risk management services to its insureds
designed to heighten their awareness of situations giving rise to potential
liability, to educate them on ways to improve administration and operation of
their medical practices and to assist them in implementing risk management
processes. In addition, the Company conducts risk management surveys for
hospitals and large medical groups to help improve their practice procedures.
Complete reports that specify areas of the insured's medical practice that may
need attention are provided to the policyholder on a confidential basis. The
Company also participates in periodic seminars on risk management with medical
societies and other groups. These educational offerings are designed to increase
risk awareness and the effectiveness of loss prevention by various medical
professionals.

Underwriting. As part of the MPL underwriting process, the Company utilizes the
data collected by the states in which it operates, including Florida and
Missouri, which includes a record of all MPL claims-paid information that
insurers are required to report. When applications are received from physicians
for MPL insurance, the Company reviews this database to verify the physician's
claims-paid record. If a physician has an excessive claims-paid history, the
application is denied. All other applicants are reviewed on the basis of the
physician's educational background, residency experience, practice history and
comments received from personal references. Annually, the Company's underwriting
department reexamines each insured before coverage is renewed, including
verifying that the insured's license is current and that any reported claims for
the insured were within acceptable limits.

In underwriting LPL insurance, the Company's underwriters use an approach
similar to the process for underwriting MPL insurance as described above. The
Company has an underwriting committee composed of lawyers to provide assistance
with this process. The committee is geographically broad-based and, in most
instances, has knowledge of applicants and renewals. This structure has enabled
the Company to maintain what it believes to be high underwriting standards.

Claims Administration. The Company's claims department is responsible for the
supervision of claims investigation, the establishment of case reserves, case
management, development of the defense strategy and the coordination and control
of attorneys engaged by the Company. The claims department, after approval from
the claims committee of the Board of Directors, has complete settlement
authority for claims filed against the Company's insureds. The Company's policy
is to defend aggressively all claims that it deems to have no merit. In those
instances where claims are deemed to have merit, the claims department attempts
to settle the case as expeditiously as possible. The Company believes that it
has developed networks of attorneys in Florida and



                                       10
<PAGE>

Missouri who have significant experience in the defense of MPL and LPL claims
and who are competent to defend claims against the Company's insureds in an
aggressive, cost-efficient manner.

Reinsurance. The Company follows the customary industry practice of reinsuring
portions of its business. The Company cedes to reinsurers a portion of its risks
and pays a reinsurance premium and in some cases other fees based upon premiums
received on the policies subject to such reinsurance. Insurance is ceded
principally to reduce the Company's net liability on individual risks, to
provide protection against large losses and to help reduce volatility of
underwriting results. Although reinsurance does not legally discharge the
Company from its obligations as the primary insurer, it does make the reinsurer
liable to the Company to the extent of risks ceded.

For MPL and LPL insurance written during 1999 and prior, the Company reinsured
risks in excess of $500 thousand per loss, except on the Company's
anesthesiology business in which the Company reinsured risks in excess of $750
thousand. The Company reinsured risks associated with these policies under
treaties pursuant to which reinsurers agreed to assume losses insured by the
Company in excess of its individual risk retention level and up to its maximum
individual policy limit offered, plus specified portions of loss adjustment
expenses ("LAE").

The Company changed its ceded reinsurance program during 2000. In 2000 and 2001,
the Company reinsured risks in excess of $250 thousand per loss subject to an
annual aggregate deductible, except for the Company's anesthesiologist program
in which the Company reinsured risks in excess of $187 thousand. In 2000, the
Company's annual aggregate deductible was $9.0 million. In 2001, the Company's
annual aggregate deductible was 10.73% of subject written premium that would
otherwise qualify as reinsurance under the agreement. The annual aggregate
deductible retained in 2001 was approximately $12.9 million. In addition, during
2000 and 2001, the Company received an approximate dollar for dollar reduction
in the rate its reinsurers would have charged for the additional risks they are
assuming in connection with the reduction in the Company's per loss retention
from $500 thousand to $250 thousand. Reinsurance is placed under reinsurance
treaties and agreements with a number of individual companies and syndicates to
mitigate the Company's concentration of credit risk. The Company relies on
reinsurance brokers and intermediaries to assist in analysis of the credit
quality of its reinsurers. As of December 31, 2001, the Company primarily
reinsured risks with insurance companies with an A.M. Best rating of B+ or
higher. Unauthorized reinsurers are required to provide an irrevocable letter of
credit or to establish a trust account to secure their reinsurance recoverables.

Liability for Loss and LAE. The Company's liability for losses and LAE is based
upon projections of ultimate losses made through actuarial analysis of the
claims history and related data of the Company, subject to adjustments deemed
appropriate due to differing or changing circumstances. Included in the
Company's claims history are losses and LAE paid in prior periods and case
reserves for anticipated losses and LAE developed by the Company's claims
department as claims are reported and investigated. The Company relies primarily
on modeling such historical loss experience using various methods in determining
reserve levels on the assumption that historical loss experience provides a good
indication of future loss experience despite the uncertainties in loss cost
trends and the inherently long cycle of reporting and settling claims. Over time
and as additional information becomes available, the estimates reflected in
earlier liabilities for loss and LAE may be revised. Furthermore, because of the
size and prominence of the liability for losses and LAE to the Company's
financial statements, any revision to the Company's estimates could be material
to operating results. Any increase in the liability, including amounts for
insured events of prior years, will have an adverse effect on the Company's
results for the period in which the adjustments are made.

The uncertainties inherent in estimating ultimate losses on the basis of past
experience are significant, principally as a result of changing judicial
liability standards and theories and potentially expansive interpretations of
insurance contracts. These uncertainties may be further affected by, among other
factors, changes in the rate of inflation and changes in the propensities of
individuals to file claims. MPL insurance is a long-tail line of business for
which the initial loss and LAE estimates may be adversely impacted by events
occurring long after the actual occurrence and reporting of the claim, such as
sudden severe inflation or adverse judicial or legislative decisions. The
Company utilizes both its staff and independent actuaries in establishing its
reserves. The Company's independent actuaries review the Company's liabilities
for loss and LAE one or more times each year



                                       11
<PAGE>

and prepare a report that includes a recommended level of reserves. The Company
considers this recommendation, as well as other factors, such as known,
anticipated or estimated changes in frequency and severity of losses as a result
of changes in underwriting standards and risks, and new and developing
strategies and defenses with regard to claims and premium rates, in establishing
the amount of its liability for losses and LAE. The Company continually refines
its estimates as experience develops and further claims are reported and
settled. The Company reflects adjustments to reserves in the results of the
current period. The following table sets forth (in thousands) the development of
the Company's liability for loss and LAE, net of reinsurance recovered or
recoverable, for the 10-year period ended December 31, 2001:

<TABLE>
<CAPTION>
 Year Ended December 31,      2001     2000     1999     1998    1997     1996     1995     1994     1993    1992     1991
                              ----     ----     ----     ----    ----     ----     ----     ----     ----    ----     ----

 <S>                       <C>       <C>      <C>      <C>      <C>      <C>     <C>      <C>      <C>      <C>      <C>
 Balance Sheet Liability   $ 238,073 223,597  214,692  200,763  173,971  161,124 155,318  143,415  132,190  126,651  118,995

 Reestimated Liability
 As of:   One Year Later             232,209  221,212  182,208  159,639  146,009 140,322  129,472  121,543   98,706  101,844

         Two Years Later                      222,281  182,498  142,369  127,529 116,151  114,193  105,704   89,301   80,932

       Three Years Later                               183,389  141,850  112,770 106,937   90,666   91,929   76,247   71,653

        Four Years Later                                        140,707  106,557 104,684   86,154   72,854   68,445   66,891

        Five Years Later                                                 105,949 103,402   87,807   73,753   69,396   63,884

         Six Years Later                                                         103,454   85,881   75,032   70,596   63,133

       Seven Years Later                                                                   85,854   74,376   71,547   63,980

       Eight Years Later                                                                            74,206   70,983   64,714

        Nine Years Later                                                                                     70,671   64,369

         Ten Years Later                                                                                              63,652

 Cumulative Paid
 As of:   One Year Later              95,890   91,269   76,291   49,697   33,103  35,562   28,701   24,794   25,924   26,482

         Two Years Later                      152,862  121,199   90,165   62,612  60,464   52,832   45,162   42,520   44,758

       Three Years Later                               153,200  115,336   88,649  78,291   63,738   57,597   55,677   52,675

        Four Years Later                                        127,774   98,027  94,882   73,296   62,630   60,448   57,248

        Five Years Later                                                 102,355 100,294   82,840   68,052   63,458   59,309

         Six Years Later                                                         102,122   85,047   72,509   66,468   59,637

       Seven Years Later                                                                   85,221   74,138   69,975   61,258

       Eight Years Later                                                                            73,986   70,753   63,468

        Nine Years Later                                                                                     70,680   64,233

         Ten Years Later                                                                                              63,661

  (Deficiency) / Redundancy        $  (8,612)  (7,589)  17,374   33,264   55,175  51,864   57,561   57,984   55,980   55,343
% (Deficiency) / Redundancy            (4)%      (4)%      9%      19%     34%      33%      40%      44%     44%      47%
</TABLE>

The following table sets forth (in thousands) an analysis of the Company's
liability for losses and LAE and provides a reconciliation of the beginning and
ending liability, net of reinsurance, for the years ended December 31, 2001,
2000 and 1999.

<PAGE>
<TABLE>
<CAPTION>
                                                           2001              2000               1999
                                                      ----------------  ----------------   ----------------
<S>                                                <C>                      <C>                <C>
Net loss and LAE liability, January 1              $      223,597           214,692            200,763

Reserves of acquired entity                                    --                --             24,591

Incurred related to:
    Current year                                          119,734           116,246             99,523
    Prior year                                              8,612             6,520            (18,555)
                                                      ----------------  ----------------   ----------------
       Total incurred                                     128,346           122,766             80,968
                                                      ----------------  ----------------   ----------------

Paid related to:
    Current year                                           17,980            22,592             15,338
    Prior year                                             95,890            91,269             76,292
                                                      ----------------  ----------------   ----------------
       Total paid                                         113,870           113,861             91,630
                                                      ----------------  ----------------   ----------------

Net loss and LAE liability, December  31           $      238,073           223,597            214,692
                                                      ================  ================   ================

Gross loss and LAE liability, December 31          $      318,483           281,295            273,092
Reinsurance recoverable, December 31                       80,410            57,698             58,400
                                                      ----------------  ----------------   ----------------
Net loss and LAE liability, December 31            $      238,073           223,597            214,692
                                                      ================  ================   ================
</TABLE>


                                       12
<PAGE>

Incurred losses and LAE for claims relating to prior years reflects the change
in the estimate of the liability charged or credited to earnings in each year
with respect to the liabilities established as of the beginning of that year.
Information regarding incurred losses and LAE is accumulated over time and the
estimates of the liability are revised accordingly, resulting in gains or losses
in the period revisions are made. The Company's management closely monitors the
adequacy of its liability for loss and LAE incurred and underlying claims
trends, including having the Company's outside actuaries perform calculations
periodically.

Incurred losses and LAE related to prior years, net of reinsurance recoveries,
were $8.6 million for the twelve months ended December 31, 2001. The increase in
the liability for losses and LAE related to prior years is the result of reserve
strengthenings with respect to the Company's core physician MPL business for
coverage years 2000 and prior. For additional information, see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

Reciprocal Management Segment
-----------------------------
Principal Business. The Company, through AFP, acts as administrator and
attorney-in-fact for PRI, the second largest MPL insurer for physicians in the
state of New York. AFP has an exclusive ten-year management agreement with PRI,
the current term of which runs through December 31, 2008, whereby it provides
all marketing, underwriting, administrative and investment functions for PRI in
exchange for compensation. Compensation under the agreement is equal to 13% of
PRI's direct premiums written, with an adjustment for expected returned
premiums, plus or minus 10% of PRI's statutory net income or loss. The manage-
ment agreement also provides for the Company to be reimbursed by PRI for certain
expenses paid on PRI's behalf. The expenses reimbursed by PRI consist
principally of salaries and related payroll expenses, and overhead costs of
claims, legal and risk management course personnel employed by AFP who work on
PRI business. In addition, the Company provides brokerage and administration
services for professional liability insurance programs through its 70% owned
subsidiary, PMA. PMA is licensed as an insurance broker in New York and the
Commonwealth of Pennsylvania. As a program manager, PMA is responsible for the
underwriting, claims administration, risk management, marketing and accounting
for the programs that it administers.

Competition. As an attorney-in-fact, AFP has no direct competition but is
subject to competition indirectly as the manager of PRI. The MPL insurance
market in New York is tightly regulated relative to other states. All rates are
determined by the New York Department of Insurance. Two carriers make up over
80% of the market, the leading carrier being Medical Liability Mutual Insurance
Company ("MLMIC"), with 55% of the MPL market and PRI with 25% of the market.
While MLMIC has an A rating by A.M. Best, and PRI has no rating, the Company
believes that PRI's name recognition and reputation contribute to PRI
maintaining its insureds.

Marketing. AFP markets PRI's policies in New York to physicians, podiatrists,
chiropractors, dentists and healthcare facilities through AFP's in-house
marketing representatives and through independent brokers. As of December 31,
2001, PRI wrote 75.5% of its business directly and 24.5% of its business through
brokers. AFP also offers certain other insurance coverages underwritten by other
carriers to its insureds on a non-commission basis. AFP markets PRI's healthcare
facilities professional liability business in New York primarily through outside
brokers, and its healthcare facilities division offers what it believes to be
innovative risk finance and risk transfer programs.

PRI uses selective underwriting with a view toward insuring the highest quality
doctors and healthcare facilities. All MPL policy applications go through the
risk evaluation unit, which closely reviews the doctors and their specialty to
determine acceptance and premium rate. The marketing department sends targeted
mailings and advertising to those areas it has determined to be target sectors.

PRI has also entered into an exclusive endorsement agreement with one of New
York's largest preferred provider organization ("PPO") networks. Through this
endorsement, the PPO completes two mailings a year to its credentialed members
endorsing PRI. Since inception in 1998, this program has generated over 1,400
insureds.

The risk management department of AFP has also developed multiple specialty
related seminars for doctors. These programs are designed to educate the
insureds on ways to improve their medical practice procedures and to



                                       13
<PAGE>

assist them in implementing risk modification measures. AFP also conducts on-
site surveys for doctors and healthcare facilities to review their practice
procedures. All policyholders are provided with a complete detailed report on
the findings and the recommended actions to be taken.

During 2000, AFP introduced dental malpractice coverage to PRI's list of
specialties. This line of insurance is primarily marketed through local brokers.
Additionally, AFP has concluded negotiations for the introduction of preferred
banking products and services for its insureds.

Regulation. A reciprocal manager ("attorney-in-fact") is subject to regulatory
oversight in the states in which the reciprocal insurer it manages is licensed.
As attorney-in-fact for PRI, AFP is authorized by the New York DOI to act in
such capacity. In addition, AFP is subject to examination by the New York DOI
and is required to file an annual statement audited and certified by the same
independent certified public accountant that audits the reciprocal insurer.
Additional requirements are imposed upon the attorney-in-fact by means of
statutorily mandated provisions, which must be included in the agreement between
the reciprocal and its subscribers.

Third-Party Administration ("TPA") Segment
------------------------------------------
Principal Business. The Company, through McCreary and EMI, operates in a sector
of the broader insurance and risk management industries often referred to as the
alternative risk markets. The Company's primary niche within these markets is as
a provider of TPA services to self-insured employer groups. The lines of
business that the Company primarily administers are group accident and health,
workers' compensation, and general liability and property insurance. The Company
also provides administration services for emerging managed care organizations
and an ambulance service organization.

During the fourth quarter 2001, the Company incurred a pre-tax charge of
approximately $0.6 million in connection with the disposition of the Brokerage
Services, Inc. ("BSI") division of EMI in Albuquerque, New Mexico. Under the
plan, the Company sold the division's assets and cancelled its service
agreements with self-insured customers. Certain other contracts were retained
and will be serviced by the Company's Jacksonville, Florida division. The 2001
restructuring activity was a continuation of the Company's consolidation of the
TPA operations and brings to an end the restructuring activities of the
Albuquerque division that began during the fourth quarter of 2000 when the
Company incurred a pre-tax charge of $0.5 million. Effective January 1, 2002,
McCreary and EMI were consolidated by legal entity merger, with EMI continuing
as the surviving entity.

The Company generates its TPA revenue from fees charged for the administration
of self-insured employer groups. The Company does not assume insurance risks on
this service; instead, each employer assumes this risk and the Company places
any desired excess coverage with various insurers and reinsurers. Commission
income is derived from the placement of this excess coverage and ancillary
products.

The Company provided TPA services to fifty-four clients at December 31, 2001,
five of which accounted for approximately 32% or $4.0 million of the claims
administration fees generated by the TPA segment. Approximately 12% or $1.5
million was derived from the single largest client. In addition to the Company's
external clients, McCreary also manages workers compensation programs for APAC.

Regulation. The Company and its TPA subsidiaries are subject to state and
federal regulation from the Florida DOI and Department of Labor. The Company's
TPAs are also subject to regulatory oversight in the other state jurisdictions
in which they conduct business. State regulation may provide that each company
conducting business in that state furnish annual reports on operational activity
to state supervisory agencies. Such agencies may examine the Company at any
time.

As noted earlier, the insurance industry is under continuous review by Congress,
state legislatures and state and federal regulatory agencies. From time to time,
various regulatory and legislative changes have been proposed for the insurance
industry, some of which could have an effect on the TPA business. Among such
proposals are the Health Insurance Portability and Accountability Act ("HIPAA")
privacy issues, HIPAA non-discrimination rules and patient bill of rights laws.
The Company is unable to predict whether these regulatory or legislative



                                       14
<PAGE>

proposals or others being considered will ultimately be adopted and therefore,
what impact they may have on the TPA business.

Competition. The Company's TPAs are competitive with regard to prices and
services. The Company believes the principle competitors of its TPA business in
the group accident and health market are other similar TPAs, including several
larger organizations, which may offer services the Company does not offer, as
well as insurance companies that compete directly with alternative risk markets,
including self insurance programs administered by TPAs. While the Company
believes its TPAs enjoy strong name recognition and a good service reputation,
it also recognizes that access to the stop-loss market in placing reinsurance
for self-funded groups is a major factor and perhaps the greatest factor in some
cases in obtaining and retaining clients. The amount of business in the
stop-loss market has decreased while the pricing of reinsurance has increased.
This has, in some cases, resulted in insurance companies being able to price
group accident and health insurance at a lower price than is available through
self-funding.

The stop-loss market for workers' compensation and property insurance has also
increased pricing. However, this has not affected the self-funded workers'
compensation and property market as much as the group accident and health
market. In addition, the commission revenue associated with the placement of
property insurance has increased accordingly. The Company's TPAs also enjoy
strong name recognition and loyalty among its client base that has resulted in
maintaining a long-term client base.

Marketing. The Company primarily markets its TPA services in Florida. The
Company may sell services directly or operate through agents and brokers. The
Company's marketing strategy includes superior service, competitive pricing and
delivery of support services. The Company's plan is to focus geographically with
an emphasis in Florida. The TPAs will continue to use agents and brokers to
receive requests for proposals as well as utilize various services in which
proposals are listed.

Investment Portfolio
--------------------
The Company's investment strategy for its investment portfolio is to maintain a
diversified investment-grade fixed income portfolio, to provide liquidity and to
maximize income and total after-tax return. Four external investment firms
manage the Company's investment portfolio. The Company has $349 million of
fixed income securities at market value. The Company's policy is to manage its
investments based on a total return approach, which balances the need for
income, appreciation and the protection of principal. All of the Company's fixed
income securities are classified as available-for-sale.

The Company does not actively trade its investments, but instead invests and
holds its securities for the long term, taking into account among other things
the duration of its liabilities, primarily its liability for losses and LAE.
Therefore, the Company's investment strategy for its core portfolio focuses
primarily on income generation and protection of principal, with a secondary
focus on capital appreciation. All of the fixed maturity securities held in the
investment portfolio are publicly traded securities. In addition to the fixed
income portfolios of the insurance subsidiaries, the Company also has
investments in other securities such as investment partnerships and certain
strategic equity investments. These investments are relatively small in relation
to the Company's total invested assets, and are held primarily for long-term
appreciation.

The Company generally does not invest in off-balance sheet derivative financial
investments. However, the Company has invested in two interest rate swaps in
connection with its revolving credit facility and term loan agreement, which
serve to fix the Company's interest expense.

Employees
---------
At December 31, 2001, the Company employed 550 persons. None of these employees
are covered by a collective bargaining agreement. Management considers the
Company's relationships with its employees to be very important and believes
that its significant number of long-term employees and low attrition are
indicative of good employee relations.



                                       15
<PAGE>
Additional Information with Respect to the Company's Business
-------------------------------------------------------------
The amounts of operating revenue and identifiable assets attributable to the
aforementioned business segments are included in Note 21 to the Company's
consolidated financial statements contained in Item 8, Financial Statements and
Supplementary Data. Additional information regarding the Company's investments
in fixed maturity and equity securities is included in Note 5 to the Company's
consolidated financial statements. Finally, information concerning the Company's
revolving credit facility and term loan is included in Note 11 to the Company's
consolidated financial statements.

Item 2.  Properties
-------------------
The physical properties used by the Company and its subsidiaries are summarized
below:

<TABLE>
<CAPTION>
                                                                  Type of             Owned          Approximate
            Business                       Location               Property          or Leased      Square Footage
-----------------------------    ---------------------------  ---------------     -------------  ------------------
<S>                                    <C>                         <C>               <C>               <C>
Corporate headquarters                 Jacksonville, FL            Offices           Leased             8,900
FPIC                                   Jacksonville, FL            Offices            Owned            26,600
APAC                                   Coral Gables, FL            Offices           Leased             4,200
Tenere                                  Springfield, MO            Offices           Leased            13,300
AFP                                      Manhasset, NY             Offices           Leased            55,600
McCreary                                  Stuart, FL               Offices           Leased            13,300
EMI                                    Jacksonville, FL            Offices           Leased            12,500
</TABLE>

Item 3.  Legal Proceedings
--------------------------
There are no material pending legal proceedings against the Company or its
subsidiaries other than litigation arising in connection with the settlement of
insurance claims.

The Company's insurance subsidiaries may become subject to claims for extra-
contractual obligations or risks in excess of policy limits in connection with
their administration of insurance claims. These claims are sometimes referred to
as "bad faith" actions as it is alleged that the insurance company acted in
bad faith in the administration of an insured's claim. Bad faith actions are
few in number and generally occur in instances where a jury verdict exceeds the
insured's policy limits. Under such circumstances, it is routinely alleged that
the insurance company failed to negotiate a settlement of a claim in good faith
within the insured's policy limit. In such cases, the insured may assign his or
her rights under the policy to the plaintiff in settlement of the insured's
portion of the verdict. The plaintiff is then permitted to sue the insurer on
behalf of the defendant. The Company has evaluated such exposures as of December
31, 2001, and in all such cases, believes its position and defenses are
meritorious, and that when all facts and circumstances are considered, including
its own insurance coverage against such risks, its potential exposure to
material losses from such exposures is immaterial.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
There were no matters submitted to a vote of security holders in the fourth
quarter of 2001.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
------------------------------------------------------------------------------
The Company's common equity has been publicly traded on the NASDAQ National
Market System since August 1, 1996 under the symbol, FPIC. The following table
sets forth for the periods indicated the high and low bid quotations as
reported. Such quotations reflect inter-dealer bids and offers, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
                                                 2001                                   2000
                                        -----------------------               -----------------------
                                        High Bid       Low Bid                High Bid      Low Bid
                                        --------       --------               --------      -------
<S>                                    <C>               <C>                    <C>          <C>
First Quarter.......................   $ 13.88            9.00                  19.94        15.00
Second Quarter......................   $ 13.75            9.00                  18.88        10.38
Third Quarter.......................   $ 15.09           10.00                  18.38        10.92
Fourth Quarter......................   $ 15.40           11.24                  16.88         8.44
</TABLE>

                                       16
<PAGE>

As of March 21, 2002, the Company estimated that there were approximately 5,500
beneficial owners of the Company's common stock. The Company does not anticipate
paying any cash dividends in the foreseeable future.

Item 6. Selected Financial Data The selected financial data presented below for
the fiscal years ending December 31 should be read in conjunction with the
Company's consolidated financial statements and the notes thereto, which are
included elsewhere herein.

<TABLE>
<CAPTION>
                                                        (in thousands, except per share amounts)
                                    ----------------------------------------------------------------------------------
Income Statement Data:                 2001              2000             1999              1998             1997
---------------------               -----------      -----------      ------------     ------------      -----------
<S>                             <C>                     <C>              <C>              <C>               <C>
Direct and assumed
     premiums written           $    245,403            197,280          148,216          116,989            77,771
Net premiums written                 147,084            161,931          122,433          101,477            70,285
Net premiums earned                  131,058            120,454          118,072           89,562            65,504
Total revenues                       197,529            182,264          170,504          120,321            93,216

Net income                             2,930                614           21,869           20,693            16,557
Basic earnings per share                 .31                .06             2.24             2.22              1.83
Diluted earnings per share               .31                .06             2.19             2.11              1.76


                                                                    (in thousands)
                                    ----------------------------------------------------------------------------------
Balance Sheet Data:                    2001              2000             1999              1998             1997
---------------------               -----------      -----------      ------------     ------------      -----------
Total cash and investments      $    441,966            423,955          353,419          352,067           275,980
Total assets                         758,297            652,198          587,433          490,943           352,849
Liability for Loss and LAE           318,483            281,295          273,092          242,377           188,086
Revolving credit facility             37,000             67,219           62,719           27,165             2,000
Term loan                             16,042                 --               --               --                --
Total liabilities                    583,723            479,671          421,054          340,012           232,785
Shareholders' equity                 174,574            172,527          166,379          150,931           120,064
</TABLE>

Item 7.  Management's Discussion & Analysis of Financial Condition and Results
         of Operations
------------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes to the consolidated financial
statements appearing elsewhere in this report. The consolidated financial
statements include the results of all of the Company's wholly owned and majority
owned subsidiaries.

