Exhibit 99.1

                                     [Logo]
                     AMERICAN PHYSICIANS SERVICE GROUP, INC.
            REVISES TERMS OF MERGER WITH MEDICAL MALPRACTICE PARTNER

     AUSTIN,  TEXAS,  August 25, 2006 - American  Physicians Service Group, Inc.
("APS") (NASDAQ:  AMPH) today announced that it has agreed to an increase in the
purchase price for its long-time client,  American Physicians Insurance Exchange
("APIE").  APIE has also approved the change.  The revised purchase price is $39
million,  comprised  of  approximately  2.1 million  shares of APS common  stock
issued to the  policyholders of APIE and the assumption of  approximately  $10.4
million in obligations, which will be converted to APS preferred stock with a 3%
dividend and a cash redemption  requirement  payable evenly over ten years.  The
merger  remains  subject  to  approval  by the Texas  Department  of  Insurance,
necessary  filings with the SEC, and the approval of the shareholders of APS and
subscriber-policyholders of APIE. The companies hope to complete the transaction
by December 31, 2006.

     Mr. Ken Shifrin,  Chairman of the Board of APS said, "From the start of our
merger  discussions  both APS and APIE had focused on maintaining  the physician
philosophy and ensuring that the physician  policyholders of APIE receive a fair
value for APIE.  During its second  quarter  ended June 30, 2006,  APIE recorded
much better than expected net income of $7.3 million,  with surplus increasing a
similar  amount.  Along with steady  operating  results,  APIE has had  positive



development on claims  reserves and on reinsurance  treaties since we originally
agreed on a price.  In light of these  positive  developments  and our desire to
achieve a long-lasting result that is fair to all parties, we have increased our
offer to reflect what the boards of both entities believe to be a fair price."

     Mr. Shifrin  concluded,  "We believe that this combination  continues to be
the natural  evolution  of two  companies  founded  simultaneously  with similar
purposes.  We believe that our partnership will provide increased  opportunities
for both the policyholders of APIE and the shareholders of APS."

     APS is a management  and  financial  services  firm with  subsidiaries  and
affiliates which provide medical malpractice  insurance services for doctors and
brokerage  and  investment   services  to   institutions   and  high  net  worth
individuals. The Company is headquartered in Austin, Texas and maintains offices
in Dallas and Houston.

     This  press  release  includes  forward-looking  statements  related to the
Company that involve risks and uncertainties  that could cause actual results to
differ materially.  These forward-looking statements are made in reliance on the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995.  For  further  information  about  these  factors  that  could  affect the
Company's  future  results,  please see the  Company's  recent  filings with the
Securities  and Exchange  Commission.  Prospective  investors are cautioned that
forward-looking  statements  are not  guarantees of future  performance.  Actual
results  may  differ  materially  from  management  expectations.  Copies of the
filings  are  available  upon  request  from the  Company's  investor  relations
department.

For further information, visit APS' website at www.amph.com or contact:
Mr. Kenneth Shifrin, Chairman of the Board (or)
Mr. W. H. Hayes, Sr. Vice President - Finance
American Physicians Service Group, Inc.
1301 Capital of Texas Highway, C-300
Austin, Texas 78746 - (512)328-0888