11-K 1 k70447e11vk.txt FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission File Number: 000-32057 AMERICAN PHYSICIANS ASSURANCE CORPORATION 401(k) PLAN AND TRUST (FULL TITLE OF PLAN) AMERICAN PHYSICIANS CAPITAL, INC. 1301 N. HAGADORN ROAD EAST LANSING, MI 48826-1471 (Name of Issuer of the Securities Held Pursuant to the Plan and the Address of its Principal Executive Office) Audited Financial Statements and Supplemental Schedules American Physicians Assurance Corporation 401(k) Plan and Trust Years ended December 31, 2001 and 2000 with Reports of Independent Accountants American Physicians Assurance Corporation 401(k) Plan and Trust Audited Financial Statements and Supplemental Schedules Years ended December 31, 2001 and 2000 CONTENTS Reports of Independent Accountants...........................................1 Financial Statements Statements of Net Assets Available for Benefits..............................3 Statements of Changes in Net Assets Available for Benefits...................4 Notes to Financial Statements................................................5 Supplemental Schedules* Schedule of Assets Held for Investment Purposes at End of Year..............11 * Other schedules required by Section 2520.103.10 of the Department of Labor and Regulations and Disclosure Under ERISA have been omitted because they are not applicable. Report of Independent Accountants To the Participants and Administrator of American Physicians Assurance Corporation 401(k) Plan and Trust: In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of American Physicians Assurance Corporation 401(k) Plan and Trust (the "Plan") at December 31, 2001, and the changes in net assets available for benefits for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes at the end of year is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP Grand Rapids, Michigan June 18, 2002 1 Report of Independent Accountants To the Board of Directors American Physicians Assurance Corporation 401(k) Plan and Trust: We have audited the accompanying statements of assets available for benefits of American Physicians Assurance Corporation 401(k) Plan and Trust as of December 31, 2000 and 1999, and the related statements of changes in assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets available for benefits of American Physicians Assurance Corporation 401(k) Plan and Trust as of December 31, 2000 and 1999, and the changes in its assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes at end of year and reportable transactions together referred to as "supplemental information", are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental information is the responsibility of the Plan's management. The supplemental information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Andrews Hooper & Pavlik P.L.C. Okemos, Michigan December 14, 2001 2 American Physicians Assurance Corporation 401(k) Plan and Trust Statements of Net Assets Available for Benefits
December 31 2001 2000 ----------- ----------- Investments: Participant directed investment accounts $ 8,522,570 $ 9,977,568 Participant loans 74,753 129,321 ----------- ----------- Total investments 8,597,323 10,106,889 Receivables: Contributions from participating employers - 97,020 Other 3,816 6,407 ----------- ----------- Total receivables 3,816 103,427 Cash surrender value of life insurance 2,486 8,227 Cash 4,076 9,406 ----------- ----------- Net assets available for benefits $ 8,607,701 $10,227,949 =========== ===========
The accompanying notes are an integral part of the financial statements. 3 AMERICAN PHYSICIANS ASSURANCE CORPORATION 401(k) Plan and Trust Statements of Changes in Net Assets Available for Benefits
Year ended December 31 2001 2000 ------------ ------------ ADDITIONS: Participants' contributions $ 1,133,742 $ 1,118,554 Participating employers' contributions 549,903 150,384 Roll-over contributions - 130,094 Interest income 11,768 17,771 Other 2,994 1,091 ------------ ------------ Total additions 1,698,407 1,417,894 DEDUCTIONS: Benefits payments 2,381,787 1,095,182 Net realized and unrealized depreciation in fair value of investments 934,568 748,897 Investment expenses 2,300 1,200 ------------ ------------ Total deductions 3,318,655 1,845,279 ------------ ------------ Net decrease in net assets available for benefits (1,620,248) (427,385) Net assets available for benefits at beginning of year 10,227,949 10,655,334 ------------ ------------ Net assets available for benefits at end of year $ 8,607,701 $ 10,227,949 ============ ============