Safe Harbor Disclosure
----------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Any written or oral statements made by or on
behalf of the Company may include forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere herein and in documents filed by the Company with the
Securities and Exchange Commission) include, but are not limited to, (i)
uncertainties relating to government and regulatory policies (such as subjecting
the Company to insurance regulation or taxation in additional jurisdictions or
amending, revoking or enacting any laws, regulations or treaties affecting the
Company's current operations), (ii) the occurrence of insured or reinsured
events with a frequency or severity exceeding the Company's estimates, (iii)
legal developments, (iv) the uncertainties of the loss reserving process, (v)
the actual amount of new and renewal business and market acceptance of expansion
plans, (vi) the loss of the services of any of the Company's executive officers,
(vii) changing rates of inflation and other economic conditions, (viii) the
ability to collect reinsurance recoverables, (ix) the competitive environment in
which the Company operates, related trends and associated pricing pressures and
developments, (x) the impact of mergers and acquisitions, including the ability
to successfully integrate acquired businesses and achieve cost savings,
competing demands for the Company's capital and the risk of undisclosed
liabilities, (xi) developments in global financial markets that could affect the
Company's investment portfolio and financing plans, (xii) risk factors
associated with financing and refinancing, including the



                                       17
<PAGE>

willingness of credit institutions to provide financing and the availability of
credit generally and, (xiii) developments in reinsurance markets that could
affect the Company's reinsurance program.

The words "believe," "anticipate," "foresee," "estimate," "project," "plan,"
"expect," "intend," "hope," "will likely result" or "will continue" and
variations thereof or similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

Critical Accounting Policies
----------------------------
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, management evaluates
its estimates, including those related to income taxes, loss and loss adjustment
expenses ("LAE") reserves, contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

Reinsurance. Reinsurance recoverables include the balances due from reinsurance
companies for paid and unpaid losses and LAE that will be recovered from
reinsurers, based on contracts in force. Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Reinsurance contracts do not relieve the Company from its
primary obligations to policyholders. Failure of reinsurers to honor their
obligations could result in losses to the Company. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit risk
with respect to the individual reinsurers, which participate in its ceded
programs to minimize its exposure to significant losses from reinsurer
insolvencies. The Company holds collateral in the form of letters of credit or
trust accounts for amounts recoverable from reinsurers that are not designated
as authorized reinsurers by the domiciliary Departments of Insurance.

Income Taxes. The Company accounts for income taxes in accordance with Financial
Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes." Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance against deferred tax assets is recorded if
it is more likely than not, that all or some portion of the benefits related to
the deferred tax assets will not be realized. Valuation allowances are based on
estimates of taxable income and the period over which deferred tax assets will
be recoverable. In the event that actual results differ from these estimates or
these estimates are adjusted in future periods, the Company may need to
establish a valuation allowance, which would impact our financial position and
results of operations. No such valuation allowance has been established to date
as the Company believes it is more likely than not that its deferred tax assets
will be fully realized.

Goodwill and Intangible Assets. Goodwill represents the aggregate cost of
companies acquired over the fair value of net assets at the date of acquisition
and is being amortized into income using the straight-line method over periods
ranging from ten to twenty-five years. Management regularly reviews the carrying
value of goodwill by determining whether the unamortized value of the goodwill
can be recovered through undiscounted future operating cash flows of the
acquired operation.



                                       18
<PAGE>

Intangible assets represent trade secrets acquired and non-compete agreements
entered into in connection with business combinations. These assets are being
amortized into income over periods corresponding with their terms or useful
lives that range from three to ten years using the straight-line method.
Management regularly reviews the carrying value of intangible assets by
determining whether the amortization of the intangible assets can be recovered
through undiscounted future operating cash flows of the acquired operation.

In the event goodwill or another intangible asset is impaired, a loss is
recognized based on the amount by which the carrying value exceeds the fair
value of the respective asset. Fair value is determined primarily using
anticipated cash flows at a rate commensurate with the risk involved. Losses on
assets to be disposed of are determined in a similar manner, except that fair
values are reduced for the cost of disposal.

Loss and Loss Adjustment Expenses. The Company estimates its liability for loss
and LAE using actuarial projections of ultimate losses and LAE and other
quantitative and qualitative analyses of conditions expected to effect the
future development of claims and related expenses. The estimated liability for
losses is based upon paid and case reserve estimates for losses reported,
adjusted through formula calculations to develop ultimate loss expectations;
related estimates of incurred but not reported losses and expected cash reserve
developments based on past experience and projected future trends; deduction of
amounts for reinsurance placed with reinsurers; and estimates received related
to assumed reinsurance. Amounts attributable to ceded reinsurance derived in
estimating the liability for loss and LAE are reclassified as assets in the
consolidated balance sheets as required by FAS No. 113. The liability for LAE is
provided by estimating future expenses to be incurred in settlement of claims
provided for in the liability for losses and is estimated using similar
actuarial techniques.

The liabilities for losses and LAE and the related estimation methods are
continually reviewed and revised to reflect current conditions and trends. The
resulting adjustments are reflected in the operating results of the current
year. While management believes the liabilities for losses and LAE are adequate
to cover the ultimate liability, the actual ultimate loss costs may vary from
the amounts presently provided and such differences may be material.

The Company also has direct and assumed liabilities under covered extended
reporting endorsements associated with claims-made MPL policy forms, which
generally provide, at no additional charge, continuing MPL coverage for
claims-made insureds in the event of death, disability or retirement. These
liabilities are carried within unearned premium reserves and are estimated using
techniques, which possess elements of both loss reserves and pension
liabilities, and thus, include additional assumptions for mortality, morbidity,
retirement, interest and inflation.

In performing its tests of the liability for losses and LAE as of December 31,
2001, the Company's independent actuarial firm utilized multiple methods and
developed a range of reasonable estimates. The Company's liability for losses
and LAE, net of reinsurance, as of December 31, 2001 is $238.1 million, which
corresponds with the point estimate of its independent actuarial firm's
consolidated range of estimates of $223.2 million (minus $11.8 million, or 6%)
to $255.5 million (plus $12.3 million, or 7%). For each 1% increase or decrease
in the Company's estimated liability for losses and LAE as of December 31, 2001,
that could occur in one or more future periods, a corresponding charge or credit
to income in the amount of approximately $2.4 million ($1.8 million, after tax
effects) would occur.

Commitments and Contingencies. Liabilities for loss contingencies arising from
claims, assessments, litigation, fines and penalties, and other sources are
recorded when it is probable that a liability has been incurred and the amount
of the assessment and/or remediation can be reasonably estimated.

General
-------
FPIC Insurance Group, Inc. (the "Company") was formed in 1996 in connection with
a reorganization (the "Reorganization") pursuant to which it became the parent
company of Florida Physicians Insurance Company, Inc. ("Florida Physicians") and
McCreary Corporation ("McCreary"), a third party administrator. In connection
with the Reorganization, Florida Physicians shareholders became the shareholders
of the Company and received



                                       19
<PAGE>

five shares of the Company's common stock for each of their shares of Florida
Physicians common stock. In May 2001, the Company changed the name of Florida
Physicians to First Professionals Insurance Company, Inc. ("First
Professionals"). Effective January 1, 2002, McCreary and its subsidiary,
Employers Mutual, Inc. ("EMI") were consolidated by legal entity merger, with
EMI continuing as the surviving entity.

The Company has three main operating segments as follows: insurance, reciprocal
management and third party administration ("TPA"). The Company's primary sources
of revenue are management fees and dividends received from its subsidiaries. The
primary sources of revenue for these amounts are premiums earned and investment
income derived from the insurance segment and fee and commission income from the
reciprocal management and TPA segments.

Through the insurance segment, the Company specializes in professional liability
insurance products and services for physicians, dentists, other healthcare
providers and attorneys. The Company's medical professional liability ("MPL")
insurance is written substantially on a "claims-made" basis (as opposed to an
"occurrence" basis) providing protection to the insured only for those claims
that arise out of incidents occurring, and of which notice to the insurer is
given, while coverage is in effect. The Company also offers "tail coverage" for
claims reported after the expiration of the policy for occurrences during the
coverage period. The price of tail coverage is based on the length of time the
insured has been covered under the Company's claims-made form. The Company
provides free tail coverage for insured physicians who die or become disabled
during the coverage period of the policy and for those who have been insured by
the Company for at least five consecutive years and retire completely from the
practice of medicine. Through the reciprocal management segment, the Company
provides brokerage and administration services for reinsurance programs and
brokerage services for the placement of annuities in structured settlements. The
Company's TPA markets and administers self-insured and fully insured plans for
both large and small employers, including group accident and health, workers'
compensation and general liability and property insurance.

The Company's financial position and results of operations are subject to
fluctuations due to a variety of factors. Unexpected high frequency or severity
of losses for the Company's insurance subsidiaries in any period, particularly
in the Company's prior three policy years, could have a material adverse effect
on the Company. In addition, reevaluations of the liability for loss and LAE
could result in an increase or decrease in liabilities and a corresponding
adjustment to earnings. The Company's historical results of operations are not
necessarily indicative of future earnings.

Overview
--------
Overall, 2001 was a successful year for the Company. Improving market conditions
laid the foundation for strategic opportunities that allowed the Company to
build its business and strengthen its market position. In addition, the Company
took initiatives to improve its operations as soft market conditions subsided.

During the year, competitors that had previously competed heavily on price
either raised their prices, reduced writings or in some cases exited the market.
As a specialized carrier, the Company was positioned to take advantage of
increasing demand and the improved pricing environment that resulted. Top-line
growth, from both price improvements and increased policyholder counts,
resulted. Strong results from our reciprocal management segment also resulted in
significant growth in programs managed.

The Company also accomplished a number of significant strategic initiatives
during 2001, including: a) its 2002 reinsurance program at acceptable rates; b)
completion of a new credit facility with a syndicate of banks, reducing
outstanding debt by approximately $14 million, or 21%; c) completion of
the Company's exit from the small group accident and health ("A&H") business; d)
consolidation of the Company's third party administration operations; and e)
implementation of an integrated investment program engaging outside professional
investment managers.

Net income for the year ended December 31, 2001, totaled $2.9 million, or $0.31
per diluted share, compared with net income of $0.6 million, or $0.06 per
diluted share, for the year ended December 31, 2000. The 2001 results include
the after-tax effects of $5.4 million for an adjustment made to increase
reserves on prior years'



                                       20
<PAGE>

business and $0.4 million in restructuring charges associated with the Company's
TPA operations. Improved pricing and growth in policyholders during 2001
generated significant top-line growth.

Total revenues for the year ended December 31, 2001 increased 8%, to $197.5
million, from $182.3 million for the year ended December 31, 2000. Annual
revenue growth was driven primarily by growth in earned premiums, which
contributed $10.6 million to such growth. Strong improvements in pricing and the
addition of MPL policyholders, primarily in Florida and Missouri, were the
primary source of premium growth. Commission income and claims administration
and management fees earned by the Company's non-insurance subsidiaries in New
York and Florida also grew, contributing $7.1 million to the growth in total
revenues. The growth in total revenues during 2001 was offset by a $1.7 million
decline in investment income as a result of lower market yields.

Total expenses for the year ended December 31, 2001 increased 6%, to $196.4
million, from $185.2 million for the year ended December 31, 2000. Net losses
and LAE incurred for the year ended December 31, 2001 increased $5.6 million or
5%, over the prior year. Excluding the pre-tax reserve strengthening in 2001 and
2000 of $8.8 million and $21.0 million, respectively, net losses and LAE
incurred increased $17.7 million, or 17% during the year 2001. The increase
reflects growth and the continuation of the Company's policy to maintain its
reserves at a conservative level. Other underwriting expenses also contributed
to the increase in total expenses, primarily as a result of enhancements made to
the Company's financial and reporting systems and an increase in operating
expenses related to growth in business. Offsetting the increases in expenses was
a reduction in the allowance for bad debts of $1.0 million.

Insurance Segment
-----------------
The Company's insurance segment is made up of its four insurance subsidiaries,
First Professionals, Anesthesiologists Professional Assurance Company ("APAC")
and The Tenere Group, Inc. ("Tenere") companies of Intermed Insurance Company
and Interlex Insurance Company. Holding company operations are included within
the insurance segment due to its size and prominence and the substantial
attention devoted to the segment. Financial data for the Company's insurance
segment for the years ended December 31, 2001, 2000 and 1999 are summarized in
the table below. Dollar amounts are in thousands.

<TABLE>
<CAPTION>
                                                               Percentage                      Percentage
                                                  2001           Change           2000          Change          1999
                                             ---------------- -------------  --------------- -------------  -------------

<S>                                        <C>                   <C>       <C>                 <C>        <C>
Direct and Assumed Premiums Written        $     245,403          24%      $    197,280          33%      $  148,216
                                             ================                ===============                =============
Net Premiums Written                       $     147,084          -9%      $    161,931          32%      $  122,433
                                             ================                ===============                =============

Net Premiums Earned                        $     131,058           9%      $    120,454           2%      $  118,072
Net Investment Income                             22,819          -7%            24,505          30%          18,832
Net Realized Investment Gains                      1,429         420%               275         -22%             351
Commission Income                                     62         -61%               157         145%              64
Finance Charge and Other Income                      733         -52%             1,520           4%           1,467
Intersegment Revenue                               2,112          95%             1,083         100%              --
                                             ----------------                ---------------                -------------
    Total Revenues                         $     158,213           7%      $    147,994           7%      $  138,786
                                             ----------------                ---------------                -------------

Net Losses and LAE Incurred                $     128,346           5%      $    122,766          52%      $   80,968
Other Underwriting Expense                        25,684          24%            20,677          -2%          21,014
Interest Expense                                   4,566           6%             4,291           8%           3,981
Other Expenses                                       997         -64%             2,790          -1%           2,823
Intersegment Expense                               3,852         -42%             6,675         154%           2,628
                                             ----------------                ---------------                -------------
    Total Expenses                         $     163,445           4%      $    157,199          41%      $  111,414
                                             ----------------                ---------------                -------------

    (Loss) Income Before Taxes                    (5,232)         43%            (9,205)       -134%          27,372

                                             ----------------                ---------------                -------------
    Net (Loss) Income                      $        (847)         71%      $     (2,925)       -115%     $   19,776
                                             ================                ===============                =============
</TABLE>


Total insureds, including insureds under fronting arrangements, were 18,794,
12,150 and 11,318 for the years ended December 31, 2001, 2001 and 1999,
respectively.

                                       21
<PAGE>

Direct and assumed premiums written increased 24%, to $245.4 million for the
year ended December 31, 2001 from $197.3 million for the year ended December 31,
2000. Excluding the effects of the non-recurring portion of assumed premiums
under the 100% quota share reinsurance agreement written in the first quarter of
2000 between the Company's insurance subsidiaries and Physicians' Reciprocal
Insurers ("PRI") whereby the Company assumed the death, disability and
retirement ("DD&R") risks under PRI's claims-made insurance policies in exchange
for cash and investments of approximately $34 million, and the effects of the
decline in premiums under A&H programs, which were discontinued in 2001, of
$16.7 million, direct and assumed premiums written increased approximately $99
million or 71%. The increase in direct and assumed premiums written is due to
the effect of rate increases and growth in new business and premiums written
under fronting arrangements. The growth in direct premiums written was partially
offset by declines in MPL assumed premiums written and group A&H premiums
written.

Direct and assumed premiums written increased 33%, to $197.3 million for the
year ended December 31, 2000 from $148.2 million for the year ended December 31,
1999. The increase in direct and assumed premiums written is primarily related
to the 100% quota share reinsurance agreement written in the first quarter of
2000 between the Company's insurance subsidiaries and PRI, as noted above. In
addition, the Company experienced growth in direct premiums written in Texas,
Alabama, Missouri, Kansas, and Georgia complimented by the acquisition of Tenere
on March 17, 1999, which was only included in operations after such date. The
increases in direct and assumed premiums written were offset by experience
adjustment accruals for business assumed from PRI. The experience adjustments
represent an estimate of the amount of premium the Company will return to PRI in
future years.

Net premiums earned increased 9%, to $131.1 million for the year ended December
31, 2001 from $120.5 million for the year ended December 31, 2000. The increase
in net premiums earned is less than the increase in direct and assumed premiums
written for the same period primarily due to the inherent lag between written
and earned premiums. In addition, as noted above, direct premiums written
include premiums written under fronting agreements for which a relatively small
portion of business is retained and therefore only a small portion of premium is
ultimately earned. The increase in net premiums earned is due to growth in the
number of policyholders and the effects of rate increases instituted by the
Company's insurance subsidiaries during 2001. Partially offsetting this increase
was a decline in A&H premiums earned of 70%, to $7.2 million for the year ended
December 31, 2001, from $24.1 million for the year ended December 31, 2000.

Net premiums earned increased 2%, to $120.5 for the year ended December 31, 2000
from $118.1 million for the year ended December 31, 1999. The increase in net
premiums earned is related to growth in assumed reinsurance, which contributed
additional assumed premiums earned of $3.1 million, and growth in direct
premiums written at APAC and Tenere during the year 2000. The Company increased
premium rates at First Professionals, APAC, and Tenere in 2000. As a result of
the rate increases taken by First Professionals, selective underwriting, and the
competitive environment in Florida, net premiums earned decreased in First
Professionals core MPL business, and First Professionals experienced a decline
in its physician insureds. APAC and Tenere experienced more favorable market
conditions, which allowed them to grow their earned premiums and policyholder
counts. Such growth offset some of the decline in net premiums earned at First
Professionals and resulted in overall increases in the Company's direct
professional liability insureds.

Net investment income decreased 7%, to $22.8 million for the year ended December
31, 2001 from $24.5 million for the year ended December 31, 2000. The decrease
in net investment income is primarily the result of lower investment returns on
the Company's investment portfolio during 2001 caused by lower prevailing
interest rates in fixed income securities. The effects of lower yields have been
offset to some degree by growth in cash and invested assets resulting from
growth in insurance premiums. On a consolidated basis, the Company's total
investment portfolio grew to $ 424.2 million in 2001, up $19.2 million or 5%,
from $405.0 million in 2000.

Net investment income increased 30%, to $24.5 for the year ended December 31,
2000 from $18.8 million for the year ended December 31, 1999. The increase is
primarily due to the investments received in association with the 100% DD&R
quota share reinsurance agreement between the Company's insurance subsidiaries
and PRI. On a



                                       22
<PAGE>

consolidated basis, the Company's total investment portfolio grew to $ 405.0
million in 2000, up $58.4 million or 17%, from $346.6 million in 1999.

Net realized investment gains increased 420%, to $1.4 million for the year ended
December 31, 2001 from $0.3 million for the year ended December 31, 2000. The
Company engaged new professional investment managers during the third quarter of
2001 as part of its overall investment strategy. While the Company's investment
strategy remains focused on high quality, fixed income securities, it does plan
some changes in its present asset allocation to take advantage of changing
market conditions. The increase in net realized investment gains coincides with
the liquidation of investments associated with repositioning the Company's
investment portfolio.

Finance charge and other income decreased 52%, to $0.7 million for the year
ended December 31, 2001 from $1.5 million for the year ended December 31, 2000.
The decline in finance charge and other income is due to the Company's decision
to include a provision for finance charges within its Florida MPL policy
premiums, rather than assessing finance charges separately.

The liability for losses and LAE represents management's best estimate of the
ultimate cost of all losses incurred but unpaid and considers prior loss
experience, loss trends, the Company's loss retention levels and changes in the
frequency and severity of claims. The process of establishing reserves for
property and casualty claims is a complex and uncertain process, requiring the
use of informed estimates and judgments. The Company's estimates and judgments
may be revised as additional experience and other data become available and are
reviewed, as new or improved methodologies are developed or as current laws
change. Any such revisions could result in future changes in the estimates of
losses or reinsurance recoverables, and would be reflected in the Company's
results of operations when the change occurs. The Company believes its liability
for losses and LAE is adequate; however, given the inherent uncertainty in
reserve estimates, there can be no assurance that the ultimate amount of actual
losses will not exceed the related amounts currently estimated. Furthermore, any
such difference, either positive or negative, could have a material effect on
the Company's results of operations and financial position.

Net losses and LAE incurred increased 5%, to $128.3 million for the year ended
December 31, 2001 from $122.8 million for the year ended December 31, 2000. The
loss ratios for such periods were 98% and 102%, respectively. A loss ratio is
defined as the ratio of loss and LAE incurred to net premiums earned. During the
fourth quarter of 2001, the Company made a decision to adjust reserves upward by
$8.8 million, pre-tax. The Company's decision to increase reserves reflects the
Company's policy to maintain its reserves at a conservative level. Excluding the
pre-tax reserve strengthening in 2001 and 2000 of $8.8 million and $21.0
million, respectively, net losses and LAE incurred increased $17.7 million, or
17% during the year 2001. This increase is consistent with the strong growth in
business during 2001 and continues to reflect the Company's stated objective of
maintaining its reserves at a conservative level, taking into consideration
expected loss trends and all other pertinent considerations. The increase in
losses and LAE incurred was partially offset by a decline in the Company's group
A&H business corresponding with the complete withdrawal from its group A&H
programs in 2001.

Net losses and LAE incurred increased 52%, to $122.8 million for the year ended
December 31, 2000 from $81.0 million for the year ended December 31, 1999. The
loss ratios for such periods were 102% and 69%, respectively. The increase in
net losses and LAE incurred is primarily due to an increase in the loss and LAE
provision during 2000 resulting from a reserve strengthening of $21.0 million,
pre-tax. In addition, the 1999 results included reserve releases of
approximately $17.0 million resulting from favorable development in loss
experience on business written in years prior to 1999, which did not recur
during the year 2000.

Other underwriting expenses increased 24%, to $25.7 million for the year ended
December 31, 2001 from $20.7 million for the year ended December 31, 2000. The
increase in other underwriting expenses is primarily attributable to additional
operating expenses associated with the growth in business and expenses incurred
to improve the information systems used by the Company. In addition, two of the
Company's insurance subsidiaries, First Professionals and APAC, increased their
accruals for guarantee fund assessments by approximately $0.9 million, combined.
Offsetting these increases was a reduction in the allowance for bad debts of
$1.0 million.



                                       23
<PAGE>

Other underwriting expenses decreased 2%, to $20.7 million for the year December
31, 2000 from $21.0 million for the year ended December 31, 1999. The decline in
other underwriting expenses is attributable to a decline in assumed reinsurance
costs and the accretion of the deferred credit associated with the 100% DD&R
quota share reinsurance agreement entered into during the first quarter of 2000.

Other expenses declined 64%, to $1.0 million for the year ended December 31,
2001 from $2.8 million for the year ended December 31, 2000. Other expenses for
the year 2000 included a non-recurring pre-tax severance charge of $1.8 million,
which did not recur in 2001.

Reciprocal Management
---------------------
The Company's reciprocal management segment is made up of Administrators for the
Professions, Inc. ("AFP"), the Company's New York subsidiary, and its two wholly
owned subsidiaries, FPIC Intermediaries, Inc. ("Intermediaries") and Group Data
Corporation ("Group Data"). AFP acts as administrator and attorney-in-fact for
PRI, the second largest medical professional liability insurer for physicians in
the state of New York. Intermediaries acts as a reinsurance broker and
intermediary in the placement of reinsurance. Group Data acts as a broker in the
placement of annuities for structured settlements. The segment also includes the
business of Professional Medical Administrators, LLC ("PMA"), a 70% owned
subsidiary of the Company. PMA provides brokerage and administration services
for professional liability insurance programs. Financial data for the Company's
reciprocal management segment for the years ended December 31, 2001, 2000 and
1999 are summarized in the table below. Dollar amounts are in thousands.

<TABLE>
<CAPTION>
                                                                         Percentage                 Percentage
                                                              2001         Change         2000        Change          1999
                                                          ------------- ------------- ------------- ------------  -------------
<S>                                                     <C>                 <C>       <C>              <C>       <C>
Net Investment Income                                   $      344           35%      $    254         440%      $      47
Claims Administration and Management Fees                   22,959           35%        17,044           1%         16,955
Commission Income                                            2,484          107%         1,199          79%            671
Other Income                                                   399          -76%         1,680          -4%          1,758
Intersegment Revenue                                         3,111          -39%         5,129         237%          1,522
                                                          -------------               -------------               -------------
    Total Revenues                                      $   29,297           16%      $ 25,306          21%      $  20,953
                                                          -------------               -------------               -------------

Claims Administration and Management Expenses           $   18,420           23%      $ 15,023           4%      $  14,490
Other Expenses                                               2,173            0%         2,172           1%          2,152
Intersegment Expense                                         1,518          145%           619         100%             --
                                                          -------------               -------------               -------------
    Total Expenses                                      $   22,111           24%      $ 17,814           7%      $  16,642
                                                          -------------               -------------               -------------

      Income Before Taxes                                    7,186           -4%         7,492          74%          4,311

                                                          -------------               -------------               -------------
      Net Income                                        $    4,348            0%      $  4,360          90%     $    2,298
                                                          =============               =============               =============
</TABLE>

In accordance with the management agreement between AFP and PRI, AFP receives a
management fee equal to 13% of PRI's direct premiums written, with an adjust-
ment for expected return premiums.  AFP's claims administration and management
fees are entirely comprised of these fees.  Claims administration and manage-
ment fees increased 35%, to $23.0 million for the year ended December 31, 2001,
from $17.0 million for the year ended December 31, 2000.  The increase in claims
administration and management fees is due to an increase in the premiums written
by PRI.  The Company's revenues and results of operations are financially
sensitive to the revenues and results of operations of PRI.  In addition, PRI,
as an MPL insurer, is subject to many of the same types of risks as those of the
Company's insurance subsidiaries, which are described throughout this document.

