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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM

TO

-------------------- --------------------

COMMISSION FILE NUMBER 0-11453

AMERICAN PHYSICIANS SERVICE GROUP, INC.
(Exact name of registrant as specified in its charter)


TEXAS 75-1458323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)


1301 CAPITAL OF TEXAS HIGHWAY AUSTIN, TEXAS 78746
(Address of principal executive offices) (Zip Code)

(512) 328-0888
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d ) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

NUMBER OF SHARES
OUTSTANDING at
TITLE OF EACH CLASS JULY 22, 2004
-------------------- ----------------
Common Stock, $.10 par value 2,583,588

============================================================================





PART I

FINANCIAL INFORMATION


2




AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(In thousands, except per share data)

Item 1 - Financial Statements


Three Months Ended June 30, Six Months Ended June 30,
2004 2003 2004 2003
------- ------ ------ ------
Revenues:

Financial services $4,227 $4,801 $8,059 $8,836
Insurance services 3,068 2,168 6,526 4,724
------ ------ ------ -----

Total revenues 7,295 6,969 14,585 13,560

Expenses:
Financial services 3,660 4,063 6,901 7,403
Insurance services 2,380 1,703 5,002 3,675
General and administrative 555 458 1,068 884
Gain on sale of assets (44) (6) (56) (8)
----- ----- ---- ---

Total expenses 6,551 6,218 12,915 11,954
----- ----- ------- ------

Operating income 744 751 1,670 1,606
Gain on sale of investments (Note 4) 218 74 245 89
Gain on forgivenes of debt (Note 5) 12 - 75 -
----- ----- ----- -----

Income from continuing operations before interest,
income taxes and minority interest 974 825 1,990 1,695

Interest income 72 76 155 170
Other income (loss) 26 (22) 18 (22)
Interest expense 2 1 2 2
Income tax expense 381 387 778 733
Minority interests - 42 - 107
Equity in earnings of unconsolidated affiliates - 235 - 235
----- ----- ---- ----

Net income $689 $684 $1,383 $1,236
===== ===== ======= ======



See accompanying notes to condensed consolidated financial statements.

- 3 -


AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS, continued
(Unaudited)

(In thousands, except per share amounts)

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Net income per common share

Basic:

Income from operations $ 0.28 $ 0.32 $ 0.56 $ 0.58
---- ---- ---- ----
Net income $ 0.28 $ 0.32 $ 0.56 $ 0.58
==== ==== ==== ====
Diluted:

Income from operations $ 0.25 $ 0.30 $ 0.49 $ 0.55
---- ---- ---- ----
Net income $ 0.25 $ 0.30 $ 0.49 $ 0.55
==== ==== ==== ====
Basic weighted average shares
outstanding 2,505 2,138 2,489 2,134
===== ===== ===== =====
Diluted weighted average
shares outstanding 2,791 2,269 2,802 2,247
===== ===== ===== =====



See accompanying notes to condensed consolidated financial statements.

- 4 -


AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands)
June 30, December 31,
2004 2003
--------- ----------
ASSETS (Unaudited)

Current Assets:
Cash and cash equivalents $7,269 $8,989
Trading account securities 86 67
Notes receivable 462 16
Management fees and other receivables 886 1,079
Deposit with clearing organization 660 500
Receivable from clearing organization 69 67
Income tax receivable 1,454 1,678
Net deferred income taxes 193 532
Prepaid expenses and other current assets 776 565
------ -------
Total current assets 11,855 13,493


Notes receivable, less current portion 318 436
Property and equipment, net 554 378
Investment in available-for-sale equity
securities (Note 6) 8,377 8,729
Investment in available-for-sale fixed
income securities (Note 7) 2,688 897
Goodwill 1,247 1,257
Other assets 392 448
------ -------

Total Assets $ 25,431 $ 25,638
======== =========







See accompanying notes to condensed consolidated financial statements.

- 5 -



AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands, except share data)



June 30, December 31,
2004 2003
-------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)

Current liabilities:

Accounts payable - trade $187 $201
Payable to clearing broker 86 67
Accrued incentive compensation 1,192 2,716
Accrued expenses and other liabilities (Note 8) 1,534 1,485
Deferred gain (Note 4) 488 487
------- --------

Total current liabilities 3,487 4,956

Payable under loan participation agreements 109 259
Deferred income tax liability 62 146
Deferred gain, net of current portion (Note 4) 871 1,171
------- --------

Total liabilities 4,529 6,532

Minority interests -- --
Contingencies ( Note 3)

Shareholders' Equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued or outstanding -- --
Common stock, $0.10 par value, shares authorized 20,000,000;
2,539,688 and 2,454,667 issued and outstanding at 06/30/04
and 12/31/03, respectively 254 245
Additional paid-in capital 7,192 6,918
Retained earnings 13,756 12,314
Accumulated other comprehensive loss, net of taxes (300) (371)
------- --------

Total shareholders' equity 20,902 19,106
------- --------

Total Liabilities and Shareholders' Equity $25,431 $25,638
======== ========



See accompanying notes to condensed consolidated financial statements.