The accompanying notes are an integral part of the financial statements. 4 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements December 31, 2001 and 2000 1. DESCRIPTION OF THE PLAN The following is a description of the American Physicians Assurance Corporation 401(k) Plan and Trust ("the Plan") and provides only general information. Plan participants should refer to the Plan agreement for a more complete description of the Plan's provisions. The Plan was previously referred to as MICOA Management Company, Inc. 401(k) Plan and Trust. GENERAL The Plan is a defined contribution plan covering employees of American Physicians Assurance Corporation, Alpha Advisors, Inc., SCW Agency Group, Inc. and KMA Insurance Agency, Inc. ("Participating Employers") who meet the eligibility requirements under the Plan and who are employed on the first day of the Plan year, or the first day of the seventh month of the Plan year coinciding with the next following date such employee meets the eligibility requirements. The Plan's operations are subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). CONTRIBUTIONS In 2000, participants could elect to defer and contribute up to 10 percent of their pretax annual compensation, as defined in the Plan, not to exceed limitations contained in Internal Revenue Code ("IRC") Section 402 (g), to the Plan. In 2000, the Participating Employers had elected to make a matching contribution of 25 percent of the participant's deferred compensation. Effective January 1, 2001, the Plan was amended so that participants could elect to defer and contribute up to 15 percent of their pretax annual compensation, as defined in the Plan, subject to the IRC limitations discussed above, to the Plan. Also, as a result of the amendment effective January 1, 2001, the Participating Employers elected to make a contribution equal to 100 percent of the participant's deferred compensation, up to three percent of the participant's eligible compensation, and 50 percent of the participant's deferred compensation which exceeds three percent but does not exceed five percent of the participant's eligible compensation. Participants may also contribute amounts representing distributions from other qualified defined benefit plans. 5 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) PARTICIPANTS' ACCOUNTS Each participant's account is credited with the Participating Employer's contribution and an allocation of net Plan earnings. Allocations of Plan earnings are based on the relative account balances of all participants as defined in the Plan agreement. The benefit to which a participant is entitled in the event of death, disability or separation from service, is the vested total of the participant's account balance. VESTING Participants are immediately vested in both voluntary employee deferrals and Participating Employers' contributions, plus earnings thereon. INVESTMENT OPTIONS Upon enrollment in the Plan, a participant may self-direct employee and employer contributions in any of the investment options that are available under the Plan. PAYMENT OF BENEFITS On termination of service, a participant may elect to receive a lump-sum amount equal to the value of his or her account balance, or periodic installments over the participant's life expectancy. If a participant's account balance is less than $5,000, a single lump sum payment is required. Benefits are recorded when paid. At December 31, 2001 and 2000 there were no unpaid benefits. PARTICIPANT LOANS A participant may borrow from the Plan an amount not in excess of 50% of the participant's vested account balance. In no event can the participant borrow more than $50,000. Loans are for a period not exceeding five years except, in the case of loan proceeds used to acquire a principal residence. Loans bear interest at an agreed-upon percentage based on prevailing market rates existing at the time a participant loan is made and the loan must be adequately secured. 6 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements (continued) 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Plan have been presented on the accrual basis. INVESTMENT VALUATION The current value of the units owned by the Plan in the investment accounts is based on quoted redemption values on the last business day of the plan year. The difference between the selling price, and cost of investments is reported as net realized and unrealized appreciation or depreciation in the statement of changes in net assets. The difference between fair market value and cost, or previously stated fair market value of investments, is also reported as net realized and unrealized appreciation or depreciation in the statements of changes in net assets. As of the valuation date, all income, as well as all investment gains and losses shall be allocated to each participant's account in the proportion that each participant's account balance bears to the total of all account balances for each particular fund. ADMINISTRATIVE EXPENSES Administrative expenses, with the exception of certain investments expenses of the Plan, were paid by the participating employers. RISKS AND UNCERTAINTIES The Plan's investments ultimately consist of stocks, bonds, fixed income securities, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in values of investment securities will occur in the near term and that such changes could materially affect participant account balances and the amounts reported in the statement of net assets available for benefits. 7 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported amounts of net assets available for benefits and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates. 3. INVESTMENTS Participants direct their entire account balance between 14 investment funds through the service provider under contract with the trustee of the Plan. Effective December 28, 2001, participant account balances were transferred to new investment funds. The Plan administrator has obtained certification from the service provider under contract with the trustee of the Plan that such information is complete and accurate. The Plan does not have any non-participant directed investments. The Plan's investments are held by their respective investment manager. 8 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) At December 31, 2001, the following investments, at fair value, exceed five percent of the value of Plan assets at January 1, 2001: Small Cap Growth/Times Square Fund $1,507,281 Balanced/Dresdner RCM Fund 1,305,378 Janus Adviser Worldwide Account 1,289,797 Mid Cap Value/Wellington Management Fund 1,226,003 Alliance Growth & Income Fund 1,177,386 Guaranteed Income Fund 700,517
