American Physicians Service Group Inc.’s (AMPH) fourth quarter operating earnings of 96 cents per share were significantly ahead of the Zacks Consensus Estimate of 73 cents. The company had earned 67 cents in the year-ago quarter.

Results reflected a favorable claims environment, strong policyholder retention and better-than-expected figures from the Financial Service segment.

Including the after-tax effects of realized investment gains and losses and other-than-temporary impairments, American Physicians earned a net income of $6.8 million or 97 cents per share in the quarter, compared to a net income of $2.5 million or 34 cents per share in the prior-year period. Revenues were up to $22.3 million from $17.4 million in the year-ago quarter.

For full year 2009, the company reported a net income of $22.9 million or $3.26 per share, compared to $19.2 million or $2.64 per share in 2008. Revenues were up to $84 million from $74.7 million reported a year ago.

American Physicians’ strong operating performance has resulted in an increase in book value per share. The company reported a book value per share of $23.15, up from $22.20 as of September 30, 2009, and $19.46 as of December 31, 2008.

For the reported quarter, net earned premiums in the Insurance segment were up 5.4% year-over-year to $17.3 million. Though premium writings reported a decrease, the company experienced strong policyholder retention. The company also reported an increase in change in unearned premiums and in premiums ceded.

American Physicians’ loss and loss adjustment expenses were $5.6 million, down from $7.2 million in the prior-year period. The improvement is primarily driven by favorable development and continued low frequency of claim. The company experienced $7 million of favorable development in the quarter, compared to $4.8 million in the same period last year.

Financial Services segment reported a pre-tax profit of $0.1 million, primarily due to strategic initiatives undertaken in this segment. Though the profit is not significant, we note that the overall increase in Financial Services revenues, together with cost cutting measures, have returned this segment to profitability in the prior quarter after having incurred losses for several quarters.

Total expenses of American Physicians decreased to $12.1 million from $13.5 million in the year-ago quarter primarily due to a decline in loss and loss adjustment expenses.

Investment income was $2.4 million, down 21.4% year-over-year. In order to lessen its portfolio risk, the company has reduced its exposure to corporate and agency mortgage obligations. Net realized capital gains were $0.2 million compared to losses of $1.02 million in the prior-year period. The company reported other-than-temporary impairments of $0.1 million, down from $2.5 million in the year-ago quarter.

Shares of American Physicians increased 70 cents or 2.98% to $24.17 during Monday’s regular trading on the New York Stock Exchange. The shares were up another 58 cents or 2.40% in after-hours trading.

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