Physicians Insurance
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Physicians Insurance's Financial Position at September 30, 2011

The company has continued to produced excellent financial results in 2011. Surplus was $180 million at September 30, 2011. The net premiums written-to-surplus ratio is a very strong and conservative .39 to 1.00.

Our investment portfolio has continued to perform well. We take a fairly conservative approach to our investments and stress high quality. This is in keeping with the company's mission to provide excellent insurance coverage consistent with sound financial and insurance practices.

Our investment portfolio totaled $373 million at September 30, 2011 with 8% invested in equities and 92% in bonds. The equity investments are all in nine mutual funds, and the company owns no individual stocks. Approximately 70% of these equity investments are in index funds that track the S&P 500. The remaining 30% are primarily in small cap and international funds. Not surprisingly, the total results of these equity investments track fairly closely with changes in the overall stock market.

Our well-diversified bond portfolio is composed primarily of three components: tax-exempt municipal bonds (30% of the total), mortgage pass-throughs (23%), and corporate bonds (28%). The remaining 19% is composed primarily of U.S. Treasury bonds, bonds of U.S. government agencies, and commercial mortgage-backed securities. The mortgage pass-throughs are pools of mortgages through Fannie Mae and similar organizations; all are high-quality mortgages and in effect guaranteed by Fannie Mae and Freddie Mac, and none are sub-prime. All of Physicians Insurance's bond holdings are rated investment grade by the rating agencies.

At the end of September, the market value of the company's $342 million bond portfolio in total was approximately $22 million higher than amortized cost (carrying value).

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David Kinard
Marketing and Communications
206-343-6618 or

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