- 6 -



AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)




Six Months Ended June 30,
--------------------------------
2004 2003
----------- ---------

Cash flows from operating activities:


Net Income $ 1,383 $ 1,236

Adjustments to reconcile net income to cash
used in operating activities:

Depreciation and amortization 151 114
Forgiveness of debt and other (53) 83
Minority interest in consolidated earnings -- 537
Undistributed gain of affiliates -- (235)
Gain on sale of assets (245) (252)
Gain on sale of investment (56) (89)
Provision for bad debt 20 6
Changes in operating assets and liabilities:
Trade receivables -- (151)
Trading account securities (19) 30
Income tax receivable 224 222
Deferred income tax 218 113
Receivable from clearing organization (143) 7
Management fees & other receivables 193 253
Prepaid expenses & other assets (210) 82
Deferred income (244) --
Trade accounts payable (14) (202)
Accrued expenses & other liabilities (1,491) (492)
------- -------
Net cash used in operating activities (286) 1,262

Cash flows from investing activities:

Capital expenditures (267) (185)
Proceeds from the sale of available-for-sale equity
and fixed income securities 1,116 4,038
Purchase of available-for-sale equity securities (2,196) (5,697)
Receipts from affiliates -- 150
Funds loaned to others (370) (150)
Collection of notes receivable -- 263
------- -------
Net cash provided by (used in) investing activities (1,717) (1,581)


Cash flows from financing activities:

Exercise of stock options 693 80
Purchase and cancellation of treasury stock (410) (89)
Distribution to minority interest -- (190)
------- -------
Net cash provided by (used in) financing activities 283 (199)


Net change in cash and cash equivalents $ (1,720) $ (518)

Cash and cash equivalents at beginning of period 8,989 6,691
------- -------
Cash and cash equivalents at end of period $ 7,269 $ 6,173
======= =======





See accompanying notes to condensed consolidated financial statements.



- 7 -


AMERICAN PHYSICIANS SERVICE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSS
For the six months ended June 30, 2003 and June 30, 2004

(In thousands)



Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Comprehensive Treasury Shareholders'
Stock Capital Earnings Income (loss) Income (loss) Stock Equity
------------------------------------------------------------------------------------------------
Balance December 31, 2002 (audited) $ 213 $ 5,584 $ 9,515 $ 1,830 $ -- $ 17,142
------------------------------------------------------------------------------------------------
Comprehensive income:

Net income -- -- 1,236 $1,236 -- -- 1,236
Other comprehensive income:
Unrealized loss on securities,
net of taxes of $1,005 -- -- -- (1,950) (1,950) -- (1,950)
--------
Comprehensive loss -- -- -- $ (714) -- -- --
========
Stock options exercised 2 78 -- -- -- 80
Treasury stock purchase -- -- -- -- (89) (89)
Cancelled treasury stock -- -- (25) -- 25 --
------------------------------------------------------------------------------------------------
Balance June 30, 2003 (unaudited) $ 215 $ 5,662 $10,726 $ -- $ (120) $ (64) 16,419
================================================================================================


Balance December 31, 2003 (audited) $ 245 $ 6,918 $ 12,314 $ -- $ (371) $ -- $ 19,106
------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- 1,383 $ 1,383 -- -- 1,383
Other comprehensive income:
Unrealized gain on securities,
net of taxes of $37 -- -- -- 71 71 -- 71
-----

Comprehensive income: -- -- -- $ 1,454 -- -- --
========
Treasury stock purchase -- -- -- -- (410) (410)
Stock options exercised 13 680 -- -- -- 693
Cancelled treasury stock (4) (406) -- 410 --
Forgiveness of Uncommon Care Debt -- -- 60 -- -- 60
------------------------------------------------------------------------------------------------
Balance June 30, 2004 (unaudited) $ 254 $ 7,192 $13,756 $ -- $ (300) $ -- $ 20,902
================================================================================================




See accompanying notes to condensed consolidated financial statements.

- 8 -


AMERICAN PHYSICIANS SERVICE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)


1. GENERAL

The accompanying unaudited condensed consolidated financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. The consolidated
financial statements for the six months ended June 30, 2004 and 2003 reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the periods presented. Such adjustments consist of only items of a normal
recurring nature. These consolidated financial statements have not been audited
by our independent certified public accountants. The operating results for the
interim periods are not necessarily indicative of results for the full fiscal
year.

The notes to consolidated financial statements appearing in our Annual
Report on Form 10-KSB for the year ended December 31, 2003 filed with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q. There have been no significant changes in the information
reported in those notes other than from normal business activities.

Certain reclassifications have been made to amounts in prior periods to
be consistent with the 2004 presentation.


2. MANAGEMENT'S 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 reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.


3. CONTINGENCIES

We are involved in various claims and legal actions that have arisen in
the ordinary course of business. Management believes that any liabilities
arising from these actions will not have a significant adverse effect on our
financial condition or results of operations.



- 9 -


4. GAIN RECOGNITION

During the three and six months ended June 30, 2004, we received
proceeds of approximately $910,000 and $1,118,000, respectively, and recognized
gains of $218,000 and $245,000, respectively, resulting from the sale of
available-for-sale equity securities.

Additionally, during the three and six months ended June 30, 2004, we
recognized $122,000 and $244,000, respectively, of deferred gain related to the
November 2001 sale and subsequent leaseback of real estate to Prime Medical. Due
to our continuing involvement in the property, we deferred recognizing
approximately $2,400,000 of the approximately $5,100,000 gain and are
recognizing it in earnings, as a reduction of rent expense, monthly through
November 2006. A total of $1,179,000 remains to be recognized in the coming
twenty-nine months. In addition, 15% of the gain ($760,000) related to our then
15% ownership in the purchaser, was deferred. As our ownership percentage in
Prime declines through our sales of Prime common stock, we recognize these gains
proportionately to our reduction of our interest in Prime. During the first six
months of 2004 and 2003, we recognized $56,000 and $8,000, respectively, of
these deferred gains, leaving a balance of approximately $180,000 remaining to
be recognized.