Commission income increased 107%, to $2.5 million for the year ended December
31, 2001 from $1.2 million for the year ended December 31, 2000. The increase in
commission income corresponds with the increase in the amount of reinsurance
brokered by Intermediaries in 2001.

Commission income increased 79%, to $1.2 million for the year ended December 31,
2000 from $0.7 million for the year ended December 31, 1999. The increase in
commission income is attributable to a full year of brokerage income from
Intermediaries, which was formed during the second quarter of 1999.



                                       24
<PAGE>
Other income decreased 76%, to $0.4 million for the year ended December 31, 2001
from $1.7 million for the year ended December 31, 2000. The decrease in other
income is the result of lower statutory net income at PRI compared to the year
2000. The income received by AFP related to PRI's statutory net income for the
years ended December 31, 2001, 2000 and 1999 was $0.3 million, $1.6 million and
$1.7 million, respectively.  In accordance with the management agreement between
AFP and PRI, AFP receives or pays an amount equal to 10% of PRI's statutory net
income or loss.

Claims administration and management expenses increased 23%, to $18.4 million
for the year ended December 31, 2001 from $15.0 million for the year ended
December 31, 2000. The increase in claims administration and management expense
is primarily attributable to an increase in commission expense incurred as a
result of growth in brokerage and administration business at AFP and PMA. Under
terms of the management agreement between AFP and PRI, AFP is responsible for
brokerage costs incurred by PRI. In addition, the Company incurred additional
operating expenses related to the growth in direct business at PRI.

Third Party Administration
--------------------------
The Company's TPA segment is made up of McCreary and its subsidiary EMI.
Effective January 1, 2002, McCreary and EMI were consolidated by legal entity
merger, with EMI continuing as the surviving entity. Financial data for the
Company's TPA segment for the years ended December 31, 2001, 2000 and 1999 are
summarized in the table below. Dollar amounts are in thousands.

<TABLE>
<CAPTION>
                                                                     Percentage                Percentage
                                                           2001        Change         2000       Change         1999
                                                        ------------ ------------  ----------- ------------  -----------
<S>                                                   <C>               <C>        <C>            <C>        <C>
Net Investment Income                                 $     159         -33%       $    239        26%       $    189
Net Realized Investment Losses                               --         100%           (366)      100%             --
Claims Administration and Management Fees                12,545          -3%         12,982        32%          9,850
Commission Income                                         2,502          19%          2,108        21%          1,741
Other Income                                                 36         -83%            213       -58%            507
Intersegment Revenue                                        742         -52%          1,547        40%          1,106
                                                        ------------               -----------               -----------
    Total Revenues                                    $  15,984          -4%       $ 16,723        25%       $ 13,393
                                                        ------------               -----------               -----------

Claims Administration and Management Expenses         $  14,931          -5%       $ 15,683        33%       $ 11,807
Other Expenses                                            1,327         -28%          1,833       -11%          2,066
Intersegment Expense                                        594          28%            464       100%             --
                                                        ------------               -----------               -----------
    Total Expenses                                    $  16,852          -6%       $ 17,980        30%       $ 13,873
                                                        ------------               -----------               -----------

      Loss Before Taxes                                    (868)         31%         (1,257)     -162%           (480)
                                                        ------------               -----------               -----------
      Net Loss                                        $    (571)         30%       $   (821)     -300%       $   (205)
                                                        ============               ===========               ===========
</TABLE>

During the fourth quarter 2001, the Company incurred a pre-tax charge of
approximately $0.6 million in connection with the disposition of the Brokerage
Services, Inc. ("BSI") division of EMI in Albuquerque, New Mexico. Under the
plan, the Company sold the division's assets and cancelled its service
agreements with self-insured customers. Certain other contracts were retained
and will be serviced by the Company's Jacksonville, Florida division. The 2001
restructuring activity was a continuation of the Company's consolidation of the
TPA operations and brings to an end the restructuring activities of the
Albuquerque division that began during the fourth quarter of 2000 when the
Company incurred a pre-tax charge of $0.5 million. Excluding the effects of the
restructuring charges, the TPA segment incurred a net loss of approximately $0.2
million and $0.5 million for the years 2001 and 2000, respectively.

Net realized investment losses for the year ended December 31, 2000 were $0.4
million, largely due to the write down of the Company's investment in a joint
venture, Bexar Credentials, Inc. ("Bexar") in the fourth quarter of 2000. The
Company's stock in Bexar was redeemed for $70 thousand in cash and notes
receivable in January 2001. All amounts receivable by the Company from the sale
have been collected.

Claims administration and management fees declined 3%, to $12.5 million for the
year ended December 31, 2001 from $13.0 million for the year ended December 31,
2000. The decline in claims administration and management fees is due to the
termination of certain non-profitable contracts at the Company's Albuquerque
division.

                                       25
<PAGE>

Excluding the effect of the terminated contracts, claims administration and
management fees increased $1.1 million for the year ended December 31, 2001, as
compared to the same period in 2000.

Claims administration and management fees increased 32%, to $13.0 million for
the year ended December 31, 2000 from $9.9 million for the year ended December
31, 1999. The growth in claims administration and management fees is
attributable to the acquisition of assets related to the BSI division, by EMI
during the third quarter of 1999, and the resulting recognition of a full twelve
months of revenue from the acquired operations during the current year.

Commission income increased 19%, to $2.5 million for the year ended December 31,
2001 from $2.1 million for the year ended December 31, 2000. The increase in
commission income corresponds with increases in the underlying rates paid by
customers for reinsurance being placed by the TPA segment under alternative
market arrangements.

Commission income increased 21%, to $2.1 million for the year ended December 31,
2000 from $1.7 million for the year ended December 31, 1999. The increase in
commission income is the result of growth in the placement of insurance and
reinsurance by McCreary with external parties on behalf of its self-insured
customers during 2000.

Claims administration and management expenses declined 5%, to $14.9 million for
the year ended December 31, 2001 from $15.7 million for the year ended December
31, 2000. The decline in claims administration and management expenses is due to
the termination of certain non-profitable contracts at the Company's Albuquerque
division. Excluding the effect of the terminated contracts, claims
administration and management expenses increased $1.0 million for the year ended
December 31, 2001, as compared to the same period in 2000.

Claims administration and management expenses increased 33%, to $15.7 million
for the year ended December 31, 2000 from $11.8 million for the year ended
December 31, 1999. The growth in claims administration and management expenses
is primarily attributable to the acquisition of assets by EMI during the third
quarter of 1999.

For the year ended December 31, 2001, other expenses decreased 28%, to $1.3
million from $1.8 million for the year ended December 31, 2000. Excluding the
restructuring charges taken during the fourth quarter of 2001 and 2000 mentioned
above, other expenses declined 46%, to $0.7 million for the year ended December
31, 2001, from $1.3 million for the year ended December 31, 2000. The decrease
in other expenses represents savings from the Company's disposition of non-core
businesses during 2000.

Other expenses decreased 11%, to $1.8 million for the year ended December 31,
2000 from $2.1 million for the year ended December 31, 1999. Excluding the
restructure charge taken during the fourth quarter of 2000 mentioned above,
other expenses declined 36%, to $1.3 million for the year ended December 31,
2000. The decrease in other expenses represents savings from the disposition of
non-core businesses during 2000.

Selected Balance Sheet Items - Years Ended December 31, 2001 and 2000
---------------------------------------------------------------------
Cash and invested assets increased $18.0 million, to $442.0 million as of
December 31, 2001 from $424.0 million as of December 31, 2000. The increase in
cash and invested assets is due primarily to the growth in premiums, which
increased the amounts available for investment, offset by a reduction in cash
associated with the pay down and refinancing of the Company's credit facility.

Accrued investment income decreased $1.3 million, to $4.6 million as of December
31, 2001 from $5.9 million as of December 31, 2000. The decrease in accrued
investment income is due to lower investment returns on the Company's investment
portfolio associated with lower interest rates on fixed income securities.

Premiums receivable increased $37.1 million, to $73.4 million as of December 31,
2001 from $36.3 million as of December 31, 2000. The increase in premiums
receivable is due to the growth in premiums written, resulting from rate
increases realized by the Company's insurance subsidiaries on core MPL lines and
an increase in new and renewal MPL business.



                                       26
<PAGE>

Due from reinsurers on unpaid losses and advance premiums increased $22.7
million, to $80.4 million as of December 31, 2001 from $57.7 million as of
December 31, 2000. Ceded unearned premiums increased $30.7 million, to $40.8
million as of December 31, 2001, from $10.1 million as of December 31, 2000. The
increases in these assets are related to the increase in the underlying reserves
and unearned premiums resulting from growth in premiums written and earned on
the Company's core MPL business and the increase in premiums written under
fronting arrangements whereby the Company cedes substantially all of the
business to other insurance carriers.

Deferred policy acquisition costs increased $3.0 million, to $9.0 million as of
December 31, 2001 from $6.0 million as of December 31, 2000. The increase in
deferred policy acquisition costs is due to an increase in underwriting expenses
as a result of the growth in premiums written.

Deferred income taxes increased $1.6 million, to $19.9 million as of December
31, 2001 from $18.3 million as of December 31, 2000. The increase in deferred
income taxes relates to an increase in deferred taxes associated with changes in
unrealized gains on financial instruments and growth in the Company's insurance
business.

Goodwill and intangible assets decreased $2.4 million, to $58.5 as of December
31, 2001 from $60.9 million as of December 31, 2000. The decrease in goodwill
and intangible assets is due to amortization.

Federal income tax receivable decreased $3.2 million, to $5.3 million as of
December 31, 2001 from $8.5 million as of December 31, 2000. The decrease in
federal income tax receivable corresponds with the related decrease in the
current benefit recognized in 2001, and the receipt of a federal tax refund
related to the overpayment of estimated taxes for the year 2000.

The Company's liability for loss and LAE increased $37.2 million, to $318.5
million as of December 31, 2001 from $281.3 million as of December 31, 2000. The
increase in the liability for loss and LAE is attributable to increases in
premiums earned and the establishment of reserves for the current book of
business, taking into consideration expected loss trends and an appropriately
conservative loss ratio. In addition, the Company recorded a pre-tax reserve
adjustment of $8.8 million in the fourth quarter of 2001 to strengthen reserves
established for prior coverage years. The adjustment to reserves reflects the
soft market conditions that prevailed for coverage years 2000 and prior.

Unearned premiums increased $46.7 million, to $146.8 million as of December 31,
2001 from $100.1 million as of December 31, 2000. The increase in unearned
premiums is primarily related to growth in premiums written at the Company's
insurance subsidiaries.

Reinsurance payable increased $20.2 million, to $26.7 million as of December 31,
2001 from $6.5 million as of December 31, 2000. The increase in reinsurance
payable is related to an increase in premiums written for direct MPL business
and business written under fronting arrangements whereby the Company cedes
substantially all of the business to other insurance carriers.

Premiums paid in advance and unprocessed premiums increased $3.8 million, to
$9.9 million as of December 31, 2001 from $6.1 million as of December 31, 2000.
The increase in paid in advance and unprocessed premiums reflects the policy
renewal cycle at the Company's largest insurance subsidiary whereby the majority
of policies are renewed with an effective date of January 1 or July 1 of each
year. In addition, the Company instituted a rate increase at its largest
insurance subsidiary in December 2001.

The Company's revolving credit facility and term loan decreased $14.2 million,
to $53.0 million as of December 31, 2001 from $67.2 million as of December 31,
2000. On August 31, 2001, the Company entered into a revolving Credit and Term
Loan Agreement (the "credit facility") with five financial institutions. The
initial aggregate principal amount of the new credit facility was $55 million,
including (i) a $37.5 million revolving credit facility (with a $15 million
letter of credit sub-facility), which matures on August 31, 2004, and (ii) a
$17.5 million term loan facility, repayable in twelve equal quarterly
installments of approximately $1.5 million each commencing on December 31, 2001.
The credit facility replaced a $75 million revolving credit facility (the "prior



                                       27
<PAGE>
facility") that was entered into by the Company in January 1999, which would
have matured on January 4, 2002. Approximately $67.2 million of principal was
outstanding under the prior facility. The Company used available funds to pay
down the difference between the outstanding principal amount of the prior
facility and the initial amount of the new facility.

Accrued expenses and other liabilities increased $10.4 million, to $28.8 million
as of December 31, 2001 from $18.4 million as of December 31, 2000. The increase
in accrued expenses and other liabilities is primarily attributable to the
increase in operating expenses associated with the growth in business.
Approximately $2.9 million of the increase in accrued expenses and other
liabilities reflects the recognition of a liability for the Company's derivative
financial instrument in accordance with FAS No. 133.

Investments
-----------
The Company's investment strategy is to maintain a diversified investment
portfolio that is focused on high grade, fixed income securities. The majority
of these securities are held as invested assets by the various insurance
subsidiaries. At the close of 2001, approximately 27% of the fixed-income
portfolio was invested in tax-exempt securities and approximately 73% in taxable
securities.

Realized investment gains and losses are recorded when investments are sold,
other-than-temporarily impaired or in certain situations, as required by
generally accepted accounting principles, when investments are marked-to-market,
with the corresponding gain or loss included in earnings. Variations in the
amount and timing of realized investment gains and losses could cause
significant variations in periodic net earnings.

Stock Repurchase Plans
----------------------
During 2001, the Company repurchased 21,500 shares of its stock on the open
market under its previously announced stock repurchase program at an average
price of $10.84 per share. Under the Company's stock repurchase programs, shares
may be repurchased at such times, and in such amounts, as management deems
appropriate, and subject to the requirements of its credit facility under which
the Company may repurchase shares up to an amount not to exceed 50% of net
income of the immediately preceding year. A decision whether or not to make
additional repurchases is based upon an analysis of the best use of the
Company's capital. Since the commencement of these repurchase programs, the
Company has repurchased 875,000 of its shares at a cost of approximately $16.2
million. A total of 365,500 shares remain available to be repurchased under the
programs.

Liquidity and Capital Resources
-------------------------------
The payment of losses, LAE and operating expenses in the ordinary course of
business is the principal need for the Company's liquid funds. Cash provided by
operating activities has been used to pay these items and was sufficient during
2001 to meet these needs. Management believes these sources will be sufficient
to meet the Company's cash needs for operating purposes for at least the next
twelve months. However, a number of factors could cause increases in the dollar
amount of losses and LAE and may therefore adversely affect future reserve
development and cash flow needs. Management believes these factors include,
among others, inflation, changes in medical procedures, increased use of managed
care and adverse legislative changes. In order to compensate for such risk, the
Company: (i) maintains what management considers to be adequate reinsurance;
(ii) monitors its reserve positions and regularly performs actuarial reviews of
loss and LAE reserves; and (iii) maintains adequate asset liquidity (by managing
its cash flow from operations coupled with the maturities from its fixed income
portfolio investments).

The Company maintains a $55 million credit facility with five banks. The credit
facility replaced a $75 million prior facility that was entered into by the
Company in January 1999, which would have matured on January 4, 2002.
Approximately $67.2 million of principal was outstanding under the prior
facility. The Company used available funds to pay down the difference between
the outstanding principal amount of the prior facility and the initial amount of
the new credit facility.

As of December 31, 2001, the Company had $53.0 million outstanding under the
credit facility. The credit facility is comprised of (i) a $37.5 million
revolving credit facility (with a $15 million letter of credit sub-facility),
which matures on August 31, 2004, and (ii) a $17.5 million term loan facility,
repayable in twelve equal quarterly

                                       28
<PAGE>

installments of approximately $1.5 million each that commenced December 31,
2001. Amounts outstanding under the credit facility bear interest at a variable
rate, primarily based upon LIBOR plus an applicable margin of 2.25 percentage
points, which may be reduced to a minimum of 1.75 percentage points as the
Company reduces its outstanding indebtedness. The Company is not required to
maintain compensating balances in connection with these credit facilities but is
charged a fee on the unused portion, which ranges from 20 to 30 basis points.

Under the terms of the credit facility, the Company is required to meet certain
financial covenants. Significant covenants as of December 31, 2001, are as
follows: a) total debt to cash flow available for debt service cannot be greater
than 4.00:1 for the quarter ending December 31, 2001 and 3:50:1 thereafter; b)
combined net premiums written to combined statutory capital and surplus cannot
exceed 2.00:1; c) the fixed charge coverage ratio cannot be less than 2.00:1 at
the end of each quarter through December 31, 2002, thereafter the fixed charge
coverage ratio cannot be less than 2:25:1 and d) funded debt to total capital
plus funded debt cannot exceed 0.27:1. The credit facility also contains minimum
equity and risk-based capital requirements and requires the Company's insurance
subsidiaries to maintain at least an A- (Excellent) rating from A.M. Best.

Should the Company fail to meet one or more of its loan covenants, such
occurrence would be considered an event of default. In the event the Company was
unable to provide an allowable remedy for such event of default, the Company's
lenders would be entitled to certain remedies, including the ability to demand
immediate repayment, including payment in full. Were the Company's lenders to
demand immediate payment in full, the Company could not make such payment
from existing funds and would have to seek replacement financing. Under such
circumstances, the Company's ability to secure such replacement financing could
not be assured, and if obtained, such financing would likely carry higher costs.

At December 31, 2001, the Company did not meet its fixed charge coverage ratio
loan covenant, primarily as a result of the reserve strengthening charge in the
fourth quarter described above. The Company's lenders have waived this violation
bringing the Company into compliance with its loan covenants. In addition, the
Company and its lenders have re-negotiated a modification to the fixed charge
coverage ratio loan covenant from 2.5:1, to 2.0:1 for the year 2002; and
to 2.25:1 beginning in the first quarter of 2003. In connection with the
waiver and modification, the applicable margin charged by the lenders as part of
interest costs will increase 25 basis points, or 1/4 of 1 percent beginning in
2002.

At December 31, 2001, the Company held investments with a fair value of
approximately $55.2 million scheduled to mature during the next twelve months,
which when combined with net cash flows from operating activities, are expected
to provide the Company with sufficient liquidity and working capital. As
reported in the accompanying consolidated statements of cash flows, the Company
has generated positive net cash from operations of $33.2 million, $14.8 million
and $14.3 million in 2001, 2000 and 1999, respectively.

Shareholder dividends payable by the Company's insurance subsidiaries are
subject to certain limitations imposed by Florida and Missouri laws. During
2002, these subsidiaries are permitted, within insurance regulatory guidelines,
to pay dividends of approximately $10.7 million, without prior regulatory
approval.

The National Association of Insurance Commissioners has developed risk-based
capital ("RBC") measurements for insurers, which have been adopted by the
Florida and Missouri Departments of Insurance. RBC measurements provide state
regulators with varying levels of authority based on the adequacy of an
insurer's adjusted surplus. At December 31, 2001, the Company's insurance
subsidiaries maintained adjusted surplus in excess of their required RBC
thresholds.

The Company's insurance subsidiaries are subject to assessment by the financial
guaranty associations in the states in which they conduct business for the
provision of funds necessary for the settlement of covered claims under certain
policies of insolvent insurers. Generally, these associations can assess member
insurers on the basis of written premiums in their particular states.

In addition to standard assessments, the Florida and Missouri Legislatures may
also levy special assessments to settle claims caused by certain catastrophic
losses. The Company would be assessed on a basis of premium



                                       29
<PAGE>

written. During 2001, a special assessment was levied on First Professionals and
APAC that totaled $0.9 million. No special assessments were made in 2000 and
1999. In addition, the Company could be subject to additional assessments in the
future as a result of damages caused by catastrophic losses, such as a
hurricane.

Accounting Pronouncements
-------------------------
Effective January 1, 2001, the Company adopted FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and FAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment to
FAS No. 133". FAS No. 133 requires all derivative financial instruments, such as
interest rate swaps, to be recognized in the financial statements and measured
at fair value regardless of the purpose or intent for holding them. Changes in
the fair market value of derivative financial instruments are either recognized
periodically in income or shareholders' equity (as a component of accumulated
other comprehensive income), depending on whether the derivative is being used
to hedge changes in fair value or cash flows. FAS No. 138 amended the accounting
and reporting standards for certain derivative instruments and hedging
activities under FAS No. 133. The adoption of FAS No. 133 did not have a
material effect on the Company's consolidated financial statements, but did
increase total shareholders' equity by $124 thousand at January 1, 2001 as a
cumulative effect of a change in accounting principle.

In June 2001, the Financial Accounting Standards Board ("FASB") issued FAS No.
141 "Business Combinations." FAS No. 141 addresses financial accounting and
reporting for business combinations and supersedes Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations," and FAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." The standard eliminates
the pooling of interests method of accounting for business combinations except
for qualifying business combinations initiated prior to July 1, 2001 and
requires that all intangible assets be accounted for separately from goodwill,
for acquisitions after July 1, 2001. Management believes the adoption of FAS No.
141 will not have a significant impact on the Company's consolidated financial
statements.

In June 2001, the FASB issued FAS No. 142, "Goodwill and Other Intangible
Assets." FAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
"Intangible Assets." The standard provides that goodwill and other intangible
assets with indefinite lives are no longer to be amortized. These assets are to
be reviewed for impairment annually, or more frequently if impairment indicators
are present. Separable intangible assets that have finite lives will continue to
be amortized over their useful lives. Impairment testing is required during the
first year of adoption and any impairment losses resulting from such testing
will be reported as a cumulative effect of a change in accounting principle in
the first quarter of 2002. Upon its adoption in the first quarter of 2002, the
Company will cease the amortization of goodwill, which will have the effect of
increasing its reported income. Goodwill amortization for the year 2001 was $3.5
million. The Company is also in the process of obtaining independent valuations
of its reporting units as required by the transitional impairment provisions of
FAS No. 142. It is possible that upon completion of the valuations, the Company
could be required under the new standards to recognize a transitional impairment
charge. Should the valuations of the reporting units fall below the carrying
values, the related goodwill could partially or totally be impaired and the
Company could recognize an impairment charge up to the carrying amount of
goodwill or $67.2 million. However, as the Company has not yet completed its
valuations, it is too early to tell whether any charge will be required.

In June 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement
Obligations."  FAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived  assets and
the associated asset retirement costs.  Although earlier application is
encouraged, FAS No. 143 is effective for financial statements issued for fiscal
years beginning after June 15, 2002.  Management  believes the adoption of FAS
No. 143 will not have a significant impact on the Company's consolidated
financial statements.

In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The proposed standard provides a unified model
for all assets to be disposed of, including the disposal of segments of a
business currently accounted for under APB Opinion No. 30.  FAS No. 144 also
resolves the implementation issues and inconsistencies in accounting for assets
to be disposed of raised by FAS No. 121 and covers the reporting of discontinued
operations.  The standard supersedes FAS No. 121, while retaining the



                                       30
<PAGE>

recognition and measurement provisions of FAS No. 121 for long-lived assets to
be held and used and the measurement of long-lived  assets to be disposed of by
sale.  Management believes the adoption of FAS No. 144 will not have a
significant impact on the Company's consolidated financial statements.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------
Market risk is the risk of loss arising from adverse changes in market
conditions, such as changes in interest rates, spreads among various asset
classes, foreign currency exchange rates, and other relevant market rate or
price changes. Market risk is directly influenced by the volatility and
liquidity in the markets in which the related underlying assets are traded. The
following is a discussion of the Company's primary market risk exposures and how
those exposures are currently managed as of December 31, 2001. The Company's
market risk sensitive instruments are entered into for purposes other than
trading.

The fair value of the Company's debt and equity investment portfolio as of
December 31, 2001 was approximately $349.0 million. Approximately 96.6% of the
investment portfolio was invested in fixed maturity securities. The fixed
maturity portfolio currently maintains an average Moody's credit quality of AA.

Generally, the Company does not invest in derivatives and does not currently use
hedging strategies in its investment portfolio. However, the Company has
invested in interest rate swaps to fix the interest rate in connection with its
revolving credit facility and term loan.

As of December 31, 2001, the Company's investments in collateral mortgage
obligations ("CMO's") and asset-backed securities represented less than 17% of
the fixed income portfolio. The CMO's held by the Company were purchased to
improve the Company's yields and current income. Approximately 22% of the
Company's fixed income portfolio is allocated to the municipal sector. The
balance is diversified through investments in treasury, agency, and corporate
and mortgage-backed securities. The four market risks that can most directly
affect the investment portfolio are changes in U.S. interest rates, credit
risks, prepayment risks, and legislative changes, including changes in tax laws
that might affect the taxation of the Company's invested securities.

From time to time discussion arises in the United States Congress relative to
changing or modifying the tax-exempt status of municipal securities. The Company
stays abreast of possible legislative acts that could adversely affect the
tax-exempt status of municipal securities. At present there are no hedging or
other strategies being used to minimize this risk. However, the Company has
reduced its concentration in tax-exempt municipal securities during 2001, as
part of its overall investment strategy.

The Company manages risks associated with the changes in interest rates by
attempting to manage the duration of its investments in relation to the duration
of its anticipated liabilities (claim payments). The Company invests in
securities with investment grade credit ratings, thereby helping control credit
risks. Approximately 61% of the fixed income portfolio is AAA or higher, 11.64%
is AA, 16.0% is A, and 9.7% is BBB. A standard measure of interest rate
sensitivity is effective duration, which takes into account, among other things,
the effect that changing interest rates will have on prepayments and the
re-investment of these funds. The effective duration of the Company's portfolio
is 4.65 years. If interest rates were to increase 100 basis points, the fair
value of the Company's fixed maturity securities would decrease approximately
$18.1 million.

The amounts reported as cash flows in the table below for fixed maturities
represent par values at maturity date, and exclude investment income and
expenses and other cash flows. The fair values of fixed maturities are based
upon quoted market prices or dealer quotes for comparable securities. The
projected cash flows of the credit facility and term loan and operating leases
approximate fair value as of December 31, 2001. The fair value of the interest
rate swaps is estimated using quotes from brokers and represents the cash
requirement if the existing agreement had been settled at year-end.



