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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

(Mark One)


|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2003

or


|_| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transaction 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
Incorporation or Organization)
(IRS Employer
Identification No.)

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)

www.fpic.com
(Registrant’s Internet Address)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |X| No |_|

As of November 4, 2003, there were 9,544,335 shares of the registrant’s common stock outstanding.



FPIC Insurance Group, Inc.
Index to Quarterly Report on Form 10-Q

Part I Financial Information Page
   
Item 1 Condensed Consolidated Financial Statements of FPIC Insurance Group, Inc.
and Subsidiaries:
Condensed Consolidated Statements of Financial Position 3
Condensed Consolidated Statements of Income (Loss) and Comprehensive
Income (Loss) 4
Condensed Consolidated Statements of Changes in Shareholders’ Equity 5
Condensed Consolidated Statements of Cash Flows 6
Notes to the Condensed Consolidated Financial Statements 7
Item 2 Management’s Discussion and Analysis of Financial Condition and
Results of Operations 18
Item 3 Quantitative and Qualitative Disclosures About Market Risk 34
Item 4 Disclosure Controls and Procedures 34
   
Part II       Other Information Page
   
Item 1 Legal Proceedings 34
Item 2 Changes in Securities and Use of Proceeds 34
Item 3 Defaults Upon Senior Securities 34
Item 4 Submission of Matters to a Vote of Security Holders 34
Item 5 Other Information 34
Item 6 Exhibits and Reports on Form 8-K 34
   
Signature 35
   
Certification of John R. Byers pursuant to Section 302 of the Sarbanes-Oxley Act
     and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
Exhibit 31.1
   
Certification of Kim D. Thorpe pursuant to Section 302 of the Sarbanes-Oxley Act
     and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
Exhibit 31.2
   
Certification of John R. Byers and Kim D. Thorpe pursuant to 18 U.S.C. Section 1350
     as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32



FPIC Insurance Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Position
As of September 30, 2003 and December 31, 2002
(In Thousands, Except Share-related Data)

(unaudited)
Sept 30,
2003
Dec 31,
2002
Assets      
   Cash and cash equivalents $ 104,595             86,589  
   Bonds and U.S. Government securities, available for sale   478,765   436,970  
   Equity securities, available for sale   8   6  
   Other invested assets (Note 8)   6,115   10,801  
   Real estate   4,224   4,354  
            Total cash and investments   593,707   538,720  
       
   Premiums receivable, net (Note 8)   119,703   108,494  
   Accrued investment income   5,699   5,998  
   Reinsurance recoverable on paid losses (Note 8)   7,765   6,529  
   Due from reinsurers on unpaid losses (Includes amounts      
      due from related parties of $86,075 and $71,299) (Note 8)   239,053   168,159  
   Ceded unearned premiums (Note 8)   79,614   78,889  
   Property and equipment, net   5,473   4,334  
   Deferred policy acquisition costs (Note 8)   6,343   4,452  
   Deferred income taxes   35,324   34,653  
   Prepaid expenses   3,652   1,744  
   Goodwill   18,870   18,870  
   Intangible assets   838   1,034  
   Federal income tax receivable   1,792   —  
   Other assets (Note 8)   21,814   54,555  
                  Total assets $ 1,139,647   1,026,431  
Liabilities and Shareholders’ Equity      
   Losses and loss adjustment expenses (Note 8) $ 527,634   440,166  
   Unearned premiums (Includes amounts due to related      
      parties of $49,419 and $43,506) (Note 8)   193,963   173,421  
   Reinsurance payable (Note 8)   126,486   96,470  
   Paid in advance and unprocessed premiums   4,066   14,060  
   Revolving credit facility   19,500   37,000  
   Mandatorily redeemable trust preferred securities   20,000   —  
   Senior notes   10,000   —  
   Term loan   —   10,208  
   Deferred credit (Note 8)   7,984   8,749  
   Deferred ceding commission   3,160   4,669  
   Federal income tax payable   —   120  
   Accrued expenses and other liabilities (Note 8)   47,212   75,655  
            Total liabilities   960,005   860,518  
   Commitments and contingencies (Note 10)      
       
   Common stock, $.10 par value, 50,000,000 shares authorized;      
      9,539,335 and 9,390,795 shares issued and outstanding at      
      September 30, 2003 and December 31, 2002, respectively   954   939  
   Additional paid-in capital   39,657   38,322  
   Accumulated other comprehensive income   6,265   5,525  
   Retained earnings   132,766   121,127  
            Total shareholders’ equity   179,642   165,913  
                  Total liabilities and shareholders’ equity $ 1,139,647   1,026,431  

See accompanying notes to the condensed consolidated financial statements.

3



FPIC Insurance Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(In Thousands, Except Share-related Data)

(unaudited)
Three Months Nine Months
  Sept 30,
 2003		            Sept 30,
2002		             Sept 30,
2003		             Sept 30,
2002		  
Revenues                
   Net premiums earned (Note 8) $ 40,895     30,435     101,674     117,337  
   Claims administration and management fees (Note 8)   10,760     9,640     28,523     25,561  
   Net investment income   4,672     5,688     13,893     16,389  
   Commission income   2,192     2,391     6,565     4,426  
   Net realized investment gains   1,286     1,969     1,942     2,113  
   Finance charges and other income (Note 8)   279     284     757     770  
        Total revenues   60,084     50,407     153,354     166,596  
Expenses                
   Net losses and loss adjustment expenses (Note 8)   36,985     30,549     93,285     105,733  
   Other underwriting expenses (Note 8)   3,489     2,226     8,521     15,612  
   Claims administration and management expenses   8,668     7,987     25,182     23,344  
   Interest expense on long term debt   899     1,211     4,498     3,647  
   Other expenses (Note 8)   1,383     849     3,496     1,059  
        Total expenses   51,424     42,822     134,982     149,395  
   Income from operations before income taxes and cumulative                
      effect of accounting change   8,660     7,585     18,372     17,201  
        Less: Income taxes   3,279     3,170     6,733     7,312  
   Income before cumulative effect of accounting change   5,381     4,415     11,639     9,889  
  
        Less: Cumulative effect of accounting change                
            (net of an $18,784 income tax benefit) (Note 3)   —     —     —     29,578  
   Net income (loss) $ 5,381     4,415     11,639     (19,689 )
  
Basic earnings (loss) per common share $ 0.57     0.47     1.23     (2.10 )
Diluted earnings (loss) per common share $ 0.55     0.47     1.22     (2.08 )
Basic weighted average common shares outstanding   9,493     9,391     9,443     9,385  
Diluted weighted average common shares outstanding   9,831     9,404     9,578     9,476  
  
Comprehensive Income (Loss)                
   Net income (loss) $ 5,381     4,415     11,639     (19,689 )
   Other comprehensive income:                
      Unrealized holding (losses) gains on debt and equity securities   (4,909 )   3,274     (1,080 )   4,335  
      Unrealized holding gains (losses) on derivative                
        financial instruments   543     (600 )   740     (520 )
      Settlement of derivative financial instruments   —     —     1,609     —  
      Income tax benefit (expense) related to unrealized                
        gains and losses   1,666     (982 )   (529 )   (1,357 )
           Other comprehensive (loss) income   (2,700 )   1,692     740     2,458  
   Comprehensive income (loss) $ 2,681     6,107     12,379     (17,231 )