5. GAIN ON FORGIVENESS OF DEBT

We recorded $12,000 and $75,000 during the three and six months ended
June 30, 2004, respectively, as gain on forgiveness of debt. This represents
that amount of liability that was released in the respective period by
participants in our loan to an affiliate, net of $15,000 interest due them from
prior period payments made by Uncommon Care. Due to poor operating results,
Uncommon Care was in default and not making scheduled payments under its loan
agreement with us in which the participations had been sold. As a result, the
loan participants released us from any obligations under the participation
agreements. That portion of the releases entered into with related parties,
totaling $60,000, was taken directly into equity. The effect of these
transactions on our balance sheet for the period ended June 30, 2004 was to
reduce the long-term liability account, "Payable under loan participation
agreements", by $150,000.


6. INVESTMENT IN AVAILABLE-FOR-SALE EQUITY SECURITIES

On June 4, 2003 we purchased from Financial Industries Corporation
("FIC")(OTC: FNIN.PK) and a foundation 339,879 shares of FIC's common stock as
an investment. Earlier in 2003 we had purchased 45,121 FIC shares in the open
market. The 385,000 shares represents an approximate 4% ownership in FIC. The
aggregate purchase price was approximately $5,650,000, which was all sourced
from our cash reserves. The shares purchased from FIC and the foundation are not
registered, but are subject to a registration rights agreement requiring FIC's
best efforts to register them within one year of the transaction. Due to FIC's
delay in filing its 2003 Form 10-K and its March 31, 2004 Form 10-Q, it has not
been able to register these shares and was delisted from the NASDAQ exchange in
July, 2004. FIC's management has committed to use its best efforts to register
these shares after filing its delinquent annual and quarterly reports with the
SEC, which efforts are currently in progress. At June 30, 2004, the value of our
investment in FIC has declined by approximately $2,075,000. We have classified
all of these shares as securities

- 10 -


available-for-sale and have recorded changes in their value, net of tax, in our
balance sheet as part of Accumulated Other Comprehensive Income (Loss) in
Stockholders' Equity. This market value decline is not reflected in our
earnings. If we had determined that the decline represented an "other than
temporary" impairment, we would have taken the $2,075,000 loss against our
second quarter 2004 earnings. Our determination that the decline is not "other
than temporary" was based on (1) the short length of time that the market value
of our FIC shares has been significantly less than our cost; (2) our intent and
financial ability to hold our investment for a period of time sufficient to
allow for a recovery in market value; (3) our expectation that the company can
restore its NASDAQ listing after making the required SEC filings, and (4) our
belief that the financial condition and near-term prospects of FIC are stable.
Our cost basis in FIC common stock is $14.67 per share and the stock has traded
at or above $14.00 per share as recently as April 6, 2004. Furthermore, FIC, as
an insurance holding company, is not subject to obsolescence in core
technologies nor has it suffered the discontinuance of a segment of its business
that may affect its future earnings potential. However, at June 30, 2004 FIC's
share price was $9.28 and, subsequently, has been as low as $7.75. While we
believe these declines are the result of the company's financial reporting
difficulties and resultant delisting and are not reflective of adverse
developments in FIC's core business, we recognize there is inherent uncertainty
regarding FIC's ability to restore its listing, the recovery of its stock price
and the impact these events may have on the company's routine operations. We are
closely monitoring FIC's situation and, if we later determine that the value of
the FIC investment has an "other than temporary" decline, we will recognize a
loss in the period during which we make such determination.

As part of this transaction we were granted options to purchase an
additional 323,000 shares of FIC's common stock at $16.42 per share. There is a
significant revenue-related performance requirement that must be met before
these options are exercisable. There are presently no registered FIC shares
available to issue upon the exercise of these options. We have assigned no value
to these options.

7. INVESTMENT IN AVAILABLE-FOR-SALE FIXED INCOME SECURITIES

We have invested primarily in U.S. government-backed securities with
maturities varying from in one to three years, as well as a Standard and Poor's
B-rated corporate bond.

8. ACCRUED EXPENSES AND OTHER LIABILITIES
-
Accrued expenses and other liabilities consists of the following:

June 30 December 31
2004 2003
(Unaudited)
---------------- --------------
Commissions payable $ 1,136,000 $ 964,000
Taxes payable 81,000 116,000
Vacation 158,000 158,000
401(k) plan matching 110,000 121,000
Other accrued liabilities 49,000 126,000
--------- ---------
$ 1,534,000 $1,485,000
=========== ==========


- 11 -


9. NET INCOME PER SHARE

Basic income per share is based on the weighted average shares
outstanding without any dilutive effects considered. Diluted income per share
reflect dilution from all contingently issuable shares, such as options and
convertible debt. A reconciliation of earnings and weighted average shares
outstanding used in the calculation of basic and diluted earnings per share from
operations follows:

For the Three Months Ended June 30, 2004
--------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ----------- ----------
Income from operations $ 689,000

Basic EPS
Income available to
common stockholders 689,000 2,505,000 $0.28
=====

Diluted EPS
Effect of dilutive securities -- 286,000
-------- --------

Income available to
common stockholders and
assumed conversions $ 689,000 2,791,000 $0.25
========= ========= =====




For the Three Months Ended June 30, 2003
-------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- --------
Income from operations $ 684,000

Basic EPS
Income available to 684,000 2,138,000 $ 0.32
common stockholder ======

Diluted EPS
Effect of dilutive securities -- 131,000
--------- ---------

Income available to common
stockholders and assumed
conversions $ 684,000 2,269,000 $ 0.30
========= ========= ======




- 12 -


For the Six Months Ended June 30, 2004
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- -------
Income from operations $ 1,383,000

Basic EPS
Income available to 1,383,000 2,489,000 $ 0.56
common stockholders =====

Diluted EPS
Effect of dilutive securities -- 313,000
--------- ---------

Income available to common
stockholders and assumed
conversions $ 1,383,000 2,802,000 $ 0.49
=========== ========= ======





For the Six Months Ended June 30, 2003
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
Income from operations $ 1,236,000

Basic EPS
Income available to 1,236,000 2,134,000 $ 0.58
common stockholders =====

Diluted EPS
Effect of dilutive securities -- 113,000
--------- ---------

Income available to common
stockholders and assumed
conversions $ 1,236,000 2,247,000 $ 0.55
=========== ========= ======


Unexercised employee stock options to purchase zero and 40,000 shares
of the Company's common stock as of June 30, 2004 and 2003, respectively, were
not included in the computations of diluted EPS because the effect would be
antidilutive as their exercise price exceeds the average stock price during the
period.