                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                Projected Cash Flows (in thousands)
                                 ---------------------------------------------------------------------------------------------------
                                                                                                                 Dec 31, 2001
                                    2002       2003       2004       2005       2006    Thereafter   Total        Fair Value
                                 ---------  ---------  ---------  ---------  ---------  ----------  --------     -------------
<S>                             <C>           <C>       <C>         <C>        <C>      <C>         <C>           <C>
Assets
-------------------------------
Fixed maturity securities,
  Available for sale            $   6,021      8,722     10,930     35,140     20,144   268,959     349,916       348,949

Liabilities
-------------------------------
  Credit facility               $  (2,111)    (1,872)   (38,110)      --          --       --       (42,093)      (37,000)
  Term loan                        (6,409)    (6,166)    (4,462)      --          --       --       (17,037)      (16,042)
  Interest rate swaps              (2,066)    (1,832)    (1,085)      --          --       --        (4,983)       (2,934)
  Operating leases                 (2,766)    (2,525)    (2,545)    (2,402)    (2,471)   (5,626)    (18,335)      (18,335)

Weighted Average Interest Rate
-------------------------------
  Fixed maturity securities          6.54%      5.55%      4.73%      6.63%      4.57%     3.49%       4.01%
  Credit Facility                    4.16%      4.16%      4.16%        --         --        --          --
  Term Loan                          4.16%      4.16%      4.16%        --         --        --          --
  Interest rate swaps                4.39%      4.44%      4.49%        --         --        --          --
</TABLE>

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------
The consolidated financial statements and schedules listed in Item 14(a)(1) and
(2) are included in this Report beginning on Page 40.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
------------------------------------------------------------------------
On April 28, 2000, the Company filed a Form 8-K notifying the Securities and
Exchange Commission of a change in the Registrant's certifying accountant. The
Company retained the services of PricewaterhouseCoopers LLP as its independent
accountants and replaced KPMG LLP ("KPMG") effective April 24, 2000. No report
of KPMG on the financial statements of the Company for 1999 or 1998 contained an
adverse opinion, or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope, or accounting principles. Since the engagement of KPMG
and through the date of replacement, there were no disagreements between the
Company and KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. The change in independent
accountants was approved by the Audit Committee and the Board of Directors of
the Company.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------
Information required hereunder with respect to directors and executive officers
will appear under the heading "Executive Compensation" in the Company's Proxy
Statement for the 2002 Annual Meeting of Shareholders, which information is
incorporated herein by reference.

Item 11.  Executive Compensation
--------------------------------
The information required herein will appear under the heading "Executive
Compensation" in the Company's Proxy Statement for the 2002 Annual Meeting of
Shareholders, which is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
The information required herein will appear under the heading " Security
Ownership of Certain Beneficial Owners, Directors, Nominees and Executive
Officers" in the Company's Proxy Statement for the 2002 Annual Meeting of
Shareholders, which information is incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------
The information required herein will appear under the heading "Certain
Relationships and Related Transactions" in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders, which information is incorporated herein by
reference.



                                       32
<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------
 (a)   1.  Financial Statements and Schedules:
           -----------------------------------
               FPIC Insurance Group, Inc.:
               Reports of Independent Certified Public Accountants
               Consolidated Balance Sheets at December 31, 2001 and 2000
               Consolidated Statements of Income for the years ended December
                 31, 2001, 2000 and 1999
               Consolidated Statements of Comprehensive Income for the years
                 ended December 31, 2001, 2000 and 1999
               Consolidated Statements of Changes in Shareholders' Equity for
                 the years ended December 31, 2001, 2000 and 1999
               Consolidated Statements of Cash Flows for the years ended
                 December 31, 2001, 2000 and 1999
               Notes to the Consolidated Financial Statements

       2.  Financial Statement Schedules:
           ------------------------------
           (Schedules other than those listed are omitted for the reason that
           they are not required or are not applicable or the required
           information is shown in the financial statements or notes thereto.)

               I      Summary of Investments - Other than Related Party
                      Investments
               II     Condensed Financial Information of Registrant
               III    Supplemental Insurance Information
               IV     Reinsurance
               V      Valuation and Qualifying Accounts

       3.  Exhibits:
           --------
               Exhibit No.
               -----------
                  3.1      Restated Articles of Incorporation of FPIC Insurance
                           Group, Inc., incorporated by reference to the
                           Company's Form 10-Q (Commission File No. 1-11983)
                           filed on August 16, 1999.

                  3.2      Bylaws of FPIC Insurance Group, Inc., incorporated
                           by reference to the Company's Registration Statement
                           on Form S-4 (Registration No. 333-02040) first filed
                           on March 7, 1996.

                  10(a)    Form of Employment Agreement dated December 30, 1992,
                           amended November 4, 1995, and amended February 28,
                           1996 and extended on November 7, 1998, between FPIC
                           and William R. Russell, incorporated by reference to
                           the Company's Registration Statement on Form S-4
                           (Registration No. 333-02040) first filed on March 7,
                           1996 and the Company's Form 10-Q, incorporated by
                           reference to the Company's definitive proxy statement
                           (Commission File No. 1-11983) filed on May 7, 1999.

                  10(b)    Form of Severance Agreements dated February 28, 1996,
                           between FPIC and William R. Russell, incorporated by
                           reference to the Company's Registration Statement on
                           Form S-4 (Registration No. 333-02040) first filed on
                           March 7, 1996.

                  10(c)    Form of Indemnity Agreement dated February 28, 1996
                           between the Registrant and Drs. Acosta-Rua, Gause,
                           Shapiro, Selander, White, Bagby, Baratta, Murray,
                           Bridges, Hagen, Van Eldik, Yonge; Messrs. Russell,
                           Rosenbloom, Sabia, Carey, Driscoll and Ms. Whitter,
                           incorporated by reference to the Company's Registra-
                           tion Statement on Form S-4 (Registration No.
                           333-02040) first filed on March 7, 1996.

                  10(d)    Omnibus Incentive Plan, as amended, incorporated by
                           reference to the Company's definitive proxy statement
                           (Commission File No. 1-11983) filed on April 30,
                           2001.


                                       33
<PAGE>

                  10(e)    Director Stock Option Plan, as amended, incorporated
                           by reference to the Company's definitive proxy
                           statement (Commission File No. 1-11983) filed on
                           April 30, 2001.

                  10(f)    Supplemental Executive Retirement Plan, as amended,
                           incorporated by reference to the Company's Form 10-Q
                           (Commission File No. 1-11983) filed on May 17, 1999.

                  10(g)    Excess Benefit Plan, incorporated by reference to the
                           Company's Registration Statement on Form S-4
                           (Registration No. 333-02040) first filed on March 7,
                           1996.

                  10(h)    Deferred Compensation Plan, incorporated by reference
                           to the Company's Registration Statement on Form S-1
                           (Registration No. 333-04585) first filed on May 24,
                           1996.

                  10(i)    Agreement and Plan of Merger dated as of April 14,
                           1998 among the Company, Anesthesiologists'
                           Professional Assurance Association, Inc., the APAA
                           Liquidating Trust and Anesthesiologists' Professional
                           Assurance Company, incorporated by reference to the
                           Company's filing on Form 10-K (Commission File No.
                           1-11983) filed on March 31, 1999.

                  10(j)    Stock Purchase Agreement dated as of November 25,
                           1998 and First Amendment to Stock Purchase Agreement
                           dated as of December 23, 1998 among the Company and
                           the Shareholders of Administrators For the
                           Professions, Inc., incorporated by reference to the
                           Company's filing on Form 8-K, first filed on January
                           21, 1999.

                  10(k)    Agreement and Plan of Merger dated as of October 2,
                           1998 and First Amendment to Agreement and Plan of
                           Merger dated as of January 1999 and Second Amendment
                           to Agreement and Plan of Merger dated as of March 17,
                           1999 among First Professionals Insurance Company,
                           Inc., TGI Acquisition Corporation and Tenere Group,
                           Inc., incorporated by reference to the Company's
                           filing on Form 10-K (Commission File No. 1-11983)
                           filed on March 31, 1999.

                  10(l)    Form of Severance Agreement dated January 1, 1999
                           between the Registrant and John R. Byers incorporated
                           by reference to the Company's Form 10-Q (Commission
                           File No. 1-11983) filed on May 17, 1999,

                10(l)(1)   Form of Amendment to Severance Agreement between the
                           Registrant and John R. Byers dated December 14, 2001.



                                       34
<PAGE>
                  10(m)    Form of Employment Agreement dated January 1, 1999
                           between the Registrant and John R. Byers incorporated
                           by reference to the Company's Form 10-Q (Commission
                           File No. 1-11983) filed on May 17, 1999.

                10(m)(1)   Form of Amendment to Employment Agreement between the
                           Registrant and John R. Byers dated December 14, 2001.

                  10(n)    Form of Employment Agreement dated November 22, 1999
                           between the Registrant and Kim D. Thorpe incorporated
                           by reference to the Company's Form 10-K (Commission
                           File No.1-11983) filed on March 30, 2000.

                10(n)(1)   Form of Amendment to Employment Agreement between the
                           Registrant and Kim D. Thorpe dated December 14, 2001.

                  10(o)    Form of Severance Agreement dated November 22, 1999
                           between the Registrant and Kim D. Thorpe incorporated
                           by reference to the Company's Form 10-K (Commission
                           File No.1-11983) filed on March 30, 2000.

                10(o)(1)   Form of Amendment to Severance Agreement between the
                           Registrant and Kim D. Thorpe dated December 14, 2001.

                  10(p)    Form of Indemnity Agreements dated January 1, 1999
                           between the Registrant and Frank Moya, M.D. and John
                           R. Byers incorporated by reference to the Company's
                           Form 10-K (Commission File No.1-11983) filed on March
                           30, 2000.

                  10(q)    Form of Indemnity Agreements dated May 8, 1999
                           between the Registrant and Ms. Deyo, Parks and Ryan
                           incorporated by reference to the Company's Form 10-K
                           (Commission File No.1-11983) filed on March 30, 2000.

                  10(r)    Form of Indemnity Agreement dated August 22, 1999
                           between the Registrant and Steven Coniglio
                           incorporated by reference to the Company's Form 10-K
                           (Commission File No.1-11983) filed on March 30, 2000.

                  10(s)    Form of Indemnity Agreements dated November 6, 1999
                           between the Registrant and Messrs. Cetin and Thorpe
                           incorporated by reference to the Company's Form 10-K
                           (Commission File No.1-11983) filed on March 30, 2000.

                  10(t)    Reinsurance agreement between Physicians' Reciprocal
                           Insurers and First Professionals Insurance Company,
                           Inc. incorporated by reference to the Company's Form
                           10-Q (Commission File No. 1-11983) filed on May 15,
                           2000.

                  10(u)    Form of Employment Agreement dated November 6, 1999
                           between the Registrant and Kurt Cetin.

                 10(u)(1)  Form of Amendment to Employment Agreement between the
                           Registrant and Kurt Cetin dated December 14, 2001.

                  10(v)    Form of Employment Agreement dated May 1, 2000
                           between the Registrant and David L. Rader.

                10(v)(1)   Form of Amendment to Employment Agreement between the
                           Registrant and David L. Rader dated December 16,
                           2000.

                  10(w)    Form of Employment Agreement dated May 1, 2000
                           between the Registrant and Gary M. Dallero.

                10(w)(1)   Form of Amendment to Employment Agreement between the
                           Registrant and Gary M. Dallero dated December 16,
                           2000.

                  10(x)    Form of Severance Agreement dated June 19, 2000
                           between the Registrant and Charles Divita III.

                  10(y)    Form of Indemnity Agreement dated July 15, 2000
                           between the Registrant and Messrs. Dallero and
                           Divita.

                                       35
<PAGE>

                  10(z)    Form of Indemnity Agreement dated December 16, 2000
                           between the Registrant and Roberta G. Cown.

                  10(aa)   Form of Severance Agreement dated December 16, 2000
                           between the Registrant and Roberta G. Cown.

                  10(bb)   Form of Severance Agreement dated December 22, 2000
                           between the Registrant and Pamela D. Deyo.

                  10(cc)   Waiver and Modification Agreement dated as of March
                           30, 2001, by and among FPIC Insurance Group, Inc.,
                           and The Banks Listed Herein, and SunTrust Bank, as
                           Issuing Bank, Administrative Agent and as Collateral
                           Agent.

                  10(dd)   Revolving Credit and Term Loan Agreement dated August
                           31, 2001 among FPIC Insurance Group, Inc., as
                           Borrower, the Lenders named therein, and SunTrust
                           Bank, as Administrative Agent and Collateral Agent.

                  10(ee)   International Swap Dealers Association, Inc. Master
                           Agreement dated June 15, 1998 between FPIC Insurance
                           Group, Inc. and SunTrust Bank, Atlanta, as amended by
                           the Confirmations of Interest Rate Transactions dated
                           August 29, 2001.

                  10(ff)   Form of Indemnity Agreement dated June 6, 2001
                           between the Registrant and John K. Anderson, Jr.

                  10(gg)   Form of Indemnity Agreement dated June 6, 2001
                           between the Registrant and M.C. Harden, III.

                  10(hh)   Form of Indemnity Agreement dated July 14, 2001
                           between the Registrant and Gene Witherspoon.

                  10(ii)   Form of Indemnity Agreement dated September 18, 2001
                           between the Registrant and Lori A. Mackey.

                  10(jj)   Form of  Employment Agreement dated December 14, 2001
                           between the Registrant and Roberta G. Cown.

                  10(kk)   Amendment No. 1 to Revolving Credit and Term Loan
                           Agreement dated March 25, 2002.

                  21       Subsidiaries of the Registrant
                  23       Consents of KPMG LLP and PricewaterhouseCoopers LLP

(b)    Reports on Form 8-K:
       --------------------
       The Company did not file any reports on Form 8-K during the fourth
       quarter of 2001.

SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this the 27th day of
March, 2002.

                                       FPIC Insurance Group, Inc.


                                       By       /s/ John R. Byers
                                           -------------------------------
                                           John R. Byers, President
                                             and Chief Executive Officer



                                       36
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                 Signature                                    Title                            Date

         <S>                                         <C>                                <C>
           /s/ John R. Byers                         President, Chief Executive         March 27, 2002
         -------------------------------
         John R. Byers                               Officer and Director
                                                     (Principal Executive Officer)

           /s/ Kim D. Thorpe                         Executive Vice President           March 27, 2002
         -------------------------------
         Kim D. Thorpe                               and Chief Financial Officer
                                                     (Principal Financial Officer)

           /s/ Pamela D. Deyo                        Vice President - Controller        March 27, 2002
         -------------------------------
         Pamela D. Deyo                              (Principal Accounting Officer)

           /s/ Robert O. Baratta                     Chairman of the Board              March 27, 2002
         -------------------------------
         Robert O. Baratta, M.D.

           /s/ David M. Shapiro                      Vice Chairman                      March 27, 2002
         -------------------------------
         David M. Shapiro, M.D.

           /s/ Gaston J. Acosta-Rua                  Director                           March 27, 2002
         -------------------------------
         Gaston J. Acosta-Rua, M.D.

           /s/ John K. Anderson, Jr.                 Director                           March 27, 2002
         -------------------------------
         John K. Anderson, Jr.

           /s/ Richard J. Bagby                      Director                           March 27, 2002
         -------------------------------
         Richard J. Bagby, M.D.

           /s/ James W. Bridges                      Director                           March 27, 2002
         -------------------------------
         James W. Bridges, M.D.

           /s/ Curtis E. Gause                       Director                           March 27, 2002
         -------------------------------
         Curtis E. Gause, D.D.S.

           /s/ M.C. Harden, III                      Director                           March 27, 2002
         -------------------------------
         M. C. Harden, III

           /s/ Louis C. Murray                       Director                           March 27, 2002
         -------------------------------
         Louis C. Murray, M.D.

           /s/ Guy T. Selander                       Director                           March 27, 2002
         -------------------------------
         Guy T. Selander, M.D.

           /s/ James G. White                        Director                           March 27, 2002
         -------------------------------
         James G. White, M.D.

           /s/ Gene C. Witherspoon                   Director                           March 27, 2002
         -------------------------------
         Gene C. Witherspoon
</TABLE>



                                       37
<PAGE>

               Report of Independent Certified Public Accountants




The Board of Directors and Shareholders of
FPIC Insurance Group, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows, present fairly, in all material respects,
the financial position of FPIC Insurance Group, Inc. and its subsidiaries at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the accompanying financial statement schedules present fairly, in all material
respects, the information set forth therein, as of and for the years ended
December 31, 2001 and 2000, when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedules are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The consolidated financial
statements and accompanying financial statement schedules of the Company for the
year ended December 31, 1999 were audited by other independent accountants whose
report dated March 8, 2000 expressed an unqualified opinion on those statements
and schedules.


                         /s/ PricewaterhouseCoopers LLP

                           PricewaterhouseCoopers LLP



Jacksonville, Florida
February 20, 2002, except
as to the matter discussed
in the fifth paragraph of
Note 11, as to which the
date is March 26, 2002





<PAGE>




               Report of Independent Certified Public Accountants




The Board of Directors and Shareholders of
FPIC Insurance Group, Inc.:

We have audited the accompanying consolidated statements of income,
comprehensive income, changes in shareholders' equity, and cash flows of FPIC
Insurance Group, Inc. and subsidiaries for the year ended December 31, 1999. In
connection with our audit of the aforementioned consolidated financial
statements, we also have audited financial statement Schedules II, III, IV and V
as of and for the years ended December 31, 1999. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated statements of income, comprehensive income,
changes in stockholders' equity and cash flows referred to above present fairly,
in all material respects, the results of operations and cash flows of FPIC
Insurance Group, Inc. and subsidiaries for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the aforementioned financial statement schedules,
when considered in relation to the consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.


                                    /s/ KPMG LLP

                                    KPMG LLP



Jacksonville, Florida
March 8, 2000


<PAGE>

                           FPIC INSURANCE GROUP, INC.

          Consolidated Balance Sheets (in thousands, except share data)

                        As of December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                        2001          2000
                                                                     ------------  ------------
<S>                                                                 <C>             <C>
Assets

    Cash and cash equivalents                                       $  75,220        18,967
    Bonds and U.S. Government securities, available for sale          348,949       385,513
    Equity securities, available for sale                                   8           555
    Other invested assets, at equity                                    2,572         3,134
    Other invested assets, at cost                                     10,962        11,388
    Real estate                                                         4,255         4,398
                                                                     ------------  ------------
            Total cash and investments                                441,966       423,955

    Premiums receivable, net of allowance for doubtful accounts
       of $734 and $1,659 in 2001 and 2000, respectively               73,362        36,300
    Accrued investment income                                           4,605         5,932
    Reinsurance recoverable on paid losses                              7,305         7,919
    Due from reinsurers on unpaid losses and advance premiums          80,410        57,698
    Ceded unearned premiums                                            40,794        10,107
    Property and equipment, net                                         4,727         4,295
    Deferred policy acquisition costs                                   9,001         5,967
    Deferred income taxes                                              19,944        18,271
    Finance charge receivable                                             227           471
    Prepaid expenses                                                    1,664         1,662
    Goodwill and identifiable intangibles, net                         58,542        60,869
    Federal income tax receivable                                       5,272         8,519
    Other assets                                                       10,478        10,233
                                                                     ------------  ------------
                 Total assets                                       $ 758,297       652,198
                                                                     ============  ============

Liabilities and Shareholders' Equity

    Loss and loss adjustment expenses                               $ 318,483       281,295
    Unearned premiums                                                 146,761       100,066
    Reinsurance payable                                                26,689         6,518
    Paid in advance and unprocessed premiums                            9,942         6,146
    Revolving credit facility                                          37,000        67,219
    Term loan                                                          16,042            --
    Accrued expenses and other liabilities                             28,806        18,427
                                                                     ------------  ------------
            Total liabilities                                         583,723       479,671
                                                                     ------------  ------------

    Commitments and contingencies (Note 18)

    Common stock, $.10 par value, 50,000,000 shares authorized;
       9,337,755 and 9,380,353 shares issued and outstanding at
       December 31, 2001 and 2000, respectively                           934           938
    Additional paid-in capital                                         37,837        37,827
    Unearned compensation                                                  --          (105)
    Accumulated other comprehensive (loss) income                         (26)          968
    Retained earnings                                                 135,829       132,899
                                                                     ------------  ------------
            Total shareholders' equity                                174,574       172,527
                                                                     ------------  ------------
                 Total liabilities and shareholders' equity         $ 758,297       652,198
                                                                     ============  ============
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

                           FPIC INSURANCE GROUP, INC.

 Consolidated Statements of Income (in thousands, except per common share data)

              For the Years Ended December 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
                                                                             2001           2000           1999
                                                                         -------------  -------------  -------------

<S>                                                                     <C>               <C>            <C>
Revenues
    Net premiums earned                                                 $  131,058        120,454        118,072
    Claims administration and management fees                               35,504         30,026         26,805
    Net investment income                                                   23,322         24,998         19,068
    Commission income                                                        5,048          3,464          2,476
    Net realized investment gains (losses)                                   1,429            (91)           351
    Finance charge and other income                                          1,168          3,413          3,732
                                                                          -------------  -------------  -------------
          Total revenues                                                   197,529        182,264        170,504
                                                                          -------------  -------------  -------------

Expenses
    Net losses and loss adjustment expenses                                128,346        122,766         80,968
    Other underwriting expenses                                             25,684         20,677         21,014
    Claims administration and management expenses                           33,351         30,706         26,297
    Interest expense                                                         4,566          4,291          3,981
    Other expenses                                                           4,497          6,795          7,041
                                                                          -------------  -------------  -------------
          Total expenses                                                   196,444        185,235        139,301
                                                                          -------------  -------------  -------------

          Income (loss) before income taxes                                  1,085         (2,971)        31,203

    Income tax (benefit) expense                                            (1,845)        (3,585)         9,334
                                                                          -------------  -------------  -------------

          Net income                                                    $    2,930            614         21,869
                                                                          =============  =============  =============





Basic earnings per common share                                         $     0.31           0.06           2.24
                                                                          =============  =============  =============

Diluted earnings per common share                                       $     0.31           0.06           2.19
                                                                          =============  =============  =============


Basic weighted average common shares outstanding                             9,383          9,497          9,748
                                                                          =============  =============  =============

Diluted weighted average common shares outstanding                           9,468          9,571         10,007
                                                                          =============  =============  =============
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>

                           FPIC INSURANCE GROUP, INC.

         Consolidated Statements of Comprehensive Income (in thousands)

              For the Years Ended December 31, 2001, 2000 and 1999



<TABLE>
<CAPTION>
                                                                  2001       2000         1999
                                                               ----------- ----------  ------------

<S>                                                          <C>            <C>          <C>
Net Income                                                   $   2,930         614        21,869
                                                               ----------- ----------  ------------

Other Comprehensive Income
    Cumulative effect of change in accounting
      principle (Note 2)                                     $     124          --            --
    Unrealized holding gains (losses) on securities
      arising during the period                                  1,198      14,697       (22,068)
    Unrealized holding losses on derivative financial
       instruments arising during the period                    (2,819)         --            --
    Income tax benefit (expense) related to unrealized
      gains and losses                                             503      (5,234)        7,952
                                                                ----------- ----------  ------------

    Other comprehensive (loss) income                             (994)      9,463       (14,116)
                                                                ----------- ----------  ------------

Comprehensive  income                                        $   1,936      10,077         7,753
                                                                =========== ==========  ============
</TABLE>






See accompanying notes to consolidated financial statements.


<PAGE>

                           FPIC INSURANCE GROUP, INC.

    Consolidated Statements of Changes in Shareholders' Equity (in thousands)

              For the Years Ended December 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
                                                                             Accumulated
                                                                                Other
                                      Common    Additional      Unearned     Comprehensive   Retained
                                      Stock   Paid-in capital  Compensation     Income       Earnings       Total
                                     -------- ---------------  ------------  -------------   ----------   ----------
<S>                                  <C>          <C>               <C>          <C>          <C>           <C>
Balance, December 31, 1998           $   952      34,299            (357)        5,621        110,416       150,931

   Net income                             --          --              --            --         21,869        21,869
   Compensation earned on
     issuance of stock options            --          --             126            --             --           126
   Unrealized loss on debt
     and equity securities, net           --          --              --       (14,116)            --       (14,116)
   Issuance of shares, net                10       7,559              --            --             --         7,569
                                     -------- ---------------  ------------  -------------   ----------   ----------
Balance, December 31, 1999           $   962      41,858            (231)       (8,495)       132,285       166,379
                                     -------- ---------------  ------------  -------------   ----------   ----------

   Net income                             --          --              --            --            614           614
   Compensation earned on
     issuance of stock options            --          --             126            --             --           126
   Unrealized gain on debt
     and equity securities, net           --          --              --         9,463             --         9,463
   Repurchase of shares, net             (24)     (4,031)             --            --             --        (4,055)
                                     -------- ---------------  ------------  -------------   ----------   ----------
Balance, December 31, 2000           $   938      37,827            (105)          968        132,899       172,527
                                     -------- ---------------  ------------  -------------   ----------   ----------

   Cumulative effect of change in
     accounting principle (Note 2)        --          --              --           124             --           124
   Net income                             --          --              --            --          2,930         2,930
   Compensation earned on
     issuance of stock options            --          --             105            --             --           105
   Unrealized loss on derivative
     financial instruments, net           --          --              --        (1,896)            --        (1,896)
   Unrealized gain on debt
     and equity securities, net           --          --              --           778             --           778
   Repurchase of shares, net              (4)         10              --            --             --             6
                                     -------- ---------------  ------------  -------------   ----------   ----------
Balance, December 31, 2001           $   934      37,837              --           (26)       135,829       174,574
                                     ======== ===============  ============  =============   ==========   ==========
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>

                           FPIC INSURANCE GROUP, INC.