At December 31, 2000, the following investments, at fair value, exceed 5% of the value of Plan assets at January 1, 2000: Janus Worldwide Fund $ 1,945,673 Alliance Common Stock 1,381,230 Janus Balanced Fund 1,253,340 Neuberger & Berman Genesis Trust 1,082,842 Alliance Money Market 998,613 Neuberger & Berman Partners Trust 691,356 Scudder Growth and Income Fund 675,938
4. RELATED-PARTY TRANSACTIONS During the years ended December 31, 2001 and 2000, there were no reportable party-in-interest transactions. The Plan does not consider participating employers' contributions to the Plan to be party-in-interest transactions. 9 American Physicians Assurance Corporation 401(k) Plan and Trust Notes to Financial Statements (continued) 5. PLAN AMENDMENTS The Plan was amended twice during 2001. The first of these two amendments, effective January 1, 2001, allowed participants to increase the maximum percentage that a participant can elect to defer from 10 percent to 15 percent of the participant's compensation, and changed the methodology for determining the matching contribution of the Participating Employers. Prior to January 1, 2001, the Participating Employer's made a matching contribution of 25 percent of the Participant's deferred compensation. Effective January 1, 2001, the participating Employers elected to make a matching contribution equal to 100 percent of the participant's deferred compensation, up to three percent of the participant's eligible compensation, and 50 percent of the participant's deferred compensation which exceeds three percent but does not exceed five percent of the participant's eligible compensation. The second amendment was effective March 15, 2001 and changed the name of the Plan from MICOA 401(k) Plan and Trust to American Physicians Assurance Corporation 401(k) Plan and Trust. 6. INCOME TAX STATUS The Plan obtained its latest determination letter on June 24, 1998, in which the Internal Revenue Service stated that the plan and related trust as then designed were in accordance with applicable requirements of the IRC. Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plan's tax counsel believe that the Plan is designed, and is currently being operated, in compliance with the applicable requirements of the IRC. 7. PLAN TERMINATION Although they have not expressed any intent to do so, the Participating Employers have the right under the Plan to discontinue contributions at any time and terminate the Plan subject to the provisions of ERISA. 10 American Physicians Assurance Corporation 401(k) Plan and Trust Schedule H, line 4i Schedule of Assets Held for Investment Purposes at End of Year December 31, 2001
(b) Identity of Issue, Borrower, (c) Description of Investment Including Maturity Date, (e) Current (a) Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value (d) Cost + Value ------------------------------------------------------------------------------------------------------------------------------------ * Connecticut General Life Insurance Company Guaranteed Income Fund $ 700,517 * Connecticut General Life Insurance Company Balanced/Dresdner RCM Fund 1,305,378 * Connecticut General Life Insurance Company Alliance Growth & Income Fund 1,177,386 * Connecticut General Life Insurance Company Large Cap Growth/Dresdner RCM Fund 451,837 * Connecticut General Life Insurance Company S&P 500 Index Fund 206,846 * Connecticut General Life Insurance Company Waddell & Reed Accumulative A Fund 372,272 * Connecticut General Life Insurance Company Mid Cap Value/Wellington Management Fund 1,226,003 * Connecticut General Life Insurance Company Small Cap Growth/Times Square Fund 1,507,281 * Connecticut General Life Insurance Company Janus Adviser Worldwide Account 1,289,797 * Connecticut General Life Insurance Company Templeton Foreign Account 285,253 ------------- 8,522,570 Participant Loans Interest rates of 7.50% to 11.50% maturing between 74,753 2002 and 2008. ------------- Total Investments $ 8,597,323 =============
There were no assets reportable as both acquired and disposed of within the plan year. * Denotes a party-in-interest. + Information not required per Department of Labor reporting requirements. Employer identification number: 38-2102867 Three digit plan number: 002 11 SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. AMERICAN PHYSICIANS ASSURANCE CORPORATION 401(k) PLAN AND TRUST DATE: JUNE 28, 2002 /S/ MARGO RUNKLE ----------------------------- MARGO RUNKLE, VICE PRESIDENT OF HUMAN RESOURCES AND LEGAL Exhibit Index ------------- Exhibit 23.1 Consent of PricewaterhouseCoopers LLP (1) Exhibit 23.2 Consent of Andrews, Hooper, & Pavlik P.L.C. (1) (1) Filed herewith