- 13 -



10. SEGMENT INFORMATION

The Company's segments are distinct by type of service provided. Comparative
financial data for the six month periods ended June 30, 2004 and 2003 are shown
as follows:

Three months ended June 30,
2004 2003
-------- ------

Operating Revenue:
Financial services $ 4,227,000 $ 4,801,000
Insurance services 3,068,000 2,168,000
Corporate -- 1,177,000
--------- ---------
Total Segment Revenues $ 7,295,000 $ 8,146,000
========= =========
Reconciliation to Consolidated
Statement of Operations:
Total segment revenues $ 7,295,000 $ 8,146,000
Less: Intercompany dividends -- (1,177,000)
--------- ---------
Total Revenues $ 7,295,000 $ 6,969,000
========= =========

Operating Income
Financial services $ 567,000 $ 738,000
Insurance services 688,000 465,000
Corporate (511,000) (452,000)
-------- -------
Total segments operating income 744,000 751,000

Gain on sale of investments 218,000 74,000
Gain on forgiveness of debt 12,000 --
------- --------

Income from operations before interest,
income taxes and minority interest 974,000 825,000

Interest income 72,000 76,000
Other gain (loss) 26,000 (22,000)
Interest expense 2,000 1,000
Income tax expense 381,000 387,000
Minority interest -- 42,000
Equity in gain of unconsolidated affiliates -- 235,000
-------- --------

Net income $ 689,000 $ 684,000
======== =======







- 14 -



Six months ended June 30,
2004 2003
----------- ----------

Operating Revenue:
Financial services $ 8,059,000 $ 8,836,000
Insurance services 6,526,000 4,724,000
Corporate 1,600,000 1,177,000
---------- ----------
Total Segment Revenues $ 16,185,000 $ 14,737,000
========== ==========

Reconciliation to Consolidated
Statement of Operations:
Total segment revenues $ 16,185,000 $ 14,737,000
Less: Intercompany dividends (1,600,000) (1,177,000)
---------- ----------
Total Revenues $ 14,585,000 $ 13,560,000
========== ==========

Operating Income
Financial services $ 1,158,000 $ 1,433,000
Insurance services 1,524,000 1,049,000
Corporate (1,012,000) (876,000)
--------- ---------
Total segments operating income 1,670,000 1,606,000

Gain on sale of investments 245,000 89,000
Gain on forgiveness of debt 75,000 --
--------- ---------

Income from operations before interest,
income taxes and minority interest 1,990,000 1,695,000

Interest income 155,000 170,000
Other gain (loss) 18,000 (22,000)
Interest expense 2,000 2,000
Income tax expense 778,000 733,000
Minority interest -- 107,000
Equity in gain of unconsolidated affiliates -- 235,000
-------- --------

Net income $ 1,383,000 $ 1,236,000
========= =========







- 15 -



11. SALE OF APS CONSULTING

Effective November 1, 2003, APS Consulting was able to obtain third
party financing and repay their note payable to us in exchange for our agreeing
to discount the note by $35,000. We provided no guarantees or credit
enhancements in connection with APS Consulting securing this financing.
Accordingly, we no longer have a risk of loss related to these operations and
have recognized the transaction as a divestiture. As a result, we ceased
consolidation of APS Consulting financial statements effective November 1, 2003.
Our consolidated statements of operations for the three and six months ended
June 30, 2003 have been adjusted to reflect this divestiture. Specifically,
revenues of $773,000 and $1,672,000 have been reversed, expenses of $616,000 and
$1,242,000 have been reversed, and the operating profit of $157,000 and $430,000
was reversed for the three and six month periods ended June 30, 2003,
respectively, from federal income taxes and minority interest. There was no
change to the net income as of June 30, 2003 as a result of these reversals
because, prior to the disposal transaction, we consolidated the division's
operations, but recognized a 100% minority interest in its earnings. As the
division had earnings in the prior period presented, there were no earnings
attributable to discontinued operations, after adjustments made to reclassify
its revenue, expenses and the related minority interest.



12. STOCK-BASED COMPENSATION

We have adopted the disclosure-only provisions of Statement of
Accouting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"), as amended by SFAS 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure", but measure compensation expense for our stock-based
employee compensation plans using the intrinsic value method prescribed by APB
Opinion No. 25, Accounting for Stock Issued to Employees. Proforma disclosures
of net income and earnings per share as if the fair value-based method
prescribed by SFAS 123 had been applied in measuring compensation expense
follow. For purposes of the proforma disclosures, the estimated fair value of
the options is amortized to expense over the option's vesting periods.