              Consolidated Statements of Cash Flows (in thousands)

              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                2001         2000        1999
                                                                            ------------ ----------- -----------
<S>                                                                         <C>            <C>          <C>
Cash flows from operating activities:
    Net income                                                              $    2,930         614       21,869
    Adjustments to reconcile net income to cash provided by
      operating activities:
         Depreciation, amortization and accretion                                5,139       3,944        5,909
         Realized (gain) loss on sale of investments                            (1,429)         91         (351)
         Realized (gain) loss on sale of property and equipment                    (17)         46           16
         Noncash compensation                                                      105         126          126
         Net loss from equity investments                                          511         188          339
         Deferred income tax (benefit) expense                                    (973)     (3,276)       1,097
         Writedown of goodwill to net realizable value                              --          --          436
         Bad debt expense                                                          191       1,139          352
         Changes in assets and liabilities:
             Premiums receivable, net                                          (37,074)     (2,651)         965
             Accrued investment income                                           1,327        (506)         (25)
             Reinsurance recoverable on paid losses                                614       6,830           --
             Due from reinsurers on unpaid losses and advance premiums         (22,712)        702           --
             Ceded unearned premiums                                           (30,687)     (3,824)          --
             Deferred policy acquisition costs                                  (3,034)     (3,178)        (526)
             Prepaid expenses and finance charge receivable                        242        (525)        (652)
             Other assets and accrued expenses and other liabilities             7,011        (319)      (2,611)
             Loss and loss adjustment expenses                                  37,188       8,203       (6,790)
             Unearned premiums                                                  46,695       7,764        3,234
             Reinsurance payable                                                20,171       3,179       (4,880)
             Paid in advance and unprocessed premiums                            3,796         687         (308)
             Federal income tax receivable                                       3,247      (4,391)      (3,857)
                                                                            ------------ ----------- -----------
                Net cash provided by operating activities                       33,241      14,843       14,343
                                                                            ------------ ----------- -----------
 Cash flows from investing activities:
    Proceeds from sale or maturity of bonds and U.S.
      Government securities                                                    221,596      59,373       69,471
    Purchase of bonds and U.S. Government securities                          (182,930)    (59,351)     (61,578)
    Proceeds from sale of equity securities, net                                   513         966          236
    (Purchase) sale of real estate investments, net                               (112)        302         (902)
    Sale (purchase) of other invested assets, net                                  477        (813)        (704)
    Purchase of property and equipment, net                                     (2,362)     (1,913)      (1,556)
    Proceeds from sale of subsidiary                                                --         185           --
    Purchase of subsidiary's net other assets and stock                             --          (5)         (50)
    Purchase of goodwill and intangible assets                                      --      (1,895)     (50,986)
                                                                            ------------ ----------- -----------
                Net cash provided by (used in) investing activities             37,182      (3,151)     (46,069)
                                                                            ------------ ----------- -----------

Cash flows from financing activities:
    (Payment) receipt of revolving credit facility, net                        (14,176)      4,500       35,554
    Issuance (buyback) of common stock, net                                          6      (4,055)      (4,061)
                                                                            ------------ ----------- -----------
                Net cash (used in) provided by financing activities            (14,170)        445       31,493
                                                                            ------------ ----------- -----------

                Net increase (decrease) in cash and cash equivalents            56,253      12,137         (233)

Cash and cash equivalents at beginning of period                                18,967       6,830        7,063
                                                                            ------------ ----------- -----------
Cash and cash equivalents at end of period                                  $   75,220      18,967        6,830
                                                                            ============ =========== ===========

Continued.

<PAGE>

                           FPIC INSURANCE GROUP, INC.

              Consolidated Statements of Cash Flows (in thousands)

              For the Years Ended December 31, 2001, 2000 and 1999

                                                                                2001         2000        1999
Supplemental disclosure of cash flow activities:
   Interest paid                                                            $    4,190       3,769        4,016
                                                                            ============ =========== ===========
   Federal income taxes paid                                                $      540       3,556        6,634
                                                                            ============ =========== ===========

Supplemental schedule of noncash investing and financing activities:

   Effective January 1, 2000, the Company's insurance subsidiaries
   entered into a 100% quota share reinsurance agreement to assume
   the death, disability, and retirement risks under Physicians'
   Reciprocal Insurers' ("PRI") claims made insurance policies. The
   Company received cash and bonds in exchange for business assumed
   from PRI recorded as follows:

     Assumed unearned premium                                               $       --      33,749           --
     Reduction in net goodwill and intangible assets                                --      13,205           --
     Receipt of bonds at market                                                     --     (44,194)          --
                                                                            ------------ ----------- -----------

     Net cash received                                                      $       --       2,760           --
                                                                            ============ =========== ===========


   Effective January 1, 1999, the Company purchased all of the
   capital stock of Administrators for the Professions, Inc. for
   $53,830 and a 70% equity interest in a limited liability
   company for $2,500. In conjunction with the acquisitions,
   common stock was issued as follows:

     Common stock issued and related additional paid-capital                $       --          --       11,630
     Goodwill and other tangible and intangible assets acquired                     --          --      (56,330)
                                                                            ------------ ----------- -----------

     Net cash paid                                                          $       --          --      (44,700)
                                                                            ============ =========== ===========
</TABLE>




See accompanying notes to consolidated financial statements.


<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)

1.   Organization and Nature of Operations
     FPIC Insurance Group, Inc. (the "Company") is an insurance holding company.
     As of December 31, 2001, the Company's principal direct and indirect
     subsidiaries include: First Professionals Insurance Company, Inc. ("First
     Professionals", formerly known as Florida Physicians Insurance Company,
     Inc.), Anesthesiologists Professional Assurance Company ("APAC"), FPIC
     Insurance Agency, Inc., Administrators For The Professions, Inc. ("AFP")
     and its two subsidiaries:  FPIC Intermediaries, Inc. ("Intermediaries") and
     Group Data Corporation ("Group Data"), The Tenere Group, Inc. ("Tenere")
     and its four subsidiaries:  Intermed Insurance Company ("Intermed"),
     Interlex Insurance Company ("Interlex"), Trout Insurance Services, Inc. and
     Insurance Services, Inc., McCreary Corporation ("McCreary") and its
     subsidiary, Employers Mutual, Inc. ("EMI,") and its two subsidiaries:  FPIC
     Services, Inc. and Professional Strategy Options, Inc.  Effective January
     1, 2002, McCreary and EMI were consolidated by legal entity merger, with
     EMI continuing as the surviving entity.

     First Professionals is a licensed casualty insurance carrier and writes
     medical professional liability ("MPL") insurance for physicians, dentists,
     and other healthcare providers. APAC is a licensed casualty insurance
     carrier and writes MPL insurance for anesthesiologists. Intermed and
     Interlex are licensed casualty insurance carriers and write professional
     liability insurance for physicians and attorneys, respectively.

     The Company, through First Professionals, APAC, Intermed, and Interlex,
     operates in the property and casualty insurance industry and is a provider
     of MPL and legal professional liability ("LPL") insurance primarily in
     Florida and Missouri. In addition to Florida and Missouri, the Company is
     licensed to write insurance in Alabama, Arizona, Arkansas, Delaware,
     Georgia, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Michigan,
     Minnesota, Mississippi, Missouri, Montana, North Carolina, Ohio,
     Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, and West
     Virginia. In addition, the Company is subject to regulation by the
     Departments of Insurance in these states.

     Through McCreary and EMI, the Company offers third party administration
     services ("TPA"), which it operates as a separate industry segment. The
     TPAs specialize in the administration of self-insured plans for large
     employers and managed care organizations, as well as group accident and
     health, workers' compensation, and general liability and property
     insurance.

     Through AFP, the Company acts as administrator and attorney-in-fact for
     Physicians' Reciprocal Insurers ("PRI"), the second largest medical
     professional liability insurer for physicians in the state of New York. As
     such, AFP's primary business is the management and administration of PRI on
     behalf of its physician members. Intermediaries acts as a reinsurance
     broker and intermediary in the placement of reinsurance. Group Data acts as
     a broker in the placement of annuities for structured settlements.
     Professional Medical Administrators, LLC ("PMA"), a 70% owned subsidiary of
     the Company, provides brokerage and administration services for
     professional liability insurance programs.

     The Company's three industry segments are insurance, third party
     administration services and reciprocal management. For financial
     information relating to the Company's industry segments, see Note 21.

     Risks inherent in the Company's operations include legal/regulatory risk,
     credit risk, underwriting risk and market risk. Following is a description
     of these risks.

     Legal/Regulatory Risk is the risk that changes in the legal or regulatory
     environment in which an insurer operates will change and create additional
     costs or expenses not anticipated by the insurer in pricing its products.
     That is, regulatory initiatives designed to reduce insurer profits or new
     legal theories may create costs for the insurer beyond those currently
     recorded in the consolidated financial statements. This risk is
     concentrated in Florida and Missouri, where the Company writes
     approximately 57% and 11% of its insurance business, respectively.


                                       46
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     Credit Risk is the risk that issuers of securities owned by the Company
     will default, or other parties, including reinsurers that owe the Company
     money, will not pay. Financial instruments that potentially expose the
     Company to concentrations of credit risk consist primarily of fixed
     maturity investments, premiums receivable, deposits with reinsurers, and
     assets carried for reinsurance recoverable related to unpaid losses and LAE
     and unearned premiums. The Company requires that deposits with unauthorized
     reinsurers be held in trust and that other net reinsurance assets be
     collateralized by other similar assets held in trust or by irrevocable
     letters of credit. The Company has not experienced significant losses
     related to such deposits.

     Underwriting Risk is the risk that the insurer does not market and price
     its products, or select its insured risks, in accordance with its chosen
     underwriting criteria. Such criteria are generally based upon the expected
     loss experience for particular types, classes, and geographic locations of
     the insured risks. Unlike other businesses, insurers must price and sell
     their products before the actual loss costs associated with those insureds
     are known. Therefore, to the extent the actual insurance-related results of
     an insurer before consideration in investment income fail to correspond
     with the related pricing and/or selection criteria, an underwriting gain or
     loss occurs.

     Market Risk is the risk that a change in interest rates will cause a
     decrease in the value of an insurer's investments. To the extent that
     liabilities come due more quickly than assets mature, an insurer would have
     to sell assets prior to maturity and recognize a gain or loss.

2.   Significant Accounting Policies
     Basis of Presentation. The accompanying consolidated financial statements
     have been prepared in conformity with accounting principles generally
     accepted in the United States of America ("GAAP"). These financial
     statements include the accounts of the Company and all of its wholly owned
     and majority-owned subsidiaries. Certain other entities in which the
     Company has significant investment are reported on the equity basis.
     Intercompany transactions and balances have been eliminated in
     consolidation.

     Use of Estimates. The preparation of financial statements in conformity
     with GAAP requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period. The
     estimates most susceptible to change are those used in determining the
     liability for losses and loss adjustment expenses ("LAE"). Although
     considerable variability is inherent in these estimates, management
     believes that these liabilities are adequate. However, there can be no
     assurance that these amounts will not differ from actual results.
     Furthermore, given the size and prominence of the liability for losses and
     LAE to the financial statements, any such differences, positive or
     negative, may be material to financial position and results of operations.

     In connection with the year-end review of the Company's estimates and
     accruals for 2001, management reduced the allowance for bad debts by
     $1.0 million. This adjustment was made to reflect management's best
     estimate of the appropriate level needed considering prior years experience
     and the balances outstanding at year-end.

     Cash and Cash Equivalents. For purposes of the consolidated statements of
     cash flows, the Company considers all demand deposits, overnight
     investments and instruments with a maturity when purchased of three months
     or less to be cash equivalents.

     Investments. The Company accounts for its investments in debt and equity
     securities under Statement of Financial Accounting Standard ("FAS") No.
     115, "Accounting for Certain Investments in Debt and Equity Securities."
     Under the provisions of FAS No. 115, the Company is required to classify
     investments in debt and equity securities into one of three categories:
     held-to-maturity, available-for-sale, or trading. All of the




                                       47
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     Company's investments in debt and marketable equity securities are
     classified as available-for-sale on the consolidated balance sheet, with
     the change in fair value during the period excluded from earnings and
     recorded net of tax as a component of other comprehensive income.

     Market values for debt and equity securities were based on quoted market
     prices. Where a quoted market price was not available, fair value was
     measured utilizing quoted market prices for similar securities or by using
     discounted cash flow methods.

     Other invested assets include investments in three limited partnerships.
     Two of the partnerships invest in stocks and other financial securities of
     both publicly and non-publicly traded companies, primarily in the insurance
     and financial services industries. The third partnership is a diversified
     real estate fund. The Company also has investments in two corporations.
     The Company accounts for these investments using the cost method based on
     the Company's percentage of ownership and an inability to control the
     entities.

     In addition, the Company has an interest in a corporation and another
     limited partnership. These investments are accounted for under the equity
     method of accounting due to the significance of the Company's investment.

     Income on investments includes the amortization of premium and accretion of
     discount on the yield-to-maturity method relating to debt securities
     acquired at other than par value. Realized investment gains and losses are
     determined on the basis of specific identification. Declines in the fair
     value of securities considered to be other than temporary, if any, would be
     recorded as realized losses in the consolidated statements of income.

     Real estate investments consist of a building, rental units and developed
     land. These investments are carried at cost less accumulated depreciation.
     Depreciation is computed over the estimated useful lives of the property
     (exclusive of land, which is non-depreciable), using the straight-line
     method. Estimated useful lives range from twenty-seven to thirty-nine
     years. Rental income and expenses are included in net investment income.

     Reinsurance. The Company records its reinsurance contracts under the
     provisions of FAS No. 113, "Accounting and Reporting for Reinsurance on
     Short-Duration and Long-Duration Contracts." In the ordinary course of
     business, the Company's insurance subsidiaries assume and cede business
     with other insurance companies. These arrangements provide greater
     diversification of business and minimize the net loss potential arising
     from large insurance risks.

     For 1999 and prior, the Company reinsured risks under the MPL policies
     issued by its four insurance subsidiaries in excess of $500 per loss,
     except on the Company's anesthesiology program in which the Company
     reinsured risks in excess of $750. The Company reinsured risks associated
     with these policies under treaties pursuant to which reinsurers agreed to
     assume those risks insured by the Company in excess of its individual risk
     retention level and up to its maximum individual policy limit offered.

     The Company changed its MPL ceded reinsurance program during 2000. In 2000
     and 2001, the Company reinsured risks in excess of $250 per loss subject to
     an annual aggregate deductible, except for the Company's anesthesiologist
     program in which the Company reinsured risks in excess of $187. In 2000,
     the Company's annual aggregate deductible was $9.0 million. In 2001, the
     Company's annual aggregate deductible was 10.73% of subject written premium
     that would otherwise qualify as reinsurance under the agreement. The annual
     aggregate deductible retained in 2001 was approximately $12.9 million.

     Reinsurance recoverables include the balances due from reinsurance
     companies for paid and unpaid losses and LAE that will be recovered from
     reinsurers, based on contracts in force. Amounts recoverable from


                                       48
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)

     reinsurers are estimated in a manner consistent with the claim liability
     associated with the reinsured policy. Reinsurance contracts do not relieve
     the Company from its primary obligations to policyholders. Failure of
     reinsurers to honor their obligations could result in losses to the
     Company. The Company evaluates the financial condition of its reinsurers
     and monitors concentrations of credit risk with respect to the individual
     reinsurers, which participate in its ceded programs to minimize its
     exposure to significant losses from reinsurer insolvencies. The Company
     holds collateral in the form of letters of credit or trust accounts for
     amounts recoverable from reinsurers that are not designated as authorized
     reinsurers by the domiciliary Departments of Insurance.

     Property and Equipment. The cost of property and equipment is depreciated
     over the estimated useful lives of the related assets ranging from three to
     fifteen years. Depreciation is computed on the straight-line basis.
     Leasehold improvements are stated at cost less accumulated amortization and
     amortized over the shorter of the useful life or the term of the lease.
     Gains and losses upon asset disposal are taken into income in the year of
     disposition.

     Deferred Policy Acquisition Costs. Deferred policy acquisition costs
     consist primarily of commissions and premium taxes that vary with and are
     primarily related to the production of new and renewal insurance business.
     Acquisition costs are deferred and amortized over the period in which the
     related premium is earned. Deferred policy acquisition costs are reviewed
     to determine if they are recoverable from future income, including
     investment income. If such costs are estimated to be unrecoverable, they
     are expensed. Commissions and brokerage fee expenses incurred by the
     Company's non-insurance businesses are expensed as incurred.

     Income Taxes. The Company accounts for income taxes in accordance with FAS
     No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities
     are recognized for the future tax consequences attributable to temporary
     differences between the financial statement carrying amounts of existing
     assets and liabilities and their respective tax bases and operating loss
     and tax credit carry forwards. Deferred tax assets and liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     years in which those temporary differences are expected to be recovered or
     settled. The effect on deferred tax assets and liabilities of a change in
     tax rates is recognized in income in the period that includes the enactment
     date. A valuation allowance against deferred tax assets is recorded if it
     is more likely than not, that all or some portion of the benefits related
     to the deferred tax assets will not be realized. Valuation allowances are
     based on estimates of taxable income and the period over which deferred tax
     assets will be recoverable.  In the event that actual results differ from
     these estimates or these estimates are adjusted in future periods, the
     Company may need to establish a valuation allowance, which would impact the
     Company's financial position and results of operations.  No such valuation
     allowance has been established to date as the Company believes it is more
     likely than not that its deferred tax assets will be fully realized.

     Goodwill and Intangible Assets. Goodwill represents the aggregate cost of
     companies acquired over the fair value of net assets at the date of
     acquisition and is being amortized into income using the straight-line
     method over periods ranging from ten to twenty-five years. Management
     regularly reviews the carrying value of goodwill by determining whether the
     unamortized value of the goodwill can be recovered through undiscounted
     future operating cash flows of the acquired operation.

     Intangible assets represent trade secrets acquired and non-compete
     agreements entered into in connection with business combinations. These
     assets are being amortized into income over periods corresponding with
     their terms or useful lives that range from three to ten years using the
     straight-line method. Management regularly reviews the carrying value of
     intangible assets by determining whether the amortization of the intangible
     assets can be recovered through undiscounted future operating cash flows of
     the acquired operation.

     In the event goodwill or another intangible asset is impaired, a loss is
     recognized based on the amount by which the carrying value exceeds the fair
     value of the respective asset. Fair value is determined primarily using
     anticipated cash flows at a rate commensurate with the risk involved.
     Losses on assets to be disposed of

                                       49
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     are determined in a similar manner, except that fair values are reduced for
     the cost of disposal. For additional information on goodwill and intangible
     assets, see the discussion under New Accounting Pronouncements that
     follows.

     Revenue Recognition. Premiums are earned and recognized as revenues on a
     monthly pro rata basis over the terms of the underlying policies. Policy
     terms do not exceed one year. Unearned premiums represent the portion of
     written premiums, which relate to future periods. Premiums received in
     advance of the policy year are recorded as premiums collected in advance in
     the consolidated balance sheet. Claims administration and management fee
     income is recognized when earned over the life of the contracts.

     Management fees of the reciprocal management segment, determined as a
     percentage of PRI premiums, are recognized as billed and earned under the
     contract, which generally corresponds with the reported premiums written of
     PRI. The incentive portion of such revenue is calculated as 10% of the
     statutory net income or loss of PRI. Such revenue is estimated and accrued
     over the year, and adjusted to actual at each year-end based upon the
     actual reported statutory operating results of PRI.

     Claims administration and management fees of the TPA segment are generally
     subject to contractual arrangements and are recognized as billed, which
     closely corresponds with the provision of those services to customers.

     Commission income for both non-insurance segments is associated with the
     placement of reinsurance with outside reinsurers on behalf of PRI and
     various TPA customers. Commissions and brokerage fees are recognized as
     earned revenues at the later of the billing or the effective date as there
     is not obligation to perform any services after that date.

     Loss and Loss Adjustment Expenses. As more fully described in Note 14, the
     Company estimates its liability for loss and LAE using actuarial
     projections of ultimate losses and LAE and other quantitative and
     qualitative analyses of conditions expected to effect the future
     development of claims and related expenses. The estimated liability for
     losses is based upon paid and case reserve estimates for losses reported,
     adjusted through formula calculations to develop ultimate loss
     expectations; related estimates of incurred but not reported losses and
     expected cash reserve developments based on past experience and projected
     future trends; deduction of amounts for reinsurance placed with reinsurers;
     and estimates received related to assumed reinsurance. Amounts attributable
     to ceded reinsurance derived in estimating the liability for loss and LAE
     are reclassified as assets in the consolidated balance sheets as required
     by FAS No. 113. The liability for LAE is provided by estimating future
     expenses to be incurred in the settlement of claims provided for in the
     liability for losses and is estimated using similar actuarial techniques.

     The liabilities for losses and LAE and the related estimation methods are
     continually reviewed and revised to reflect current conditions and trends.
     The resulting adjustments are reflected in the operating results of the
     current year. While management believes the liabilities for losses and LAE
     are adequate to cover the ultimate liability, the actual ultimate loss
     costs may vary from the amounts presently provided and such differences may
     be material.

     The Company also has direct and assumed liabilities under covered extended
     reporting endorsements associated with claims-made MPL policy forms, which
     generally provide, at no additional charge, continuing MPL coverage for
     claims-made insureds in the event of the death, disability or retirement.
     These liabilities, which possess elements of both loss reserves and pension
     liabilities, are carried within unearned premiums and are estimated using
     assumptions for mortality, morbidity, retirement, interest and inflation.

     Per Share Data. Basic earnings per share are calculated by dividing net
     income by the weighted average number of common shares outstanding during
     the year. Diluted earnings per common share is calculated



                                       50
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     using the combination of dilutive common share equivalents and the weighted
     average number of common shares outstanding during the period. Diluted loss
     per common share for the three months ended December 31, 2001 is based only
     on the weighted average number of common shares outstanding during the
     period, as the inclusion of 115 common stock equivalents would have been
     antidilutive.

     Accounting for Stock-based Compensation. FAS No. 123, "Accounting for
     Stock-based Compensation" requires the fair value of stock options and
     other stock-based compensation issued to employees to either be recognized
     as compensation expense in the income statement, or be disclosed as a pro
     forma effect on net income and earnings per share in the footnotes to the
     Company's consolidated financial statements. The Company elected to adopt
     FAS No.123 on a disclosure basis only and will continue to measure
     stock-based compensation in accordance with Accounting Principles Board
     Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," using
     intrinsic values with appropriate disclosures under the fair value based
     method as required by FAS No. 123.

     Commitments and Contingencies. Liabilities for loss contingencies arising
     from claims, assessments, litigation, fines and penalties, and other
     sources are recorded when it is probable that a liability has been incurred
     and the amount of the assessment and/or remediation can be reasonably
     estimated.

     Interest Rate Swap. The Company uses derivative financial instruments,
     specifically interest rate swaps, to manage market risks related to changes
     in interest rates associated with its revolving credit facility and term
     loan.  The differential to be paid or received as interest rates change is
     accrued and recognized as an adjustment on interest expense related to the
     debt.  The related amount payable to or receivable from the counter parties
     are included as adjustments to accrued interest. See Note 12 for additional
     information related to the interest rate swaps. The Company does not
     currently hold or issue any other derivative financial instruments for
     trading purposes.

     Reclassification.  Certain amounts for 2000 and 1999 have been reclassified
     to conform to the 2001 presentation.

     New Accounting Pronouncements.
     Effective January 1, 2001, the Company adopted FAS No. 133, "Accounting for
     Derivative Instruments and Hedging Activities" and FAS No. 138, "Accounting
     for Certain Derivative Instruments and Certain Hedging Activities, an
     amendment to FAS No. 133". FAS No. 133 requires all derivative financial
     instruments, such as interest rate swaps, to be recognized in the financial
     statements and measured at fair value regardless of the purpose or intent
     for holding them. Changes in the fair market value of derivative financial
     instruments are either recognized periodically in income or shareholders'
     equity (as a component of accumulated other comprehensive income),
     depending on whether the derivative is being used to hedge changes in fair
     value or cash flows. FAS No. 138 amended the accounting and reporting
     standards for certain derivative instruments and hedging activities under
     FAS No. 133. The adoption of FAS No. 133 did not have a material effect on
     the Company's consolidated financial statements, but did increase total
     shareholders' equity by $124 at January 1, 2001 as a cumulative
     effect of a change in accounting principle.

     In June 2001, the Financial Accounting Standards Board ("FASB") issued FAS
     No. 141 "Business Combinations." FAS No. 141 addresses financial accounting
     and reporting for business combinations and supersedes APB Opinion No. 16,
     "Business Combinations," and FAS No. 38, "Accounting for Preacquisition
     Contingencies of Purchased Enterprises." The standard eliminates the
     pooling of interests method of accounting for business combinations except
     for qualifying business combinations initiated prior to July 1, 2001 and
     requires that all intangible assets be accounted for separately from
     goodwill, for acquisitions after July 1, 2001. Management believes the
     adoption of FAS No. 141 will not have a significant impact on the Company's
     consolidated financial statements.



                                       51
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     In June 2001, the FASB issued FAS No. 142, "Goodwill and Other Intangible
     Assets." FAS No. 142 addresses financial accounting and reporting for
     acquired goodwill and other intangible assets and supersedes APB Opinion
     No. 17, "Intangible Assets." The standard provides that goodwill and other
     intangible assets with indefinite lives are no longer to be amortized.
     These assets are to be reviewed for impairment annually, or more frequently
     if impairment indicators are present. Separable intangible assets that have
     finite lives will continue to be amortized over their useful lives.
     Impairment testing is required during the first year of adoption and any
     impairment losses resulting from such testing will be reported as a
     cumulative effect of a change in accounting principle in the first quarter
     of 2002. Upon its adoption in the first quarter of 2002, the Company will
     cease the amortization of goodwill, which will have the effect of
     increasing its reported income. Goodwill amortization for the year 2001 was
     $3.5 million. The Company is also in the process of obtaining independent
     valuations of its reporting units as required by the transitional
     impairment provisions of FAS No. 142. It is possible that upon completion
     of the valuations, the Company could be required under the new standards to
     recognize a transitional impairment charge. Should the valuations of the
     reporting units fall below the carrying values, the related goodwill could
     be partially or totally impaired and the Company could recognize an
     impairment charge up to the carrying amount of goodwill or $67.2 million.
     However, as the Company has not yet completed its valuations, it is too
     early to tell whether any charge will be required.

