Jacksonville insurer caught in market’s carnival ride

The Florida Times-Union--September 28, 2008

By The Times-Union

During these strange times in the financial markets, some things stand out as weirder than others.

For example, follow the bouncing ball that represents the recent stock price of FPIC Insurance Group Inc. The Jacksonville-based medical malpractice insurer had been trading at record-high levels in the mid-$50s recently. Then on Sept. 19, the stock jumped $9.53 at the opening bell to $65.61 and reached $71.50 before the morning was out. But that afternoon, the stock plummeted to $51.62, almost $20 off its morning high, before closing at $58.38.

The next trading day, which was last Monday, it opened at $67 before settling back to $60.19 at the close.

There was no news out of the company to account for the activity, although FPIC was included on the Securities and Exchange Commission’s list of stocks that are banned from short-selling. That might have caused some scrambling among investors that had short positions in FPIC’s stock.

“The only thing that we can see was those days corresponded to the days when there were changes to the short-selling rules,” FPIC chief executive John Byers said.

Normally, stock price action like that is a result of takeover talk. But in a research note last week, Sandler O’Neill & Partners analyst Paul Newsome said it’s difficult to predict mergers in the insurance industry. He said the regulatory environment makes takeovers difficult.

“Nothing other than the general environment suggests that FPIC’s recent run-up in value is due to a pending acquisition,” he wrote.

Speaking of strange doings, Newsome took the unusual step of downgrading FPIC from “buy” to “sell” Tuesday morning, with the stock priced at $60.19. Analysts generally grade stocks on a scale that goes from (lowest to highest) sell, to neutral, to buy. It’s unusual for an analyst to change a rating from one extreme to the other.

Newsome said in his note that the downgrade was strictly based on price after the run-up in the stock.

“FPIC remains – in our view – one of the few insurers that can deliver stronger-than-expected earnings in this difficult financial market,” he said.

But Newsome’s report helped lead to more turbulence in the stock, as it fell to $52.83 on Tuesday and stayed mostly in the low $50s the rest of the week.

Winn-Dixie CEO’s pay steady

As executive pay packages (mainly for financial executives) made the news last week, Winn-Dixie Stores Inc. filed its annual proxy statement showing that chairman and CEO Peter Lynch received a compensation package for fiscal 2008 that was roughly in line with 2007.

His base salary of $1.25 million and incentive plan award of $1.3 million were about the same as 2007. The big difference in his total package was a $2 million bonus he received in fiscal 2007 related to the Jacksonville-based supermarket chain’s emergence from Chapter 11 bankruptcy.

The estimated value of stock and option awards Lynch received in fiscal 2008 were higher than 2007. But without the post-bankruptcy bonus, the total value of his compensation was pegged at $5.6 million for 2008, down from $6.5 million in 2007.

Company lowers dividends

Atlantic Coast Federal Corp. announced it was cutting its quarterly cash dividend by a penny to 11 cents a share on Friday. The Waycross, Ga.-based savings bank holding company said that “the decision to reduce the cash dividend is prudent considering the prevailing operating and economic environment.”

But Atlantic Coast noted that its annual dividend yield was still an attractive 6.2 percent after the dividend cut.

Media General battles debt

Media General Inc. announced a more drastic quarterly dividend cut last week, going from 23 cents a share to 12 cents. The Virginia-based company said the move will help maintain its cash flow to reduce its debt.

As part of its plan to reduce debt, Media General put five of its television stations up for sale in November, including WCWJ TV-17 in Jacksonville. It has already sold three of them and reached an agreement to sell a fourth. But after indicating in April that a deal for WCWJ might be close, Media General has not said anything about its negotiations for the local CW network affiliate.

CFO joins MPS Group’s board

Jacksonville-based MPS Group Inc. announced last week that senior vice president and chief financial officer Robert Crouch has been added to its board of directors. That brings the size of its board to 10 members.