Three Months Ended June 30,

2004 2003
---- ----

Net Income as reported $689,000 $684,000

Deduct: Total additional stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (86,000) (59,000)
--------- --------

Pro forma net income $603,000 $625,000
========= ========

Net income per share
Basic - as reported $ 0.28 $ 0.32
====== ======
Basic - pro forma $ 0.24 $ 0.29
====== ======
Diluted - as reported $ 0.25 $ 0.30
====== ======
Diluted - pro forma $ 0.22 $ 0.28
====== ======





- 16 -




Six Months Ended June 30,

2004 2003
---- ----

Net Income as reported $1,383,000 $1,236,000

Deduct: Total additional stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (172,000) (117,000)
-------- ---------

Pro forma net income $1,211,000 $1,119,000
========== =========

Net income per share
Basic - as reported $ 0.56 $ 0.58
====== ======
Basic - pro forma $ 0.49 $ 0.52
====== ======
Diluted - as reported $ 0.49 $ 0.55
====== ======
Diluted - pro forma $ 0.43 $ 0.50
====== ======




13. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2004, the Financial Accounting Standards Board ("FASB") issued
an exposure draft entitled "Share-Based Payment, an Amendment of FASB Statements
No. 123 and 95." This proposed statement addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The proposed Statement would eliminate the ability to account for share-based
compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued
to Employees", and generally would require instead that such transactions be
accounted for using a fair-value-based method. As proposed, this statement would
be effective for the Company on January 1, 2005. We are currently evaluating the
effect this proposed standard will have on our financial position or results of
operations.


In March 2004, the FASB reached a consensus on EITF 03-1, "The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments"
(" EITF 03-1"). EITF 03-1 provides guidance for determining when an investment
is impaired and whether the impairment is other than temporary. EITF 03-1 also
incorporates into its consensus the required disclosures about unrealized losses
on investments announced by the EITF in late 2003 and adds new disclosure
requirements relating to cost-method investments. The impairment accounting
guidance is effective for reporting periods beginning after June 15, 2004 and
the new disclosure requirements for annual reporting periods ending after
December 15, 2003. We are currently evaluating the impact that adoption of the
impairment guidance contained in EITF 03-1 may have on our financial position or
results of operations.





- 17 -


6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

Our statements contained in this report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements regarding our expectations, hopes, intentions or strategies
regarding the future. You should not place undue reliance on forward-looking
statements. All forward-looking statements included in this report are based on
information available to us on the date hereof, and we assume no obligation to
update any such forward-looking statements. It is important to note that our
actual results could differ materially from those in the forward-looking
statements. In addition to any risks and uncertainties specifically identified
in the text surrounding the forward-looking statements, you should consult our
reports on Forms 10-KSB and our other filings under the Securities Act of 1933
and the Securities Exchange Act of 1934, for factors that could cause our actual
results to differ materially from those presented.

The forward-looking statements included herein are necessarily based on
various assumptions and estimates and are inherently subject to various risks
and uncertainties, including risks and uncertainties relating to the possible
invalidity of the underlying assumptions and estimates and possible changes or
developments in social, economic, business, industry, market, legal and
regulatory circumstances and conditions and actions taken or omitted to be taken
by third parties, including customers, suppliers, business partners and
competitors and legislative, judicial and other governmental authorities and
officials. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond our control. Any of these assumptions
could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this report will prove to be accurate.

GENERAL

We provide (1) financial services, including brokerage and investment
services to individuals and institutions, and (2) insurance services, including
management and agency services to medical malpractice insurance companies.

FINANCIAL SERVICES. We provide investment and investment advisory services to
institutions and individuals throughout the United States through the
following subsidiaries:




- 18 -


o APS FINANCIAL. APS Financial is a fully licensed broker/dealer that
provides brokerage and investment services primarily to institutional and
high net worth individual clients. APS Financial also provides portfolio
accounting, analysis, and other services to insurance companies, banks
and public funds. We recognize commissions revenue, and the related
compensation expense, on a trade date basis.

o ASSET MANAGEMENT. Asset Management manages fixed income and equity assets
for institutional and individual clients on a fee basis. We recognize fee
revenues monthly based on the amount of funds under management.




INSURANCE SERVICES. Through Insurance Services we provide management and agency
services to medical malpractice insurance companies through the following
subsidiary:

o FMI. APS Facilities Management, Inc., dba APMC Insurance Services, Inc.,
or FMI, provides management and administrative services to APIE,
a regional insurance exchange that sells medical professional
liability insurance only to its physician subscribers, who pay annual
insurance premiums and maintenance fees to APIE. APIE is governed by a
physician board of directors. Pursuant to a management agreement and
the direction of this board, FMI manages and operates APIE, including
performing policy issuance, claims investigation and settlement, and
all other management and operational functions. As a management fee,
FMI receives a percentage of APIE's earned premiums and a portion of
APIE's profit, subject to a cap based on premium levels. We recognize
revenues for the management fee portion based on a percentage of earned
premium on a monthly basis, and we recognize revenues for the
management fee portion based on profit sharing when it is reasonably
certain the managed company will have an annual profit, generally in
the fourth quarter. FMI's assets are not subject to APIE policyholder
claims.

In addition, as of June 30, 2004, we have the following significant
investments accounted for as available-for-sale securities: (1) we own
approximately 555,000 shares of Prime Medical common stock, representing
less than 3% of its outstanding common stock, and (2) we own 385,000 shares
of Financial Industries Corporation, representing approximately 4% of its
outstanding common stock. We account for these investments as
available-for-sale securities, which means they are reflected on our
consolidated balance sheets at fair value, and fluctuations in fair value
are recognized as unrealized gains or losses excluded from earnings and
reported as a separate component of stockholders' equity, net of income
taxes.



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. On an on-going basis, we evaluate our
estimates, including those related to, impairment of assets; bad debts; income
taxes; and contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies and estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements. We periodically review the carrying value
of our assets to determine if events and circumstances exist indicating that
assets might be impaired. If facts and circumstances support this possibility of
impairment, our management will prepare undiscounted and discounted cash flow
projections, which require judgments that are both subjective and complex.
Management may also obtain independent valuations.

Our financial services revenues are composed primarily of commissions
on securities trades and asset management fees. Revenues related to securities
transactions are recognized on a trade date basis. Asset management fees are
recognized as a percentage of assets under management during the period based
upon the terms of agreements with the applicable customers.