     In June 2001, the FASB issued FAS No. 143, "Accounting for Asset Retirement
     Obligations."  FAS No. 143 addresses financial accounting and reporting for
     obligations associated with the retirement of tangible long-lived assets
     and the associated asset retirement costs.  Although earlier application is
     encouraged, FAS No. 143 is effective for financial statements issued for
     fiscal years beginning after June 15, 2002. Management believes the
     adoption of FAS No. 143 will not have a significant impact on the Company's
     consolidated financial statements.

     In August 2001, the FASB issued FAS No. 144, "Accounting for the Impairment
     or Disposal of Long-Lived Assets." The proposed standard provides a unified
     model for all assets to be disposed of, including the disposal of segments
     of a business currently accounted for under APB Opinion No. 30. FAS No. 144
     also resolves the implementation issues and inconsistencies in accounting
     for assets to be disposed of raised by FAS No. 121 and covers the reporting
     of discontinued operations.  The standard supersedes FAS No. 121, while
     retaining the recognition and measurement provisions of FAS No. 121 for
     long-lived assets to be held and used and the measurement of long-lived
     assets to be disposed of by sale.  Management believes the adoption of
     FAS No. 144 will not have a significant impact on the Company's
     consolidated financial statements.

3.   Business Acquisitions
     On March 22, 2000, the Company entered into agreements (the "new
     agreements") with the sellers of McCreary and EMI to fix the remaining
     payments due under their prior respective acquisition agreements, and
     thereby effectively eliminated the contingent terms under those agreements.
     Under the new agreements, the Company paid the sellers of McCreary $1.7
     million on July 31, 2000, and agreed to pay the sellers of EMI $227 and
     $538 on March 27, 2000 and March 1, 2001, respectively. These payments
     increased the original purchase price and the recorded goodwill,
     accordingly.

     1999 Business Acquisitions
     Effective January 1, 1999, the Company purchased all of the outstanding
     capital stock of AFP and a 70% interest in PMA for aggregate consideration
     equal to $56.3 million, paid in cash of $44.7 million and Company common
     stock. The earnings of PMA are not material to the consolidated results of
     the Company.



                                       52
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     For the year ended December 31, 1999, the purchase had the following
     impact, which is included in the consolidated financial statements.

                                                                      1999
                                                                 -------------
         Revenues............................................   $    20,650
         Expenses............................................        18,552
         Net income .........................................         1,011
         Earnings per share..................................           .10

     On March 17, 1999, the Company's subsidiary, First Professionals, purchased
     all of the outstanding common stock of Tenere for $19.6 million in cash.
     Included in the net assets acquired was approximately $14.0 million in
     cash. Tenere, headquartered in Springfield, Missouri, is a stock holding
     company, with two primary insurance subsidiaries, Intermed and Interlex.
     Intermed and Interlex provide MPL and LPL insurance. For the nine and a
     half months ended December 31, 1999, the purchase had the following impact,
     which is included in the consolidated financial statements:

                                                                      1999
                                                                 --------------
         Revenues............................................   $     8,217
         Expenses............................................         9,303
         Net loss............................................          (689)
         Loss per share......................................          (.07)

     Had Tenere been included in the consolidated results of operations for the
     Company for the years ended December 31, 1999, the following increases and
     (decreases) would have resulted:

                                                                   Pro forma
                                                                      1999
                                                                 --------------
         Revenues............................................   $     9,565
         Expenses............................................        13,920
         Net loss............................................        (2,484)
         Loss per share......................................          (.25)


     On August 6, 1999, the Company's subsidiary, EMI, purchased all of the
     assets of Brokerage Services, Inc. ("BSI") and Group Brokerage, Inc.
     ("GBI"), related corporations headquartered in Albuquerque, New Mexico. BSI
     and GBI provided third party administration services for self-insured and
     fully insured health plans. The consideration paid by EMI for such assets
     aggregated approximately $1.0 million. For the five months ended December
     31, 1999, the purchase had the following impact, which is included in the
     consolidated financial statements:
                                                                      1999
                                                                 --------------
         Revenues............................................   $     1,364
         Expenses............................................         1,705
         Net loss............................................          (223)
         Loss per share......................................          (.02)

     Had the assets of BSI and GBI been included in the consolidated results of
     operations for the Company for the years ended December 31, 1999, the
     following increases and (decreases) would have resulted:

                                                                   Pro forma
                                                                      1999
                                                                 --------------
         Revenues............................................   $     3,825
         Expenses............................................         4,661
         Net loss............................................          (543)
         Loss per share......................................          (.05)



                                       53
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


4.   Fair Value of Financial Instruments
     Fair value estimates are made as of a specific point in time based on the
     characteristics of the financial instruments and the relevant market
     information. Where available, quoted market prices are used. In other
     cases, fair values are based on estimates using valuation techniques, such
     as discounting estimated future cash flows using a rate commensurate with
     the risks involved or other acceptable methods. These techniques involve
     uncertainties and are significantly affected by the assumptions used and
     the judgments made regarding risk characteristics of various financial
     instruments, prepayments, discount rates, estimates of future cash flows,
     future anticipated loss experience and other factors. Changes in
     assumptions could significantly affect these estimates. Independent market
     data may not be available to validate those fair value estimates that are
     based on internal valuation techniques. Moreover, such fair value estimates
     may not be indicative of the amounts that could be realized in an immediate
     sale of the instrument. Also, because of differences in methodologies and
     assumptions used to estimate fair value, the Company's fair values may not
     be comparable to those of other companies.

     Fair value estimates are based on existing financial instruments without
     attempting to estimate the value of anticipated future business and the
     value of assets and liabilities that are not considered financial
     instruments. Accordingly, the aggregate fair value amounts presented do not
     represent the underlying value of the Company. For certain assets and
     liabilities, the information required is supplemented with additional
     information relevant to an understanding of the fair value.

     The following methods and assumptions were used to estimate the fair value
     of each class of financial instruments for which it is practicable to
     estimate that value:

     Cash and cash equivalents - Carrying value approximates the fair value
     because of the short maturity of these instruments.

     Bonds and equity securities - Fair value was estimated based on bid prices
     published in financial newspapers or by using discounted cash flow methods.

     Other invested assets - Fair value was estimated based on the percentage of
     net assets owned.

     Revolving credit facility - Carrying value approximates the fair value.

     Interest rate swaps - Fair value was estimated using quotes from brokers
     and represents the cash requirement if the existing agreement had been
     settled at year-end.

     The following table presents the carrying values and estimated fair values
     of the Company's financial instruments as of December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                               December 31, 2001                 December 31, 2000
                                        --------------------------------  --------------------------------
                                           Carrying        Estimated         Carrying        Estimated
                                             Value        Fair Value           Value        Fair Value
                                        --------------------------------  --------------------------------
<S>                                  <C>                    <C>               <C>             <C>
Financial Assets
    Cash and cash equivalents        $       75,220          75,220            18,967          18,967
    Bonds                                   348,949         348,949           385,513         385,513
    Equity securities                             8               8               555             555
    Other invested assets                    13,534          15,272            14,522          11,657
                                        --------------------------------  --------------------------------
       Total financial assets        $      437,711         439,449           419,557         416,692
                                        ================================  ================================
Financial Liabilities
    Interest rate swaps              $        2,943           2,943                --             124
    Revolving credit facility                37,000          37,000            67,219          67,219
    Term loan                                16,042          16,042                --              --
                                        --------------------------------  --------------------------------
       Total financial liabilities   $       55,985          55,985            67,219          67,343
                                        ================================  ================================
</TABLE>



                                       54
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


5.   Investments
     The amortized cost and estimated fair value of investments in debt and
     equity securities as of December 31, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                                                   Gross         Gross
                                                   Amortized    Unrealized    Unrealized       Fair
                  2001                               Cost          Gains        Losses         Value
----------------------------------------------   --------------------------------------------------------
<S>                                             <C>                <C>           <C>         <C>
Bonds
    Corporate securities                        $  104,175         2,357         1,814       104,718
    Mortgage-backed securities                     100,488         1,693         1,085       101,096
    States, municipalities and
       political subdivisions                       94,304         1,999         1,225        95,078
    United States Government
       agencies and authorities                     47,157           945            45        48,057
                                                 --------------------------------------------------------
       Total bonds                                 346,124         6,994         4,169       348,949
                                                 --------------------------------------------------------

Equity securities
    Common stocks                                        7             2             1             8
                                                 --------------------------------------------------------
       Total equity securities                           7             2             1             8
                                                 --------------------------------------------------------

Total securities available-for-sale             $  346,131         6,996         4,170       348,957
                                                 ========================================================

                                                                   Gross         Gross
                                                   Amortized    Unrealized    Unrealized       Fair
                  2000                                Cost          Gains        Losses        Value
----------------------------------------------   --------------------------------------------------------
Bonds
    Corporate securities                        $   85,354           998         4,405        81,947
    Mortgage-backed securities                      48,711         1,976           173        50,514
    States, municipalities and
       political subdivisions                      182,303         3,562           956       184,909
    United States Government
       agencies and authorities                     67,617           801           275        68,143
                                                 --------------------------------------------------------
       Total bonds                                 383,985         7,337         5,809       385,513
                                                 --------------------------------------------------------

Equity securities
    Common stocks                                        5            --            --             5
    Preferred stocks                                   450           100            --           550
                                                 --------------------------------------------------------
       Total equity securities                         455           100            --           555
                                                 --------------------------------------------------------

Total securities available-for-sale             $  384,440         7,437         5,809       386,068
                                                 ========================================================
</TABLE>

     The Company's other invested assets include investments in three limited
     partnerships and two corporations. These assets are recorded at a cost of
     $10,962 and $11,388 at December 31, 2001 and 2000, respectively. The
     Company also has a significant interest in a corporation and another
     limited partnership. These investments are recorded under the equity method
     at $2,572 and $3,134 at December 31, 2001 and 2000, respectively. In
     January 2001, the Company's investment in a joint venture, Bexar
     Credentials Inc., was redeemed for $70 in cash and notes receivable.



                                       55
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     The amortized cost and estimated fair value of debt securities at December
     31, 2001 by contractual maturity are shown below. Expected maturities will
     differ from contractual maturities, because borrowers have the right to
     call or prepay these obligations with or without call or prepayment
     penalties.

                                                      Amortized        Fair
                                                         Cost          Value
                                                    ----------------------------
     Due in one year or less                     $      54,757        55,198
     Due after one year through five years             103,413       104,828
     Due after five years through ten years             95,269        96,046
     Due after ten years                                92,685        92,877
                                                    ----------------------------
                                                 $     346,124       348,949
                                                    ============================


     As of December 31, 2001, investments in securities and cash with
     an amortized cost of $14,984 and a market value of $15,564 were on deposit
     with the Insurance Departments in various states as required by law.

     Net investment income for the years ended December 31, 2001, 2000 and 1999
     was as follows:

                                             2001          2000          1999
                                         ---------------------------------------
     Bonds                            $     21,807        23,005        19,340
     Equity securities                           6            43            72
     Real estate                               375           206           596
     Short-term investments                  1,141           551           266
     Other invested assets                    (140)        1,130           206
     Cash on hand and on deposit               935         1,158           341
                                      ------------------------------------------
                                            24,124        26,093        20,821
     Less: investment expense                 (802)       (1,095)       (1,753)
                                      ------------------------------------------
        Net investment income         $     23,322        24,998        19,068
                                      ==========================================


     Proceeds from sales and maturities of bonds were $221,596, $59,373 and
     $69,471, for the years ended December 31, 2001, 2000 and 1999,
     respectively. Proceeds from sales of equity securities were $566, $966 and
     $236 for the years ended December 31, 2001, 2000 and 1999, respectively.
     Gross gains of $4,530, $168 and $353 were realized on sales of debt and
     equity securities for the years ended December 31, 2001, 2000 and 1999,
     respectively. Gross losses of $3,101 and $3 were realized on sales of debt
     and equity securities for the years ended December 31, 2001 and 1999,
     respectively.

6.   Real Estate Investments
     At December 31, 2001 and 2000, real estate investments consisted of the
     following:

                                                        2001          2000
                                                    ----------------------------
     Land and building                              $   5,283         5,170
     Rental units                                         261           261
     Other                                                 38            38
                                                    ----------------------------
                                                        5,582         5,469
     Accumulated depreciation                          (1,327)       (1,071)
                                                    ----------------------------
      Net real estate investments                  $    4,255         4,398
                                                    ============================


     Total depreciation expense on real estate investments was $256 in both 2001
     and 2000 and $249 in 1999.



                                       56
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


7.   Property and Equipment
     At December 31, 2001 and 2000, property and equipment consisted of the
     following:

                                                        2001          2000
                                                    ----------------------------
     Furniture, fixtures and equipment           $      3,133         3,544
     Data processing equipment and software             7,487         5,168
     Leasehold improvements                             1,203         1,167
     Automobiles                                          313           223
                                                    ----------------------------
                                                       12,136        10,102
     Accumulated depreciation                          (7,409)       (5,807)
                                                    ----------------------------
        Net property and equipment               $      4,727         4,295
                                                    ============================


     Total depreciation expense on property and equipment was $1,930, $1,455 and
     $1,174, in 2001, 2000 and 1999, respectively.

8.   Deferred Policy Acquisition Costs
     Changes in deferred policy acquisition costs for the years ended December
     31, 2001, 2000 and 1999 were as follows:

                                          2001          2000          1999
                                      ------------------------------------------
     Beginning balance             $      5,967         2,789         2,001
     Additions                           12,293         8,795         7,515
     Amortization expense                (9,259)       (5,617)       (6,727)
                                      ------------------------------------------
       Ending balance              $      9,001         5,967         2,789
                                      ==========================================


9.   Goodwill
     At December 31, 2001, 2000 and 1999, goodwill consisted of the following:

                                          2001          2000          1999
                                      ------------------------------------------
     Beginning balance             $     70,754        71,851        14,170
     Additions at cost                       --         2,557        61,341
     Reductions at cost                      --           (46)         (436)
      Amortization expense               (3,522)       (3,608)       (3,224)
                                      ------------------------------------------
        Ending balance             $     67,232        70,754        71,851
                                      ==========================================

10.  Identifiable Intangibles
     At December 31, 2001, 2000 and 1999, identifiable intangibles consisted of
     the following:

                                          2001          2000          1999
                                      ------------------------------------------
     Beginning balance             $    (9,885)         1,881         2,194
     Deferred credit                        --        (13,205)           --
     Amortization expense                 1,195         1,439          (313)
                                      ------------------------------------------
        Ending balance             $     (8,690)       (9,885)        1,881
                                      ==========================================

     Effective January 1, 2000, the Company's insurance subsidiaries entered
     into a 100% quota share reinsurance agreement with PRI, to assume the
     death, disability and retirement ("DD&R") risks under PRI's claims-made
     insurance policies in exchange for cash and investments. The Company
     completed a GAAP valuation of the underlying liability during 2000 and a
     deferred credit in the amount of $13.2 million was recognized and
     classified with goodwill and identifiable intangibles. The deferred credit,
     which will be accreted into income over 20 years, represents the difference
     between the GAAP valuation of the underlying liabilities and the


                                       57
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     initial premium received. The liability was calculated using benefit
     assumptions and elements of pension actuarial models (i.e. mortality,
     morbidity, retirement, interest and inflation rate assumptions).

11.  Borrowing Arrangements
     On August 31, 2001, the Company entered into a Revolving Credit and Term
     Loan Agreement (the "credit facility") with five financial institutions.
     The initial aggregate principal amount of the new credit facility is $55
     million, including (i) a $37.5 million revolving credit facility (with a
     $15 million letter of credit sub-facility), which matures on August 31,
     2004, and which the Company has the right to increase up to $47.5 million
     by securing additional lenders to participate in the facility; and (ii) a
     $17.5 million term loan facility, repayable in twelve equal quarterly
     installments of approximately $1.5 million each commencing on December 31,
     2001.

     Amounts outstanding under the credit facility bear interest at a variable
     rate, primarily based upon LIBOR plus an applicable margin of 2.25
     percentage points, which may be reduced to a minimum of 1.75 percentage
     points as the Company reduces its outstanding indebtedness. The credit
     facility replaced a $75 million revolving credit facility (the "prior
     facility") that was entered into by the Company in January 1999, which
     would have matured on January 4, 2002. Approximately $67.2 million of
     principal was outstanding under the prior facility. The Company used
     available funds to pay down the difference between the outstanding
     principal amount of the prior facility and the initial amount of the new
     facility. As of December 31, 2001 and 2000, the interest rates on the
     Company's credit facilities were 4.16% and 7.78%, respectively. The Company
     is not required to maintain compensating balances in connection with these
     credit facilities but is charged a fee on the unused portion, which ranges
     from 20 to 30 basis points.

     Under the terms of the credit facility, the Company is required to meet
     certain financial covenants. Significant covenants as of December 31,
     2001, are as follows: a) total debt to cash flow available for debt
     service cannot be greater than 4.00:1 for the quarter ending December 31,
     2001 and 3:50:1 thereafter; b) combined net premiums written to combined
     statutory capital and surplus cannot exceed 2.00:1; c) the fixed charge
     coverage ratio cannot be less than 2.00:1 at the end of each quarter
     through December 31, 2002, thereafter the fixed charge coverage ratio
     cannot be less than 2:25:1 and d) funded debt to total capital plus funded
     debt cannot exceed 0.27:1. The credit facility also contains minimum
     equity and risk-based capital requirements and requires the Company's
     insurance subsidiaries to maintain at least an A- (Excellent) rating from
     A.M. Best.

     Should the Company fail to meet one or more of its loan covenants, such
     occurrence would be considered an event of default. In the event the
     Company was unable to provide an allowable remedy for such event of
     default, the Company's lenders would be entitled to certain remedies,
     including the ability to demand immediate repayment, including payment
     in full. Were the Company's lenders to demand immediate payment in full,
     the Company could not make such payment from existing funds and would
     have to seek replacement financing. Under such circumstances, the
     Company's ability to secure such replacement financing could not be
     assured, and if obtained, such financing would likely carry higher costs.

     At December 31, 2001, the Company did not meet its fixed charge coverage
     ratio loan covenant, primarily as a result of the reserve strengthening
     charge in the fourth quarter of 2001. The Company's lenders have waived
     this violation bringing the Company into compliance with its loan
     covenants. In addition, the Company and its lenders have re-negotiated a
     modification to the fixed charge coverage ratio loan covenant from 2.5:1,
     to 2.0:1 for the year 2002; and to 2.25:1 beginning in the first
     quarter of 2003. In connection with the waiver and modification, the
     applicable margin charged by the lenders as part of interest costs will
     increase 25 basis points, or 1/4 of 1 percent beginning in 2002.


                                       58
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


12.  Derivative Financial Instruments
     In connection with the Company's credit facility entered into on August 31,
     2001, the Company replaced its interest rate swaps (the "previous swaps").
     Related to the previous swaps, the Company had recorded an unrealized loss
     associated with changes in fair value, which is included in accumulated
     other comprehensive income as a component of shareholders' equity. The
     unrealized loss is being amortized into income over the term of the
     previous swaps, which would have expired January 2, 2004.

     The Company uses interest rate swap agreements (the "swap agreements") to
     minimize fluctuations in cash flows caused by interest rate volatility and
     to effectively convert all of its floating-rate debt to fixed-rate debt.
     Such agreements involve the exchange of fixed and floating interest rate
     payments over the life of the agreement without the exchange of the
     underlying principal amounts. Accordingly, the impact of fluctuations in
     interest rates on these swap agreements is offset by the opposite impact on
     the related debt. Amounts to be paid or received under the swap agreements
     are recognized as increases or reductions in interest expense in the
     periods in which they accrue. The swap agreements are only entered into
     with creditworthy counterparties.

     The swap agreements in effect at December 31, 2001 are as follows:

<TABLE>
<CAPTION>
            Notional Amount         Maturities          Receive Rate (1)        Pay Rate
          -------------------   --------------------   ----------------   -------------------
          <S>                       <C>                      <C>                  <C>
          $     37,000              08/31/2004               1.91%                6.45%
          $     16,042              08/31/2004               1.91%                5.97%
</TABLE>

     (1) Based on three-month LIBOR

     The following is a summary of the Company's interest risk management
     strategy and the effect of this strategy on the Company's consolidated
     financial statements:

     Under the swap agreements, the Company agrees to pay an amount equal to a
     specified fixed-rate of interest times a notional principal amount and to
     receive in return an amount equal to a specified variable-rate of interest
     times the same notional principal amount. The notional amounts on the
     contract are not exchanged. No other cash payments are made unless the
     contract is terminated prior to maturity, in which case the amount paid or
     received in settlement is established by agreement at the time of
     termination, and usually represents the net present value, at current
     interest rates, of the remaining obligations to exchange payments under the
     terms of the contract.

     The Company's swap agreements provide a hedge against changes in the amount
     of cash flows associated with the Company's revolving credit facility.
     Accordingly, the swap agreements are reflected at fair value in the
     Company's consolidated balance sheet and the effective portion of the
     related gains or losses on the agreements are recognized in shareholders'
     equity (as a component of accumulated other comprehensive income). The net
     effect of this accounting on the Company's operating results is that
     interest expense on the variable debt being hedged is recorded based on
     fixed interest rates.

     The Company formally documents the relationships between the hedging
     instruments and the revolving credit facility. The Company also assesses
     the effectiveness of the hedging instruments on a quarterly basis. If it is
     determined that the hedging instruments are no longer highly effective, the
     change in the fair value of the ineffective portion of the swaps would be
     included in earnings rather than comprehensive income. For the year ended
     December 31, 2001, the net gain or loss on the ineffective portion of the
     swap agreements was not material.

13.  Reinsurance
     The Company cedes certain premiums and losses to other insurance carriers
     under various reinsurance agreements. The Company's reinsurance agreements
     do not relieve the Company from its obligations as


                                       59
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     primary insurer to its policyholders. To the extent that any reinsurer
     might be unable to meet its obligations, the Company would be liable for
     such defaulted amounts. At December 31, 2001 and 2000, amounts due from a
     single reinsurer had a carrying value of $25.0 million and $16.8 million,
     respectively, which were fully collateralized by irrevocable letters of
     credit, trust accounts, and ceded balances payable. Of the total amount due
     from reinsurers on reinsurance recoverables at December 31, 2001 and 2000,
     $48.9 million and $43.5 million, respectively, was due from three
     reinsurers, of which $34.4 million in 2001 and $43.8 million in 2000 was
     collateralized by letters of credit, trust accounts, and ceded balances
     payable.

     The effect of reinsurance on premiums written and earned for the years
     ended December 31, 2001, 2000 and 1999, was as follows:
<TABLE>
<CAPTION>
                                              2001                          2000                           1999
                                  ---------------------------   ----------------------------   ----------------------------
                                    Written       Earned           Written       Earned           Written       Earned
                                  ---------------------------   ----------------------------   ----------------------------
     <S>                       <C>               <C>              <C>           <C>              <C>           <C>
     Direct and assumed        $   245,403       198,691          197,280       153,977          148,216       144,588
     Ceded                         (98,319)      (67,633)         (35,349)      (33,523)         (25,783)      (26,516)
                                  ---------------------------   ----------------------------   ----------------------------
     Net                       $   147,084       131,058          161,931       120,454          122,433       118,072
                                  ===========================   ============================   ============================
</TABLE>

14.  Liability for Losses and LAE
     The liability for losses and LAE is generally determined on the basis of
     individual claims and actuarially determined estimates of future claims
     based upon the Company's actual experience, assumptions and projections as
     to claims frequency, severity and inflationary trends and settlement
     payments. Such estimates may vary significantly from the eventual outcome.
     The ranges of reasonably expected ultimate unpaid losses and LAE are
     estimated by the Company's external consulting actuaries on an undiscounted
     basis. The assumptions used in making such estimates and for establishing
     the resulting liabilities are continually reviewed and updated based upon
     current circumstances, and any adjustments resulting therefrom are
     reflected in current income.

     Activity in the liability for loss and LAE for the years ended December 31,
     2001, 2000, and 1999 was as follows:
<TABLE>
<CAPTION>
                                                           2001               2000               1999
                                                      ----------------   ----------------   ----------------
     <S>                                           <C>                       <C>                <C>
     Gross balance, January 1                      $      281,295            273,092            242,377
     Less reinsurance recoverables                         57,698             58,400             41,614
                                                      ----------------   ----------------   ----------------
     Net balance, January 1                               223,597            214,692            200,763
                                                      ----------------   ----------------   ----------------

     Reserves of acquired entity                               --                 --             24,591

     Incurred related to:
         Current year                                     119,734            116,246             99,523
         Prior year                                         8,612              6,520            (18,555)
                                                      ----------------   ----------------   ----------------
            Total incurred                                128,346            122,766             80,968
                                                      ----------------   ----------------   ----------------

     Paid related to:
         Current year                                      17,980             22,592             15,338
         Prior year                                        95,890             91,269             76,292
                                                      ----------------   ----------------   ----------------
            Total paid                                    113,870            113,861             91,630
                                                      ----------------   ----------------   ----------------

     Net balance, December 31                             238,073            223,597            214,692
     Plus reinsurance recoverables                         80,410             57,698             58,400
                                                      ----------------   ----------------   ----------------
     Gross balance, December 31                    $      318,483            281,295            273,092
                                                      ================   ================   ================
</TABLE>

                                       60
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     Incurred losses and LAE for claims relating to prior years reflects the
     change in the estimate of the liability charged or credited to earnings in
     each year with respect to the liabilities established as of the beginning
     of that year. Information regarding incurred losses and LAE is accumulated
     over time and the estimates of the liability are revised accordingly,
     resulting in gains or losses in the period revisions are made. The
     Company's management closely monitors the adequacy of its liability for
     loss and LAE incurred and underlying claims trends, including having the
     Company's outside actuaries perform calculations periodically.