Our insurance services revenues are primarily related to management
fees based on the earned premiums of the managed company and include a profit
sharing component, as defined in the management agreement, related to the
managed company's annual earnings. Management fees are recorded, based upon the
terms of the management agreement, in the period the related premiums are earned
by the managed company. The managed company recognizes premiums as earned
ratably over the terms of the related policy. The profit sharing component is
recognized when it is reasonably certain the managed company will have an annual
profit, and, typically, has been recognized during the fourth quarter.

Effective November 1, 2003, our former consulting subsidiary, APS
Consulting, paid off the negotiated remainder of the note due us, allowing us to
cease accounting for them as a variable interest entity. Consequently, we have
reclassified the three and six months ended June 30, 2003 income statements to
reflect the disposition of APS Consulting.




- 20 -


On June 4, 2003 we purchased from Financial Industries Corporation
("FIC")(OTC: FNIN.PK) and a foundation 339,879 shares of FIC's common stock as
an investment. Earlier in 2003 we had purchased 45,121 FIC shares in the open
market. The 385,000 shares represents an approximate 4% ownership in FIC. The
aggregate purchase price was approximately $5,650,000, which was all sourced
from our cash reserves. The shares purchased from FIC and the foundation are not
registered, but are subject to a registration rights agreement requiring FIC's
best efforts to register them within one year of the transaction. Due to FIC's
delay in filing its 2003 Form 10-K and its March 31, 2004 Form 10-Q, it has not
been able to register these shares and was delisted from the NASDAQ exchange in
July, 2004. FIC's management has committed to use its best efforts to register
these shares after filing its delinquent annual and quarterly reports with the
SEC, which efforts are currently in progress. At June 30, 2004, the value of our
investment in FIC has declined by approximately $2,075,000. We have classified
all of these shares as securities available-for-sale and have recorded changes
in their value, net of tax, in our balance sheet as part of Accumulated Other
Comprehensive Income (Loss) in Stockholders' Equity. This market value decline
is not reflected in our earnings. If we had determined that the decline
represented an "other than temporary" impairment, we would have taken the
$2,075,000 loss against our second quarter 2004 earnings. Our determination that
the decline is not "other than temporary" was based on (1) the short length of
time that the market value of our FIC shares has been significantly less than
our cost; (2) our intent and financial ability to hold our investment for a
period of time sufficient to allow for a recovery in market value; (3) our
expectation that the company can restore its NASDAQ listing after making the
required SEC filings, and (4) our belief that the financial condition and
near-term prospects of FIC are stable. Our cost basis in FIC common stock is
$14.67 per share and the stock has traded at or above $14.00 per share as
recently as April 6, 2004. Furthermore, FIC, as an insurance holding company, is
not subject to obsolescence in core technologies nor has it suffered the
discontinuance of a segment of its business that may affect its future earnings
potential. However, at June 30, 2004 FIC's share price was $9.28 and,
subsequently, has been as low as $7.75. While we believe these declines are the
result of the company's financial reporting difficulties and resultant delisting
and are not reflective of adverse developments in FIC's core business, we
recognize there is inherent uncertainty regarding FIC's ability to restore its
listing, the recovery of its stock price and the impact these events may have on
the company's routine operations. We are closely monitoring FIC's situation and,
if we later determine that the value of the FIC investment has an "other than
temporary" decline, we will recognize a loss in the period during which we make
such determination.



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RESULTS OF OPERATIONS

REVENUES

Revenues from operations increased $326,000 (5%) and $1,025,000 (8%) in the
three and six months ended June 30, 2004, respectively, compared to the same
periods in 2003. Our income from continuing operations before interest, income
taxes and minority interest increased $149,000 (18%) and $295,000 (17%) in the
current year three and six months, respectively, compared to the same periods in
2003. Our net income increased $5,000 (1%) and $147,000 (12%) in the current
year three and six months, respectively, compared to the same periods in 2003.
Our diluted net income per share declined $0.05 (17%) and $0.06 (11%) in the
current year three and six months, respectively, compared to the same periods in
2003 as a result of our weighted average of diluted shares outstanding
increasing 522,000 and 555,000 shares in the current year three and six months,
respectively, compared to the same periods in 2003. The reasons for these
changes are described below.

FINANCIAL SERVICES

Our financial services revenues decreased $574,000 (12%) and $777,000
(9%) in the three and six months ended June 30 2004, respectively, compared to
the same periods in 2003. The decrease in both current year periods was due to
lower commission revenues at APS Financial, the broker/dealer division of our
financial services segment. APS Financial derives most of its revenue from
trading in the fixed income market, both in investment and non-investment
securities. Interest rates during the second quarter of 2004 rose substantially,
as evidenced by short-term treasuries climbing a full percentage point. This,
along with election year issues, Federal Reserve actions and higher oil prices,
caused a measure of uncertainty amongst investors that can be responsible for
our reduced volume of investment and non-investment grade trading. Additionally,
the predominant thinking about the high yield market was that it was richly
valued. Therefore, many of our customers remained cautious or on the sidelines,
reducing their level of trading.

Our financial services expense decreased $403,000 (10%) and $502,000
(7%) in the three and six months ended June 30, 2004, respectively, compared to
the same periods in 2003. The primary reason for the current quarter decrease is
a $376,000 (14%) decrease in commissions expense resulting from the decrease in
commission income mentioned above. In addition, incentive compensation costs
were down $53,000 (12%) in the current quarter compared to the same period in
2003 as a result of lower profits and higher minimum performance criteria placed
upon management at APS Financial for 2004. Lastly, legal fees were down $14,000
(29%). For the six months, the reasons for the decline in expenses are the same
as those for the current quarter.



- 22 -


INSURANCE SERVICES

Our insurance services revenues from our premium-based insurance
management segment, APS Insurance Services, increased $900,000 (42%) and
$1,802,000 (38%) in the three and six months ended June 30, 2004, respectively,
compared to the same periods in 2003. The primary reason for the current year
increase is a $460,000 (87%) and $997,000 (74%) increase in respective current
year three and six month pass-through commissions earned by third party agents
resulting from approximately $10.4 million in additional written premium this
year compared to 2003. Net income is not affected by outside sales commissions
as these agents are paid commissions equivalent to the revenue earned. Further
contributing to the 2004 increase in revenues was a $443,000 (27%) and $672,000
(20%) increase in three and six month management fees resulting from an increase
in earned premium of approximately $5.0 million for the year. Lastly, our risk
management fees earned increased $101,000 (149%) in the current six months
compared to the same period in 2003 as a result of a greater number of doctor
groups receiving this service as well as an increase in the rate charged.

Insurance services expenses increased $677,000 (40%) and $1,327,000
(36%) in the three and six months ended June 30, 2004, respectively, compared to
the same periods in 2003. The current year increase is primarily due to the
above-mentioned increase in respective current year three and six month third
party pass-through commissions paid. In addition, salaries expense was $94,000
(14%) and $147,000 (11%) higher in the three and six months, respectively, as a
result of personnel additions, including a high-level management position to
help meet our growing financial reporting requirements, as well as normal annual
merit raises. Also, depreciation and amortization expense increased $34,000
(131%) and $71,000 (147%) in the current three and six months, respectively,
primarily as a result of amortizing the non-compete agreement that was created
upon the repurchase of the 20% minority interest in October, 2003. Partially
offsetting these increases was a current quarter decrease in advertising.
Advertising declined $79,000 (79%) and $102,000 (79%) in the current three and
six months as a result of re-branding efforts of the business during 2003.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased $97,000 (21%) and
$184,000 (21%) in the three and six months ended June 30, 2004, respectively,
compared to the same periods in 2003. Incentive compensation expense was $83,000
(111%) and $151,000 (99%) higher in the respective current three and six months
as the monthly accrual has been raised in order to better match anticipated
annual earnings. The majority of last year's management incentive costs were
expensed in the latter half of 2003 as it was not until then that we were able
to more accurately estimate 2003 earnings. In addition, professional fees were
$11,000 (175%) and $20,000 (182%) higher in the respective



- 23 -


current three and six months as a result of fees incurred in connection with
investor relations expenses. Partially offsetting these increases was a $35,000
(44%) and $58,000 (57%) decrease in the respective current three and six months
legal fees, the result of non-recurring legal consulting fees incurred in 2003
in connection with our investment in Financial Industries.


GAIN ON SALE OF ASSETS

Gain on sale of assets primarily represents the recognition of deferred
income. Approximately $760,000 of the $5,100,000 deferred gain on the sale of
real estate to Prime Medical in 2001 was due to our ownership interest in Prime
and is recognized upon the reduction of our ownership percentage in Prime
Medical through the sale of its stock. In the first six months of 2004, we
recognized approximately $56,000 from the sale of Prime Medical common stock
versus a gain of $8,000 in the same period of 2003.


GAIN ON SALE OF INVESTMENTS

Gain on the sale of investments increased $144,000 (195%) and $156,000
(175%) in the three and six months ended June 30, 2004, respectively, compared
to the same periods in 2003. The current year increase was due to the sale of an
increased number of available-for-sale equity securities in 2004 than were sold
in the first six months of 2003.


GAIN ON FORGIVENESS OF DEBT

We recorded $12,000 and $75,000 in the three and six months ended June
30, 2004 as a gain on forgiveness of debt. These represent those amounts of
liability that were released in the current year by participants in our loan to
this affiliate, net of $15,000 in expenses associated with these releases. Due
to poor operating results, Uncommon Care was in default and not making scheduled
payments under its loan agreement with us in which the participations had been
sold. As a result, the loan participants released us from any obligations under
the participation agreements. That portion of the releases entered into with
related parties, totaling $60,000, was taken directly into equity in the first
quarter of 2004. The effect of these transactions on our balance sheet for the
period ended June 30, 2004 was to reduce the long-term liability account,
"Payable under loan participation agreements", by $150,000.







- 24 -


INTEREST INCOME

Our interest income decreased slightly in both the three and six month
periods ended June 30, 2004 compared to the same periods in 2003 primarily as a
result of a higher balance of interest-bearing securities held in 2003. In June
2003, we liquidated approximately $4.0 million in interest-bearing securities in
order to secure the funds required to invest in 385,000 shares of Financial
Industries common stock.

OTHER INCOME (LOSS)

Our other income rose $48,000 and $40,000 for the three and six months
ended June 30, 2004, respectively compared to the same periods in 2003. The
increase in the current year represents primarily management fees received from
our former consulting division partially offset by inventory losses at APS
Financial. In the same period in 2003, management fees from our former
consulting division were eliminated from earnings since they were still
consolidated and, as such, fees paid by them to us were eliminated as an
inter-company item.

MINORITY INTERESTS

During the first six months of 2003, minority interests represented the
combination of two outside interests in subsidiaries of the Company: a twenty
percent interest in Insurance Services owned by FPIC Insurance Group, Inc. and a
three percent interest in APS Asset Management, a subsidiary of the financial
services subsidiary of the Company (APS Investment Services), owned by key
individuals within APS Asset Management. Minority interests decreased in the
current year due to the repurchase of the 20% minority interest in Insurance
Services from the minority interest holder, FPIC Insurance Group effective
October 1, 2003.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL

Our net working capital was $8,368,000 and $8,537,000 at June 30, 2004
and December 31, 2003, respectively. The decrease in the current year was due in
part to cash used to purchase long-term available-for-sale fixed income and
equity securities. Partially offsetting this was cash received from operations
as well as tax refunds received in 2004. Historically, we have maintained a
strong working capital position and, as a result, we have been able to satisfy
our operational and capital expenditure requirements with cash generated from
our operating and investing activities. These same sources of funds have also
allowed us to pursue investment and expansion opportunities consistent with our
growth plans.