     Incurred losses and LAE related to prior years, net of reinsurance
     recoveries, were $8.6 million for the twelve months ended December 31,
     2001. The increase in the liability for losses and LAE related to prior
     years is the result of reserve strengthenings with respect to the Company's
     core physician MPL business for coverage years 2000 and prior.

     Incurred losses and LAE related to prior years, net of reinsurance
     recoveries, was $6.5 million for the twelve months ended December 31, 2000.
     The increase in the liability for loss and LAE includes a reserve
     strengthening resulting from the identification of certain unfavorable
     trends in the underlying claim data with respect to First Professionals
     core physician's MPL business, including an increase in the rate of claims
     closed with indemnity payment, a slow down in the overall closure rate of
     pending claims, and an increase in the severity of indemnity payments made
     during 2000 relating to prior periods.

     The net reduction of $18.6 million in incurred loss and LAE related to
     prior years for the twelve months ended December 31, 1999, was the result
     of reevaluations of the liability for loss and LAE and reflects overall
     favorable underwriting results and lower than expected losses and LAE.

15.  Stock Option Plans
     The Company has a stock option plan for officers and key employees (the
     "employee plan") and a plan for non-employee directors (the "director
     plan"). Under the director plan, only nonqualified stock options may be
     issued. Under the employee plan, both incentive stock options and
     nonqualified stock options may be granted to the same individual. The
     option price of an incentive stock option may not be less than 100% of the
     fair market value of shares on the grant date. The option price of a
     non-qualified option shall not be less than 50% of the fair market value of
     shares on the grant date. Under the terms of the director plan, 5,000
     shares are granted to each director on the date that person becomes a
     director, and on a discretionary basis at future dates as approved by the
     Board, at a price not less than 100% of the fair market value of the
     underlying stock on the grant date.

     During 2000, the Company offered a stock purchase incentive program (the
     "incentive plan") to eligible employees, including executive officers, to
     encourage ownership of the Company's stock. Under the incentive plan,
     employees who purchased shares of the Company's common stock in the open
     market during the term of the incentive plan were granted matching
     nonqualified stock options on a one-for-one basis, up to the maximum of
     5,000 options per employee. The incentive plan began January 2000 and ended
     April 2000. Option grants under the incentive plan were made as of May
     1, 2000 at an exercise price equal to the closing market price of the
     Company's common stock on that date. Options granted under the incentive
     plan will vest in three equal annual installments commencing on the one-
     year anniversary of their grant. Options under this plan were granted under
     the employee plan.

     The Company also maintains an Employee Stock Purchase Plan that allows
     employees to purchase the Company's common stock at 85% of the market value
     on the first or last day of the offering period, whichever is lower.



                                       61
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     At December 31, 2001 and 2000, 530,180 and 571,307 shares of the Company's
     common stock were reserved for issuance in connection with the stock option
     plans, respectively. A summary of the status of the Company's stock options
     is presented below:
<TABLE>
<CAPTION>
                                                    Weighted Avg         Options         Weighted Avg
                                       Options     Exercise Price      Exercisable      Exercise Price
     -------------------------------------------  ------------------  --------------   ------------------
     <S>                              <C>          <C>                <C>              <C>
     Balance, December 31, 1998        1,115,070    $     17.72          581,556        $      20.16
         Granted                         658,400          30.65               --                  --
         Exercised                      (201,823)         10.97               --                  --
         Cancelled                      (150,000)         39.36               --                  --
                                  --------------  ------------------  --------------   ------------------
     Balance, December 31, 1999        1,421,647    $     22.47          886,170        $      20.64
                                  --------------  ------------------  --------------   ------------------
         Granted                         510,798          12.19               --                  --
         Exercised                      (119,500)          9.10               --                  --
         Cancelled                      (253,677)         35.07               --                  --
                                  --------------  ------------------  --------------   ------------------
     Balance, December 31, 2000        1,559,268    $     17.99          730,832        $      19.39
                                  --------------  ------------------  --------------   ------------------
         Granted                         273,750          13.72               --                  --
         Exercised                       (13,000)          8.90               --                  --
         Cancelled                            --             --               --                  --
                                  --------------  ------------------  --------------   ------------------
     Balance, December 31, 2001        1,820,018    $     17.85        1,088,651        $      19.79
                                  ==============  ==================  ==============   ==================
</TABLE>
     The following table summarizes information for options outstanding and
     exercisable at December 31, 2001:
<TABLE>
<CAPTION>
                                                                                   Options Exercisable
      Range of      Number      Remaining Life                          ------------------------------------
     Prices per      of         of Outstanding         Weighted Avg                         Weighted Avg
        Share      Options          Options           Exercise Price        Number         Exercise Price
     ----------------------------------------------   ------------------ ---------------  -------------------
     <S>          <C>              <C>                <C>                 <C>             <C>
     $   8-11      584,336         7.18 years         $        9.92         343,657                 9.60
        12-15      560,948         8.86 years                 14.39         166,783                14.98
        16-19       76,300         8.38 years                 17.93          25,931                17.94
        20-35      468,700         6.02 years                 24.61         465,799                24.63
        36-60      129,734         7.16 years         $       44.04          86,481                44.04
                 ----------------------------------   ------------------ ---------------  -------------------
                 1,820,018         7.45 years                 17.85       1,088,651       $        19.79
                 ==================================   ================== ===============  ===================
</TABLE>
     On a pro forma basis, assuming compensation expense for the Company's stock
     options had been recognized based on their fair values on the grant date
     under the methodology prescribed by FAS No.123, the Company's net income,
     tax expense and diluted earnings per share for the three years ended
     December 31, 2001, 2000 and 1999, would have been impacted as follows:
<TABLE>
<CAPTION>
                                                                        2001            2000             1999
                                                                  ----------------  -------------  ----------------
       <S>                                                        <C>                   <C>             <C>
       Pro Forma Net Income                                       $      1,899          (1,114)         18,289
       Pro Forma Tax (Benefit) Expense                            $     (2,490)         (4,666)          7,093
       Pro Forma Diluted Earnings (Loss) Per  Share               $        .20            (.12)           1.83
</TABLE>

     The fair value of options granted, which is amortized to expense over the
     option vesting period in determining the pro forma impact, is estimated on
     the date of grant using the Black-Scholes option pricing model with the
     following weighted average assumptions:
<TABLE>
<CAPTION>
                                                                         2001              2000           1999
                                                                  ----------------  -------------  ----------------
       <S>                                                           <C>               <C>             <C>
       Expected Life of Options                                      5 years           5 years         5 years
       Risk Free Interest Rate                                         4.60%             5.50%           5.20%
       Expected Volatility of Stock                                   43.64%            42.17%          38.96%
</TABLE>

                                       62
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     The weighted average fair value of options granted during 2001, 2000 and
1999 are as follows:

<TABLE>
<CAPTION>
                                                                        2001            2000             1999
                                                                  ----------------  -------------  ----------------
       <S>                                                        <C>                 <C>              <C>
       Fair Value of Options Granted                              $      6.12            5.50             8.84
       Total Fair Value of all Options Granted                    $     1,676           2,809            5,821
       Expected Dividends                                         $        --              --               --
       Total Number of Options Granted                                273,750         510,798          658,400
</TABLE>

     In accordance with FAS 123, the weighted average fair value of stock
     options granted is required to be based on a theoretical statistical model
     using the preceding Black-Scholes assumptions. In actuality, because the
     Company's incentive stock options are not traded on any exchange, employees
     can receive no value nor derive any benefit from holding stock options
     under these plans without an increase in the market price of the Company's
     stock. Such an increase in stock price would benefit all stockholders
     commensurately.

16.  Income Taxes
     The Company's provision for income taxes consisted of the following:

     <TABLE>
     <CAPTION>
                                                                   2001          2000          1999
                                                               ------------------------------------------
     <S>                                                     <C>                <C>            <C>
     Current (benefit) expense
         Federal                                             $    (1,206)         (935)        6,306
         State                                                       334           626         1,931
                                                               ------------------------------------------
            Total                                                   (872)         (309)        8,237
                                                               ------------------------------------------

     Deferred (benefit) expense
         Federal                                                  (1,149)       (2,943)          973
         State                                                       176          (333)          124
                                                               ------------------------------------------
            Total                                                   (973)       (3,276)        1,097
                                                               ------------------------------------------

     Net income tax (benefit) expense                        $    (1,845)       (3,585)        9,334
                                                               ==========================================
</TABLE>

     The provision for income taxes differs from the statutory corporate tax
     rate of 35 percent for 2001, 2000 and 1999 as follows:

<TABLE>
<CAPTION>
                                                                   2001          2000          1999
                                                               ------------------------------------------
     <S>                                                     <C>               <C>            <C>
     Computed "expected" tax expense (benefit)               $      380        (1,040)        10,889
     Municipal bond interest                                     (2,416)       (2,851)        (2,579)
     State income taxes, net of Federal benefit                     332           190          1,422
     Other, net                                                    (141)          116           (398)
                                                               ------------------------------------------
         Actual income tax expense (benefit)                 $   (1,845)       (3,585)         9,334
                                                               ==========================================
</TABLE>


                                       63
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     At December 31, 2001 and 2000, the significant components of the net
     deferred tax asset were as follows:

<TABLE>
<CAPTION>
                                                                   2001              2000
                                                               --------------    --------------
     <S>                                                     <C>                    <C>
     Deferred tax assets arising from:
         Loss reserve discounting                            $    11,775            10,756
         Unearned premium reserves                                11,719             8,585
         Net operating loss carry forward                            925             2,122
         Unrealized losses on securities                             341                --
         Other                                                       585             1,785
                                                               --------------    --------------
            Total deferred tax assets                             25,345            23,248
                                                               --------------    --------------

     Deferred tax liabilitites arising from:
         Deferred policy acquisition costs                         3,530             2,346
         Goodwill                                                  1,534             1,137
         Unrealized gain on securities                                --               660
         Other                                                       337               834
                                                               --------------    --------------
            Total deferred tax liabilities                         5,401             4,977
                                                               --------------    --------------

         Net deferred tax asset                              $    19,944            18,271
                                                               ==============    ==============
</TABLE>

     Net deferred tax assets and Federal income tax expense in future years can
     be significantly affected by changes in enacted tax rates or by unexpected
     adverse events that would influence management's conclusions as to the
     ultimate realizability of deferred tax assets.

17.  Employee Benefit Plans
     The Company currently sponsors eight post-retirement plans for its
     employees. The table below lists those plans and the subsidiary of the
     Company whose employees are covered by that plan.

     Holding company ("FIG")    Defined contribution profit sharing plan
     FIG                        Defined benefit plan
     FIG                        Supplemental executive retirement plan ("SERP")
     Tenere                     Defined contribution profit sharing plan
                                  and trust
     Tenere                     Money purchase pension plan
     AFP                        Defined contribution profit sharing plan
     AFP                        Defined benefit plan
     McCreary                   Defined contribution profit sharing plan

     The FIG defined contribution profit sharing plan is available to all
     employees of FIG after meeting certain eligibility requirements. The plan
     is comprised of two parts. The first part of the plan is a defined
     contribution plan that allows employees to contribute up to 12.5% of their
     annual compensation, subject to Internal Revenue Service ("IRS") limits.
     The Company contributes a matching amount equal to 2.5% of the employee's
     annual compensation. The second part of the plan being a profit sharing
     plan, whereby the Company may at its discretion make an additional
     contribution to the plan up to a maximum of 10% of the employee's annual
     compensation. The Company's policy is to fully fund the liability for the
     matching portion at the end of each year. At December 31, 2001 and 2000,
     the fair market value of plan assets was $4,900 and $3,927, respectively.
     The expense for this plan amounted to $1,138, $896 and $516 in 2001, 2000
     and 1999, respectively.

     The FIG defined benefit plan is available to all eligible employees of FIG
     who have six months of service and who are twenty and one half years or
     older. The amount of benefits is based on years of service and 0.75% of the
     employee's average monthly salary not over the Social Security base plus
     1.4% of the employee's average


                                       64
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     monthly salary over the Social Security base. The Company's policy is to
     contribute the maximum amount of benefits to the plan subject to IRS
     limits. At December 31, 2001 and 2000, the fair market value of plan assets
     was $1,584 and $1,693, respectively. The Company had a net periodic pension
     cost of $217, $197 and $272 for this plan in 2001, 2000 and 1999,
     respectively. The expense for this plan amounted to $143, $193 and $82 in
     2001, 2000 and 1999, respectively.

     FIG also has a SERP that provides certain executives with income at
     retirement equal to 60% of pre-retirement base compensation, less qualified
     pension plan benefits paid by the Company and all predecessor plans and
     Social Security benefits. The plan has no vesting prior to age 55. The
     total liability included in the financial statements for this plan amounted
     to approximately $1,353 and $1,265 as of December 31, 2001 and 2000,
     respectively. At December 31, 2001 and 2000, the fair market value of plan
     assets was $1,584 and $1,693, respectively. The Company had a net periodic
     pension cost of approximately $386, $395 and $188, to cover any liability
     under this plan in 2001, 2000 and 1999, respectively.

     The Tenere defined contribution profit sharing plan and trust is available
     to all employees of Tenere upon meeting certain eligibility requirements.
     The plan is comprised of two parts. The first being a defined contribution
     plan that allows employees to contribute up to 10% of their annual
     compensation, subject to IRS limits, and a profit sharing plan, whereby the
     Company may at its discretion contribute an employer contribution to the
     participants in the plan. At December 31, 2001 and 2000, the fair market
     value of plan assets was $1,122 and $1,470, respectively. The expense for
     this plan amounted to $66, $59 and $65 in 2001, 2000 and 1999,
     respectively.

     The Tenere money purchase plan is available to all employees of Tenere upon
     meeting certain eligibility requirements. The plan is designed to reward
     long and loyal service, whereby the Company will make contributions to the
     plan on behalf of the participants for each year of service until the
     employee retires. At retirement, the employee will be eligible to receive
     the value of the contributions made on the employees behalf. The Company
     contributes on behalf of each participant an amount equal to 6% of the
     employee's annual compensation plus 5.7% of the employee's annual
     compensation in excess of the Social Security Taxable Wage Base. At
     December 31, 2001 and 2000, the fair market value of plan assets was $445
     and $437, respectively. The expense for this plan amounted to $94, $75 and
     $80 in 2001, 2000 and 1999, respectively.

     The AFP defined contribution and profit sharing and defined benefit plans
     are available to all eligible employees of AFP. The benefits under these
     plans are based on years of service and employee compensation. AFP's
     funding policy is to contribute to the plans an amount sufficient to meet
     the minimum funding requirements set forth in the Employee Retirement
     Income Security Act of 1974, plus any additional amounts determined to be
     appropriate from time to time. Contributions are intended to be sufficient
     to cover the costs of benefits earned for service to date and an estimate
     of those costs for future service. AFP contributed $957, $650, $999 to the
     plans in 2001, 2000, and 1999, respectively. The invested assets of the
     plans consist of investments in various types and categories of stocks and
     bonds. At December 31, 2001 and 2000, the fair market value of plan assets
     was $6,185 and $5,733, respectively. Pension costs for the years 2001, 2000
     and 1999 amounted to approximately $978, $748 and $831, respectively.

     The McCreary defined contribution profit sharing plan is available for all
     employees of McCreary upon meeting certain eligibility requirements. Under
     the plan, employees can contribute up to 16% of their annual salary,
     subject to IRS limits, of which the Company may, at its discretion,
     contribute a matching amount up to 100% of the employee contribution.
     Historically, McCreary has contributed a matching amount equal of
     approximately 30% of the employee contribution. At December 31, 2001 and
     2000, the fair market value of plan assets was $3,281 and $3,259. The
     expense for this plan amounted to $147, $125 and $102 for 2001, 2000 and
     1999, respectively.


                                       65
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     The actuarially computed net periodic pension cost for December 31, 2001,
     2000 and 1999, included the following:

<TABLE>
<CAPTION>
                                                                                  2001              2000              1999
                                                                              --------------    --------------    --------------
     <S>                                                                  <C>                        <C>              <C>
     Service cost of benefits earned during the period                    $         906               808               914
     Interest cost on projected benefit obligation                                  638               540               605
     Expected return on plan assets                                                (541)             (500)             (498)
     Recognized net actuarial loss                                                   --                --                38
     Net amortization and deferral                                                  191                96               191
                                                                              --------------    --------------    --------------
         Net periodic pension cost                                        $       1,194               944             1,250
                                                                              ==============    ==============    ==============

     Actuarial Present Value of Benefit Obligation
     ---------------------------------------------
     Accumulated benefit obligation                                       $      (7,330)           (6,563)           (7,268)
                                                                              ==============    ==============    ==============

     Projected benefit obligation for service rendered
         to date                                                          $     (10,680)           (9,456)          (10,465)
     Plan assets at fair value                                                    7,769             7,426             7,656
                                                                              --------------    --------------    --------------
     Projected benefit obligation in excess of plan assets                       (2,911)           (2,030)           (2,809)
     Unrecognized net loss from past experience different
         from that assumed                                                        1,952             1,081             1,982
     Prior service cost not yet recognized in net periodic
         pension cost                                                               259               253               204
     Unrecognized net obligation at inception recognized
         over 15.29 years                                                           208               246               269
                                                                              --------------    --------------    --------------
         Accrued pension cost                                             $        (492)             (450)             (354)
                                                                              ==============    ==============    ==============
</TABLE>

     The following table sets forth the plan's funded status for the fiscal
     years ending December 31, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                                             2001          2000
                                                                          -----------   -----------
     <S>                                                                 <C>               <C>
     Change in Benefit Obligation
     ----------------------------
     Benefit obligation, January 1                                       $   9,974         7,911
         Acquisition related costs                                              --           620
         Service cost                                                          906           808
         Interest cost                                                         638           540
         Actuarial gain                                                       (346)          (45)
         Benefits paid                                                        (538)         (378)
         Other                                                                  46            --
                                                                          -----------   -----------
     Benefit obligation, December 31                                     $  10,680         9,456
                                                                          ===========   ===========

     Change in Plan Assets
     ---------------------
     Fair value of plan assets, January 1                                $   7,426         6,536
         Acquisition related costs                                              --           421
         Actual return on plan assets                                         (270)          115
         Employer contributions                                              1,150           732
         Benefits paid                                                        (537)         (378)
                                                                          -----------   -----------
     Fair value of plan assets, December 31                              $   7,769         7,426
                                                                          ===========   ===========
</TABLE>


                                       66
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     Assumptions used in the accounting for net periodic pension cost at
     December 31, 2001, 2000, and 1999, were as follows (weighted-average of the
     combined plans based on the fair value of the plan assets year end):
<TABLE>
<CAPTION>
                                                            2001                     2000                     1999
                                                   ----------------------    --------------------    --------------------
     <S>                                                    <C>                      <C>                      <C>
     Discount rates                                         6.55%                    6.56%                    6.55%
     Rate of increase in compensation levels                5.04%                    5.04%                    5.19%
     Return on assets                                       6.75%                    7.07%                    9.00%
</TABLE>

18.  Commitments and Contingencies
     The future minimum annual rentals under noncancellable operating leases are
     as follows:

      2002            $      2,766
      2003                   2,525
      2004                   2,545
      2005                   2,402
      2006                   2,471
      Thereafter             5,626
                        ---------------
      Total           $     18,335
                        ===============

     Total rental expense was $2,410, $2,190, and $2,381 for 2001, 2000 and
     1999, respectively.

     The Company's insurance subsidiaries may become subject to claims for
     extra-contractual obligations or risks in excess of policy limits in
     connection with their administration of insurance claims. These
     claims are sometimes referred to as "bad faith" actions as it is alleged
     that the insurance company acted in bad faith in the administration of an
     insured's claim. Bad faith actions are few in number and generally occur in
     instances where a jury verdict exceeds the insured's policy limits. Under
     such circumstances, it is routinely alleged that the insurance company
     failed to negotiate a settlement of a claim in good faith within the
     insured's policy limit. In such cases, the insured may assign his or her
     rights under the policy to the plaintiff in settlement of the insured's
     portion of the verdict. The plaintiff is then permitted to sue the insurer
     on behalf of the defendant. The Company has evaluated such exposures as of
     December 31, 2001, and in all such cases, believes its position and
     defenses are meritorious, and that when all facts and circumstances are
     considered, including its own insurance coverage against such risks, its
     potential exposure to material losses from such exposures is immaterial.

     The Company has also been involved in one or more legal actions not
     involving claims under its insurance policies from time to time. The
     Company's management is not aware of any such actions that in their opinion
     will have a material adverse effect on the Company's financial position or
     results of operations.

     The Company's insurance subsidiaries are subject to assessment by the
     financial guaranty associations in the states in which they conduct
     business for the provision of funds necessary for the settlement of covered
     claims under certain policies of insolvent insurers. Generally, these
     associations can assess member insurers on the basis of written premiums in
     their particular states.

     In addition to standard assessments, the Florida and Missouri Legislatures
     may also levy special assessments to settle claims caused by certain
     catastrophic losses. The Company would be assessed on a basis of premium
     written. During 2001, a special assessment was levied on First
     Professionals and APAC that totaled $0.9 million. No special assessments
     were made in 2000 and 1999. In addition, the Company could be subject to
     additional assessments in the future as a result of damages caused by
     catastrophic losses, such as a hurricane.

19.  Statutory Accounting
     First Professionals, APAC, Intermed and Interlex are required to file
     statutory financial statements with state insurance regulatory authorities.
     The insurance subsidiaries are restricted under the Florida and Missouri

                                       67
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     Insurance Codes as to the amount of dividends they may pay without
     regulatory consent. In 2002, dividends of $10.7 million can be paid without
     regulatory consent.

     The restricted net assets for the Company's insurance subsidiaries at
     December 31, 2001, 2000, and 1999, are as follows:
<TABLE>
<CAPTION>
                                                          2001             2000             1999
                                                    ---------------------------------------------------
     <S>                                         <C>                      <C>               <C>
     First Professionals                         $        97,960          109,550           96,377
     APAC                                                 12,797           14,893           11,781
     Intermed and Interlex                                22,615           20,803           11,150
</TABLE>
     The statutory capital and surplus for the Company's insurance subsidiaries
     at December 31, 2001, 2000 and 1999, is shown in the table below.
<TABLE>
<CAPTION>
                                                          2001             2000             1999
                                                    ---------------------------------------------------
     <S>                                         <C>                       <C>              <C>
     First Professionals                         $        91,682           91,594           97,578
     APAC                                                 15,405           15,923           18,141
     Intermed                                             22,174           20,923           13,685
     Interlex                                              5,729            4,354            5,294
                                                    ---------------------------------------------------
         Combined statutory surplus                      134,990          132,794          134,698
                                                    ---------------------------------------------------
         Less: intercompany eliminations                 (27,903)         (24,295)         (16,818)
                                                    ---------------------------------------------------
            Consolidated statutory surplus       $       107,087          108,499          117,880
                                                    ===================================================
</TABLE>
     For the years ended December 31, 2001, 2000 and 1999, the statutory net
     income or loss for the Company's insurance subsidiaries was as follows:
<TABLE>
<CAPTION>
                                                          2001             2000             1999
                                                    ---------------------------------------------------
     <S>                                         <C>                     <C>               <C>
     First Professionals                         $      (6,623)          (6,792)           14,233
     APAC                                               (1,131)          (1,088)            5,051
     Intermed                                              390              608               159
     Interlex                                             (637)            (692)             (405)
                                                    ---------------------------------------------------
         Total statutory income (loss)           $      (8,001)          (7,964)           19,038
                                                    ===================================================
</TABLE>
     In March 1998, the National Association of Insurance Commissioners ("NAIC")
     adopted the Codification of Statutory Accounting Principles (the
     "Codification") as the NAIC supported basis of accounting. Codification
     affects all statutory financial statements issued after January 1, 2001.
     The Codification was approved with a provision allowing for discretion by
     each state's Department of Insurance ("DOI) in determining appropriate
     statutory accounting for insurers. Accordingly, such discretion will
     continue to allow prescribed or permitted accounting practices that may
     differ from state to state or company to company. The Codification does not
     affect the Company's consolidated financial statements, which have been
     prepared in accordance with GAAP.

     The Company's insurance subsidiaries: First Professionals, APAC, Intermed
     and Interlex prepare financial statements on a statutory basis in
     conformity with the accounting practices prescribed or permitted by the
     State of Florida and Missouri. Effective January 1, 2001, both states
     required all domiciled insurance companies to prepare their statutory
     financial statements in accordance with the provisions of the Codification
     subject to the deviations prescribed or permitted by the each state's DOI.
     Accounting changes adopted to conform to the provisions of Codification are
     reported in the statutory financial statements as a cumulative effect of a
     change in accounting principle and are recorded as an adjustment to
     statutory surplus. As a result of the Codification, the Company's statutory
     surplus, on a consolidated basis, increased by $7.1 million. The components
     of this increase included surplus increases of $5.5 million, $1.2 million,
     $0.3 million and $0.1 million for First Professionals, APAC, Intermed and
     Interlex, respectively. In addition, on a consolidated

                                       68
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


     basis and at the subsidiary level, the Company's statutory surplus after
     adoption continues to be in excess of the current regulatory and risk-based
     capital requirements.

20.  Reconciliation of Basic and Diluted Earnings Per Share
     Data with respect to the Company's basic and diluted earnings per common
     share are shown below:

<TABLE>
<CAPTION>
                                                                2001             2000             1999
                                                          ---------------------------------------------------
<S>                                                     <C>                       <C>             <C>
     Net income and income from continuing
          operations                                    $        2,930              614           21,869
                                                          ===================================================

     Basic weighted average shares outstanding                   9,383            9,497            9,748
     Common stock equivalents                                       85               74              259
                                                          ---------------------------------------------------
     Diluted weighted average shares outstanding                 9,468            9,571           10,007
                                                          ===================================================

     Basic earnings per common share                    $         0.31             0.06             2.24
                                                          ===================================================
     Diluted earnings per common share                  $         0.31             0.06             2.19
                                                          ===================================================
</TABLE>

21.  Segment Information
     Under the provisions of FAS No. 131, the Company has determined that it has
     three reportable operating segments: insurance, reciprocal management
     ("RM") and third party administration ("TPA"). Through its four insurance
     subsidiaries, the Company specializes in professional liability insurance
     products and services for physicians, dentists, other healthcare providers
     and attorneys. The Company's RM segment provides reciprocal management
     services, brokerage and administration services for reinsurance programs
     and brokerage services for the placement of annuities in structured
     settlements. In addition, the Company provides TPA services through its
     subsidiaries that market and administer self-insured plans for both large
     and small employers, including group accident and health insurance,
     workers' compensation and general liability and property insurance.