- 25 -


Although there can be no assurance our operating activities will
provide positive cash flow in 2004, we are optimistic that our working capital
requirements will be met for the foreseeable future for the following reasons:
(1) our current cash position is very strong, with a balance of approximately
$7.3 million comprising 29 percent of our total assets; (2) our investments in
available-for-sale equity and fixed income securities could provide an
additional $11.1 million should the need arise, although at June 30, 2004, a
liquidation of these investments would have caused a loss of $300,000 to be
realized; (3) we expect federal income tax refunds during the second half of
2003 totaling $1 million; and (4) we established a line of credit in November
2003 that is described below.

LINE OF CREDIT

During November 2003, we established a $3.0 million line of credit with
PlainsCapital Bank. The loan called for interest payments only to be made on any
amount drawn until April 15, 2004, when the entire amount of the note, principal
and interest then remaining unpaid, became due and payable. We have since
renewed this line of credit for a period of one year following the April 15,
2004 maturity date. At June 30, 2004, there were no draws taken against this
line of credit. We are in compliance with the covenants of the loan agreement,
including requirements for a minimum of $5.0 million of unencumbered liquidity
and a minimum 2 to 1 debt to worth ratio.

CAPITAL EXPENDITURES

Our capital expenditures for equipment were $267,000 in the six months
of 2004. We expect capital expenditures in 2004 to be approximately $375,000,
including $270,000 in improvements to our reporting software. Our 2004 capital
expenditure budget is expected to be funded through cash on hand.

ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS

In March 2004, the Financial Accounting Standards Board ("FASB") issued
an exposure draft entitled "Share-Based Payment, an Amendment of FASB Statements
No. 123 and 95." This proposed statement addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The proposed Statement would eliminate the ability to account for share-based
compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued
to Employees", and generally would require instead that such transactions be
accounted for using a fair-value-based method. As proposed, this statement would
be effective for the Company on Jaunary 1, 2005. We are currently unable to
determine what effect this statement will have on our financial position or
results of operations, if any.



- 26 -


In March 2004, the FASB reached a consensus on EITF 03-1, "The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments"
(" EITF 03-1"). EITF 03-1 provides guidance for determining when an investment
is impaired and whether the impairment is other than temporary. EITF 03-1 also
incorporates into its consensus the required disclosures about unrealized losses
on investments announced by the EITF in late 2003 and adds new disclosure
requirements relating to cost-method investments. The impairment accounting
guidance is effective for reporting periods beginning after June 15, 2004 and
the new disclosure requirements for annual reporting periods ending after June
15, 2004. We are currently evaluationg the impact that adoption of the
impairment guidance contained in EITF 03-1 may have on our financial position or
results of operations.


Item 3.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed by us in reports that we file
or submit under the Securities Exchange Act, is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures. In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurances of achieving the desired
control objectives, and management necessarily is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
As of the end of the period covered by this report, and under the supervision
and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we evaluated the effectiveness of thedesign
and operation of these disclosure procedures. Based on this evaluation and
subject to the foregoing, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective in
reaching a reasonable level of assurance of achieving management's desired
controls and procedures objectives.

There have been no changes in internal controls over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to affect, our internal control
over financial reporting.

As part of a continuing effort to improve our business processes we are
evaluating our internal controls and may update certain controls to accommodate
any modifications to our business processes or accounting procedures.


- 27 -




PART II

OTHER INFORMATION







- 28 -


- -Item 1. LEGAL PROCEEDINGS

We are involved in various claims and legal actions that have arisen in the
ordinary course of business. Management believes that any liabilities arising
from these actions will not have a significant adverse effect on our financial
condition or results of operations.


Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Items 2(a) through(d) are inapplicable.

(e) Stock Repurchases




(d) Maximum
Number of
Shares (or
Approximate
Dollar Value)
(c) Total Number of Shares that
of Shares May Yet be
Purchased as Part Purchased Under
Period (a) Total Number (b) Average of Publicly the Plans or
of shares Price Paid Annonuced Plans Programs
Purchased (1) per Share or Programs
- ------- --------- ---------- ------------ --------------


April 1, 2004-April 30, 2004 915 $ 12.90 -- N/A
May 1, 2004-May 31, 2004 15,683 $ 9.69 -- N/A
June 1, 2004-June 31, 2004 24,581 $ 10.04 -- N/A



(1) Of the total shares purchased 26,263 were purchased in open market
transactions and 14,916 were purchased in private transactions.



Item 4. RESULTS OF VOTES OF SECURITY HOLDERS

On June 7, 2004 the annual meeting of American Physicians Service Group,
Inc. was held in Austin, Texas. Shareholders voted and approved the
following motion:

ELECTION OF DIRECTORS

The names of the directors elected at the meeting along with numbers of
votes for and withheld are as follows:



- 29 -


Name For Withheld
- --------------------- ---------------- ------------

Jackie Majors 2,223,632 47,255
Robert L. Myer 2,223,831 47,056
William A. Searles 2,223,832 47,055
Kenneth S. Shifrin 2,223,831 47,056
Cheryl Williams 2,223,832 47,055


Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer

32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer


(b) Reports on Form 8-K.

Report filed May 6, 2004 concerning the press release
reporting first quarter 2004 results of operations and
financial condition.









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