     The accounting policies of the segments are the same as those described in
     the summary of significant accounting policies. The Company evaluates a
     segment's performance based on net income or loss and accounts for
     intersegment sales and transfers as if the sales or transfers were to a
     third party. Holding company operations are included within the insurance
     segment due to the size and prominence of the segment and the substantial
     attention devoted to it. Intersegment revenues for transactions between the
     segments are based on actual costs incurred and are similar to services
     that may have been obtained from an unrelated third party. All segments are
     managed separately because each business requires different technology and
     marketing strategies.

     Selected financial information by industry segment follows:

<TABLE>
<CAPTION>
                                                    For the year ended December 31, 2001
                                            ---------------------------------------------------------------------------------------
                                                                                       Total        Intersegment
                                              Insurance        RM          TPA        Segments      Eliminations    Consolidated
                                            ---------------------------------------------------------------------------------------
     <S>                                 <C>                <C>         <C>           <C>              <C>            <C>
     Operating revenue                   $    158,213       29,297      15,984        203,494           (5,965)        197,529
     Interest revenue                          23,621          344         159         24,124               --          24,124
     Interest expense                           4,566           --          --          4,566               --           4,566
     Net (loss) income                           (847)       4,348        (571)         2,930               --           2,930
     Identifiable assets                      693,765       61,468      14,788        770,021          (11,724)        758,297
     Depreciation and amortization              1,013        2,829       1,297          5,139               --           5,139
</TABLE>


                                       69
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


<TABLE>
<CAPTION>
                                                               For the year ended December 31, 2000
                                            ---------------------------------------------------------------------------------------
                                                                                       Total        Intersegment
                                              Insurance        RM         TPA         Segments      Eliminations    Consolidated
                                            ---------------------------------------------------------------------------------------
     <S>                                  <C>                <C>         <C>           <C>             <C>             <C>
     Operating revenue                    $    147,994       25,306      16,723        190,023         (7,759)         182,264
     Interest revenue                           25,600          254         239         26,093             --           26,093
     Interest expense                            4,291           --          --          4,291             --            4,291
     Net (loss) income                          (2,925)       4,360        (821)           614             --              614
     Identifiable assets                       583,124       62,864      16,565        662,553        (10,355)         652,198
     Depreciation and amortization                 151        2,557       1,236          3,944             --            3,944

                                                               For the year ended December 31, 1999
                                            ---------------------------------------------------------------------------------------
                                                                                       Total        Intersegment
                                              Insurance        RM         TPA         Segments      Eliminations    Consolidated
                                            ---------------------------------------------------------------------------------------
     Operating revenue                    $    138,786       20,953      13,393        173,132         (2,628)         170,504
     Interest revenue                           20,585           47         189         20,821             --           20,821
     Interest expense                            3,981           --          --          3,981             --            3,981
     Net income (loss)                          19,776        2,298        (205)        21,869             --           21,869
     Identifiable assets                       521,165       57,824      11,030        590,019         (2,586)         587,433
     Depreciation and amortization               2,513        2,506         889          5,908             --            5,908
</TABLE>

     The following table provides a reconciliation of reportable segment assets
     to the Company's consolidated totals:

<TABLE>
<CAPTION>
                                                                  2001               2000            1999
                                                         -------------------------------------------------------
     <S>                                               <C>                        <C>              <C>
     Total assets for reportable segments              $       1,043,714           967,571          744,889
     Investments in equity method investees                     (241,309)         (247,921)        (119,225)
     Intercompany receivables                                    (44,108)          (67,452)         (38,231)
                                                         -------------------------------------------------------
         Total consolidated assets                     $         758,297           652,198          587,433
                                                         =======================================================
</TABLE>

22.  Related Party Transactions
     Effective June 30, 1998, the Company entered into a management services
     agreement with APA Management, Inc. ("APAM") to provide the Company with
     all necessary insurance management and administrative services for APAC, a
     wholly owned subsidiary of the Company. The Company has an indirect
     financial interest in APAM through its 9.9% interest in American
     Professional Assurance, Ltd. ("APAL,") an affiliate of APAC, which owns
     100% of APAM. The agreement terminates on December 31, 2002, with a
     one-year renewal option, and provides that APAM will receive an annual fee
     of 14.5% of direct premiums (net of refunds) consisting of an annual 10.5%
     service fee and 4% claims management fee. The agreement also provides that
     anesthesiologist business produced by First Professionals or its respective
     agents will be transferred to APAC upon renewal, assuming the insured
     agrees, and that APAM will receive an annual 1% service fee on such
     business. The Company incurred $2.0 million, $1.6 million, and $1.4 million
     in management fees related to its agreement with APAM during the years
     ended December 31, 2001, 2000 and 1999, respectively.

     On July 1, 1998, First Professionals and APAC also entered into a quota
     share reinsurance agreement whereby these two subsidiaries cede a 25% quota
     share portion of all business written by them related to anesthesiologists
     and certain related specialties to APAL. These agreements were entered into
     in connection with and at the time of the Company's acquisition of APAC.
     During 2001, 2000 and 1999, the Company


                                       70
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)

     ceded premiums of $4.6 million, $3.4 million and 2.9 million, respectively
     and received ceding commissions of $0.9 million, $0.7 million and $0.6
     million, respectively.

     Effective in 2001, APAL formed a new subsidiary, APAL (SPC) Limited, which
     was established in accordance with Section 235(1) of the Company's Law 2nd
     Revision of Caymanian Law as a segregated portfolio corporation. The
     Company, through its subsidiaries, EMI and APAC, has developed alternative
     risk insurance programs for insureds, whereby segregated portfolio
     corporations have been formed for each to assume workers' compensation
     risks. The underlying policies are written for these insureds on APAC
     policy forms and reinsured 100% to segregated portfolio corporations
     established for each within APAL (SPC) Limited. APAC receives a fee for the
     use of its policy forms and does not retain any underwriting risks or incur
     any administrative expenses under these programs. Like other reinsurance
     agreements, APAC does remain liable to the insureds under these programs as
     the primary insurer in the event APAL (SPC) Limited were to not perform.
     Therefore, APAC maintains collateral in the form of assets in trust and an
     irrevocable letter of credit corresponding with applicable reinsurance
     recoverable balances. During 2001, premiums written and ceded under these
     programs were $11.7 million.

     On July 1, 1998, First Professionals began assuming reinsurance from PRI, a
     writer of medical malpractice insurance in the state of New York. PRI is
     managed by an attorney-in-fact, AFP, which effective January 1, 1999 was
     acquired by and became a wholly owned subsidiary of the Company. Under one
     contract, which reinsures PRI for policies with limits of $1.0 million in
     excess of $1.0 million, First Professionals assumes losses only and pays
     PRI a ceding commission on the premium assumed. Under the second contract,
     First Professionals reinsures PRI for losses of $0.25 million on each claim
     in excess of $0.5 million on each loss. During 2001, 2000 and 1999, the
     Company assumed written premiums of approximately $11.3 million, $16.3
     million and $22.0 million, respectively, of which approximately $16.9
     million, $16.7 million and $15.0 million, respectively, was earned under
     these contracts. The net premium written under these agreements was reduced
     during the fourth quarter of 2000 due to the accrual of charges for
     experience adjustments. The accrual represents an estimate of the amount of
     premium the Company will return in future years. The Company has incurred
     approximately $8.1 million, $12.6 million and $6.7 million in losses
     related to these reinsurance agreements with PRI for the years ending
     December 31, 2001, 2000 and 1999, respectively. Premiums on these contracts
     are paid by PRI on a quarterly basis. As of December 31, 2001, 2000 and
     1999, the amount due from PRI under these contracts was approximately $2.4
     million, $1.1 million and $4.3 million, respectively.

     Effective January 1, 2000, First Professionals entered into a 100% quota
     share reinsurance agreement with PRI to assume PRI's death, disability and
     retirement risks under its claims-made insurance policies in exchange for
     cash and investments in the amount of $47.0 million. During 2000, a GAAP
     valuation of the underlying liability was completed and a deferred credit
     in the amount of $13.2 million was recognized and classified as goodwill
     and intangible assets. The deferred credit, which will be amortized into
     income over 20 years, represents the difference between the GAAP valuation
     of the liability and the initial premium received. The liability was
     calculated using benefit assumptions and elements of pension actuarial
     models (i.e. mortality, morbidity, retirement, interest and inflation rate
     assumptions). In connection with the agreement, First Professionals
     recognized a 5% ceding commission expense, which is being deferred and
     amortized as premiums are earned under the agreement.

     In accordance with a management agreement, AFP performs underwriting,
     administrative and investment functions on PRI's behalf for which it
     receives compensation. Compensation under the agreement is equal to 13% of
     PRI's direct premiums written, with an adjustment for expected return
     premiums, plus or minus 10% of PRI's statutory net income or loss.
     Accordingly, the Company's revenues and results of operations are
     financially sensitive to the revenues and results of operations of PRI. In
     addition PRI, as an MPL insurer, is subject to many of the same types of
     risks as those of the Company's insurance subsidiaries. Claims
     administration and management fees earned by AFP based on 13% of PRI's
     direct written premiums were $23.0 million, $17.0 million and $16.9 million
     for the years ended December 31, 2001, 2000 and 1999, respectively.

                                       71
<PAGE>
                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)

     The income received by AFP related to PRI's statutory net income was $0.3
     million, $1.6 million and $1.7 million for the years ended December 31,
     2001, 2000 and 1999, respectively.  The management agreement also provides
     that AFP is to be reimbursed by PRI for certain expenses paid by AFP on
     PRI's behalf. The expenses reimbursed by PRI consist principally of the
     salaries and related payroll and overhead costs of AFP's claims, legal, and
     risk management course personnel who work on PRI's behalf. These directly
     reimbursed expenses amounted to $11.5 million, $10.6 million and $10.9
     million for 2001, 2000 and 1999, respectively, and are not reported in the
     accompanying consolidated financial statements. The management agreement
     was reviewed and approved by the New York Insurance Department and is
     effective January 1, 1999 through December 31, 2008.

     The Company, through its 70% owned subsidiary, PMA, also manages an MPL
     insurance program in Pennsylvania established primarily for the benefit of
     PRI whereby business is written on First Professionals policy forms and
     ceded to PRI under a 90% quota share reinsurance agreement. PMA receives a
     management fee equal to 20% of premiums written under the program, in
     return for its services to PRI, which include underwriting, claims
     management and other administrative aspects of this program. PMA also pays
     all commissions and brokerage for the placement of business under the
     program. First Professionals retains 10% of the risks insured and also
     receives a fee for use of its policy forms. During 2001 and 2000, premiums
     written, management fees and fronting fees under this program were as
     follows:

                                                  2001              2000
                                           ----------------------------------
     Premiums written                   $        12,122              570
     Management fees                              1,896              114
     Fronting fees                                2,133              128

     In addition, the Company has entered into guarantees on behalf of PRI
     related to two of its former ceded reinsurance contracts with unaffiliated
     carriers whereby such contracts have been commuted. Under the terms of
     these commutations, PRI was required to obtain such guarantees as further
     assurance to the reinsurer of their respective complete release from
     liability.

23.  Restructuring
     During the fourth quarter of 2001, the Company recorded a pre-tax charge of
     $632 in connection with the disposition of its non-profitable division in
     Albuquerque, New Mexico. Under the plan, the Company sold the division's
     assets and cancelled its service agreements with self-insured customers.
     Certain other contracts were retained and will be serviced by the Company's
     Jacksonville, Florida division. The 2001 restructuring activity was a
     continuation of the Company's consolidation of the TPA operations and
     brings to an end the restructuring activities of the Albuquerque division
     that began during the fourth quarter of 2000 when the Company incurred a
     pre-tax charge of $500.

     As a result of the plan, fifty-two employees were terminated at December
     31, 2001. This reduction represents 24% of the TPA workforce and 100% of
     the New Mexico office. Thirty employees were terminated at December 31,
     2000.  This reduction represented 12% of the TPA workforce and 35% of the
     New Mexico office. All employees terminated in 2001 and 2000 were located
     in the New Mexico office.

     Restructuring activity for years 2001 and 2000 was as follows:
<TABLE>
<CAPTION>
                                                     Severance                         Other
                                                     & Benefits      Facilities        Expense          Total
                                                  ----------------------------------------------------------------
     <S>                                       <C>                      <C>             <C>             <C>
     Fiscal 2000 restructuring charge          $          360            90              50              500
     Amount utilized in 2000                              (10)          (27)            (33)             (70)
                                                  ----------------------------------------------------------------
     Balance, December 31, 2000                           350            63              17              430
     Fiscal 2001 restructuring charge                      88           446              98              632
     Amount utilized in 2001                             (350)          (63)            (30)            (443)
                                                  ----------------------------------------------------------------
     Balance, December 31, 2001                $           88           446              85              619
                                                  ================================================================
</TABLE>

                                       72
<PAGE>

                           FPIC Insurance Group, Inc.
                 Notes to the Consolidated Financial Statements
     (Dollars in thousands, except per share amounts and elsewhere as noted)


24.  Quarterly Results of Operations
     The following is a summary of quarterly results of the Company's operations
     for the years ended December 31, 2001 and 2000:

<TABLE>
<CAPTION>
                       2001                           First            Second           Third           Fourth
                       ----                      ---------------  ----------------  -------------  ----------------
     <S>                                        <C>                    <C>              <C>             <C>
     Direct and assumed premiums written        $     55,173           46,943           73,004          70,283
     Net premiums written                             35,898           29,318           43,194          38,674
     Premiums earned                                  31,517           34,802           29,686          35,053
     Net investment income                             6,702            5,976            5,754           4,890
     Total revenues                                   46,287           49,461           48,262          53,519
     Net income (loss)                                 1,294            1,862            3,099          (3,325)
     Basic earnings per share                            .14              .20              .33            (.36)
     Diluted earning per share                           .14              .20              .33            (.36)

                         2000                         First            Second           Third           Fourth
                         ----                    ---------------  ----------------  -------------  ----------------
     Direct and assumed premiums written        $     76,033 (1)       35,046           54,610          31,591 (1)
     Net premiums written                             66,247           29,919           39,987          25,778
     Premiums earned                                  29,119           33,434           29,867          28,034
     Net investment income                             6,039            6,174            6,490           6,295
     Total revenues                                   44,177           47,772           46,383          43,932
     Net income (loss)                                 4,712            5,143            4,926         (14,167)
     Basic earnings per share                            .49              .54              .52           (1.49)
     Diluted earning per share                           .49              .54              .52           (1.49)
</TABLE>

     (1) Includes the effect of the reclassification of a portion of the
     statutory assumed reinsurance premiums written in the amount of $13.2
     million related to the 100% Quota Share reinsurance agreement with PRI.
     This amount was finalized, reclassified and reported directly as a deferred
     credit in the balance sheet account, "Goodwill and other intangibles"
     during the second quarter of 2000, after the initial reporting of the
     contract in the first quarter. This reclassification had no effect on
     revenues or income previously reported.


                                       73
<PAGE>

                                                                      SCHEDULE I
                           FPIC Insurance Group, Inc.
 Summary of Investments Other Than Investments in Related Parties (in thousands)
                             As of December 31, 2001


<TABLE>
<CAPTION>
                                                         Cost or               Fair            Amount in
                                                     Amortized Cost           Value          Balance Sheet
                                                  ----------------------  ---------------  ------------------
<S>                                             <C>                          <C>                 <C>
Bonds:
    United States Government agencies
       and authorities                          $            47,157           48,057              48,057
    States, municipalities and political
       subdivisions                                          94,304           95,078              95,078
    Corporate securities                                    104,175          104,718             104,718
    Mortgage-backed securities                              100,488          101,096             101,096
                                                  ----------------------  ---------------  ------------------
       Total bonds                                          346,124          348,949             348,949

Equity securities:
    Industrial, miscellaneous, and other                          7                8                   8
                                                  ----------------------  ---------------  ------------------
       Total equity securities                                    7                8                   8

Real estate                                                   5,582            4,255               4,255
Other invested assets                                        14,020           15,272              13,534
                                                  ----------------------  ---------------  ------------------
       Total investments                        $           365,733          368,484             366,746
                                                  ======================  ===============  ==================
</TABLE>




See accompanying Report of Independent Certified Public Accountants

<PAGE>

                                                                     SCHEDULE II
                           FPIC Insurance Group, Inc.
                  Condensed Financial Information of Registrant
                    FPIC Insurance Group, Inc. (Parent Only)
        Condensed Balance Sheet (in thousands, except share information)
                        As of December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                          2001          2000
                                                                      ------------  ------------
<S>                                                                  <C>              <C>
Assets

    Cash and cash equivalents                                        $    1,459            37
    Investments in subsidiaries*                                        209,656       218,594
    Other invested assets, at equity                                      1,796         3,064
    Other invested assets, at cost                                        5,380        11,188
                                                                      ------------  ------------
            Total cash and investments                                  218,291       232,883

    Property and equipment, net                                           1,650         1,153
    Due from subsidiaries, net*                                             449            --
    Deferred income taxes                                                 1,432           218
    Prepaid expenses                                                        991           350
    Goodwill and intangible assets, net                                   6,493         7,085
    Federal income tax receivable                                         5,273         8,519
    Other assets                                                            456           292
                                                                      ------------  ------------
                  Total assets                                       $  235,035       250,500
                                                                      ============  ============

Liabilities and Shareholders' Equity

    Due to subsidiaries, net*                                        $       --         3,366
    Revolving credit facility                                            37,000        67,219
    Term loan                                                            16,042            --
    Accrued expenses and other liabilities                                7,419         7,388
                                                                      ------------  ------------
            Total liabilities                                            60,461        77,973
                                                                      ------------  ------------

    Common stock, $.10 par value, 50,000,000 shares authorized;
       9,337,755 and 9,380,353 shares issued and outstanding at
       December 31, 2001 and 2000, respectively                             934           938
    Additional paid-in capital                                           37,837        37,827
    Unearned compensation                                                    --          (105)
    Accumulated other comprehensive (loss) income                           (26)          968
    Retained earnings                                                   135,829       132,899
                                                                      ------------  ------------
            Total shareholders' equity                                  174,574       172,527
                                                                      ------------  ------------
                  Total liabilities and shareholders' equity         $  235,035       250,500
                                                                      ============  ============
</TABLE>


* Eliminated in consolidation
See accompanying Report of Independent Certified Public Accountants

<PAGE>

                                                                     SCHEDULE II
                           FPIC Insurance Group, Inc.
                  Condensed Financial Information of Registrant
                    FPIC Insurance Group, Inc. (Parent Only)
                 Condensed Statement of Earnings (in thousands)
              For the Years Ended December 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
                                                                   2001           2000          1999
                                                               ------------  ------------- -------------

<S>                                                           <C>                <C>           <C>
Revenues
     Management fees from subsidiaries*                       $   24,428         22,057        17,974
     Net investment (loss) income                                   (335)           194           171
     Other income                                                     52            197            --
                                                               ------------  ------------- -------------
           Total revenues                                         24,145         22,448        18,145
                                                               ------------  ------------- -------------

Expenses
     Other underwriting expenses                                  20,155         18,224        13,859
     Interest expense                                              4,491          4,209         3,906
     Other expenses                                                  592          2,407         2,464
                                                               ------------  ------------- -------------
           Total expenses                                         25,238         24,840        20,229
                                                               ------------  ------------- -------------

           Loss before income taxes                               (1,093)        (2,392)       (2,084)

     Income tax benefit                                             (426)          (766)       (1,486)
                                                               ------------  ------------- -------------

           Loss before equity in undistributed earnings
              of subsidiaries                                       (667)        (1,626)         (598)

     Equity in undistributed earnings of subsidiaries*             3,597          2,240        22,467
                                                               ------------  ------------- -------------

           Net income                                         $    2,930            614        21,869
                                                               ============  ============= =============
</TABLE>




* Eliminated in consolidation
See accompanying Report of Independent Certified Public Accountants



<PAGE>

                                                                     SCHEDULE II
                           FPIC Insurance Group, Inc.
                  Condensed Financial Information of Registrant
                    FPIC Insurance Group, Inc. (Parent Only)
                       Condensed Statements of Cash Flows
              For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                            2001         2000         1999
                                                                         -----------  -----------  ----------
<S>                                                                    <C>              <C>         <C>
Cash flows from operating activities:
    Net income                                                         $    2,930          614       21,869
    Adjustments to reconcile net income to cash provided by
      operating activities:
         Equity in undistributed earnings of subsidiaries                  (3,597)      (2,240)     (22,467)
         Common stock dividend from subsidiaries                            5,892        3,230       12,674
         Return of capital from subsidiaries                               13,100           --           --
         Capital contribution to subsidiaries                                  --       (6,017)          --
         Depreciation and amortization                                      1,193          852          752
         Realized loss on sale of property and equipment                        9           --            8
         Noncash compensation                                                 105          126          126
         Net loss (earnings) from equity investments                          319          (90)          18
         Deferred income tax (benefit)                                        (79)        (218)          --
         Changes in assets and liabilities:
              Due from subsidiaries                                        (3,505)       5,930        2,779
              Prepaid expenses                                               (641)         (24)          54
              Other assets and accrued expenses and other liabilities      (3,076)       2,286        5,133
              Federal income tax receivable                                 3,247       (3,446)      (3,268)
                                                                         -----------  -----------  ----------
                Net cash provided by operating activities                  15,897        1,003       17,678
                                                                         -----------  -----------  ----------

Cash flows from investing activities:
    Proceeds from sale of other invested assets                               326           --           --
    Purchase of other invested assets                                          --         (813)      (1,606)
    Purchases of property and equipment, net                                 (631)        (652)        (617)
    Purchase of subsidiary's net other assets and stock                        --           (5)     (55,114)
    Purchase of goodwill and intangible assets                                 --           --       (2,708)
                                                                         -----------  -----------  ----------
                Net cash used in investing activities                        (305)      (1,470)     (60,045)
                                                                         -----------  -----------  ----------

Cash flows from financing activities:
    (Payment) receipt of revolving credit facility                        (14,176)       4,500       35,554
    Issuance (buyback) of common stock outstanding                              6       (4,055)       7,569
                                                                         -----------  -----------  ----------
                Net cash provided by financing activities                 (14,170)         445       43,123
                                                                         -----------  -----------  ----------

                Net increase (decrease) in cash and cash equivalents        1,422          (22)         756

Cash and cash equivalents at beginning of period                               37           59         (697)
                                                                         -----------  -----------  ----------

Cash and cash equivalents at end of period                             $    1,459           37           59
                                                                         ===========  ===========  ==========

Supplemental disclosure of cash flow information
    Federal taxes paid                                                 $    4,190        3,556        6,634
    Cash paid for interest                                             $      540        3,769        4,016
</TABLE>


See accompanying Report of Independent Certified Public Accountants

<PAGE>

                                                                    SCHEDULE III

                           FPIC Insurance Group, Inc.
         Consolidated Supplementary Insurance Information (in thousands)
              For the years ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                            Deferred
                             Policy                                         Net                Amortization
                              Costs       Loss     Unearned    Premium   Investment     Loss         of         Other      Net
Segment                     ("DPAC")    Reserves   Premiums    Revenue     Income     Expenses      DPAC      Expenses   Written
-------                     -------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>         <C>        <C>          <C>        <C>         <C>         <C>       <C>
2001
  Medical professional
   and other liability     $   9,001    318,483     146,761    131,058      22,819     128,346     9,259       17,422    147,084

2000
  Medical professional
   and other liability     $   5,967    281,295     100,066    120,454      24,505     122,766     5,617       17,850    161,931

1999
 Medical professional
   and other liability     $   2,789    273,092      61,314    118,189      18,832      80,968     6,727       17,110    122,127
</TABLE>






See accompanying Report of Independent Certified Public Accountants.


<PAGE>



                                                                     SCHEDULE IV

                           FPIC Insurance Group, Inc.
                           Reinsurance (in thousands)
              For the years ended December 31, 2001, 2000 and 1999





<TABLE>
<CAPTION>
                                                          Ceded             Assumed                          Percentage
                                                        Earned to           Earned                              of
         Type of                   Gross                  Other            From Other          Net            Assumed
       Insurance                   Amount               Companies          Companies         Earned            to net
----------------------------- ---------------------    ------------        ----------       ---------        ----------


<S>                            <C>                        <C>                <C>             <C>                 <C>
   2001:
   ----
Medical Professional
     Liability                 $   172,064                67,633             26,627          131,058             20%

   2000:
   ----
Medical Professional
     Liability                 $   122,857                33,523             31,120          120,454             26%

   1999:
   ----
Medical Professional
     Liability                 $   116,496                26,341             28,034          118,072             24%
</TABLE>




See accompanying Report of Independent Certified Public Accountants.


<PAGE>



                                                                      SCHEDULE V

                           FPIC Insurance Group, Inc.
                Valuation and Qualifying Accounts (in thousands)






<TABLE>
<CAPTION>
                                                  Balance at          Charged to                       Balance
                                                  Beginning           Costs and                        at End
          Description                             of Period           Expenses         Deductions      of Period
          -----------                          ----------------     --------------     ----------      --------

<S>                                              <C>                     <C>                <C>         <C>
Year-ended December 31, 2001
     Allowance for Doubtful Accounts, net        $     1,659              12                937           734



Year-ended December 31, 2000
     Allowance for Doubtful Accounts, net        $     1,247             961                549         1,659
</TABLE>






See accompanying Report of Independent Certified Public Accountants.