SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare
liability insurance, today reported continued improved results for
its second quarter and first half ended June 30, 2006. For the 2006
second quarter, SCPIE reported a 55% increase in net income to $2.6
million, or $0.27 per diluted share, on total revenues of $36.6
million. This compares to net income in the 2005 second quarter of
$1.7 million, or $0.18 per diluted share, on total revenues of
$36.6 million. For the first six months of 2006, SCPIE reported net
income of $5.0 million, or $0.52 per diluted share, on revenues of
$73.2 million. This compares to net income in the first half of
2005 of $3.4 million, or $0.35 per diluted share, on revenues of
$74.0 million. Core Operating Review In the 2006 second quarter,
SCPIE's core direct healthcare liability operations posted an
underwriting profit of $2.8 million, an increase from the profit of
$1.5 million in 2005. Net earned premiums for core direct
healthcare operations totaled $31.4 million, compared with $32.4
million a year earlier. This decrease is due to a small reduction
in the number of insureds and decreased premiums for loss-rated
groups. Net written premiums for the quarter were $3.4 million,
from $4.0 million in the 2005 second quarter. The combined ratio
for SCPIE's core business in the second quarter of 2006 improved to
91.2%, with a loss ratio of 70.9%. A year ago, the company's
combined ratio for the second quarter was 95.3%, including a loss
ratio of 74.5%. The expense ratio for the core segment in the 2006
second quarter improved slightly to 20.3% from 20.8% a year
earlier. For the first half of 2006, SCPIE's core healthcare
operations achieved an underwriting profit of $4.9 million, a
significant increase over the underwriting income of $1.7 million
in the first six months of 2005. Net earned premiums for the core
business decreased slightly to $62.6 million from $64.5 million a
year earlier, and net written premiums totaled $92.1 million in the
2006 first half, compared with $95.4 million in the first half of
2005. The combined ratio for the 2006 first half was 92.2%,
including a loss ratio of 71.0%. This is improved from a combined
ratio for the first half of last year of 97.4%, with a loss ratio
of 75.6%. SCPIE's retention rate for its core direct healthcare
liability business over the past 12 months totaled 95.0%. "Our
performance for the second quarter and the first half of 2006
continues to deliver positive results, building on the momentum of
the past 18 months," said Donald J. Zuk, SCPIE President and Chief
Executive Officer. "Moving into the second half of 2006, the
trending in California gives us every reason to remain optimistic
about future results." Non-Core Review SCPIE's continuing run-off
of its non-core healthcare liability operations in states other
than California and Delaware had minimal impact on the company's
financial results for the second quarter and first half of 2005.
Net outstanding reserves for this segment declined to $48.7 million
from $60.6 million at December 31, 2005. Open claims dropped to 170
from 229 at year-end 2005. In the assumed reinsurance area, which
is also in run-off, increased reserves on some London-based
contracts produced an underwriting loss of $3.1 million for the
quarter and $5.9 million for the first six months of 2006,
comparable to losses of $3.1 million and $5.5 million,
respectively, for the same periods in 2005. Financial Summary
Revenues for the second quarter of 2006 included net investment
income of $5.2 million and realized investment losses of $53,000,
compared with net investment income in the 2005 second quarter of
$4.1 million and realized investment losses of $10,000. For the
2006 first half, net investment income totaled $10.2 million and
realized investment losses of $164,000. A year earlier, the company
reported first-half net investment income of $8.8 million and
realized investment gains of $6,000. The increase in net investment
income in 2006 over comparable periods in 2005 is principally
attributable due to the general rise in shorter-term interest rates
during the respective periods. At June 30, 2006, SCPIE's balance
sheet remained debt-free. Book value at the close of the 2006
second quarter rose to $20.15 per share, compared with $20.05 per
share at December 31, 2005. About SCPIE Holdings SCPIE Holdings
Inc. is a leading provider of healthcare liability insurance for
physicians, oral and maxillofacial surgeons, and other healthcare
providers, as well as medical groups and healthcare facilities.
Since the company was founded in 1976, it has carved out a
significant niche in the insurance industry by providing innovative
products and services specifically for the healthcare community.
Investor Conference Call An investor conference call to discuss
SCPIE's 2006 second-quarter results will be held today, August 3,
2006, at 9 am PDT (12 noon EDT). The call will be open to all
interested investors through a live audio web broadcast via the
Internet at www.scpie.com and www.earnings.com. Rebroadcast over
the Internet will be available for one year on both websites. A
telephonic playback of the call will be available from
approximately 11 am PDT, Thursday, August 3, 2006 to 5 pm PDT,
Thursday, August 10, 2006. Listeners should call 888/286-8010
(domestic) or 617/801-6888 (international) and use Reservation
Number 57303315. In addition to historical information, this news
release contains forward-looking statements that are based upon the
company's estimates and expectations concerning future events and
are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the
forward-looking statements. Actuarial estimates of losses and loss
expenses and expectations concerning the company's ability to
retain current insureds at profitable levels, successful withdrawal
from the assumed reinsurance business, continued solvency of the
company's reinsurers, obtaining rate change regulatory approvals,
expansion of liability insurance business in its principal market,
and improved performance and profitability are dependent upon a
variety of factors, including future economic, competitive and
market conditions, frequency and severity of catastrophic events,
future legislative and regulatory actions, uncertainties and
potential delays in obtaining rate approvals, the level of ratings
from recognized rating services, the inherent uncertainty of loss
and loss expense estimates in both the core business and
discontinued non-core business and the cyclical nature of the
property and casualty insurance industry, all of which are
difficult or impossible to predict accurately and many of which are
beyond the control of the company. The company is also subject to
certain structural risks as an insurance holding company, including
statutory restrictions on dividends and other intercompany
transactions. In light of the significant uncertainties inherent in
the forward-looking information herein, the inclusion of such
information should not be regarded as representation by the company
or any other person that the company's objectives or plans will be
realized. -0- *T SCPIE Holdings Inc. and Subsidiaries Consolidated
Balance Sheets (Dollars in Thousands) June 30, December 31, 2006
2005 ---------------- --------------- ASSETS Securities
available-for-sale: Fixed maturities investments, at fair value
(amortized cost 2006 - $443,150; 2005 - $469,350) $ 427,081 $
461,480 Equity investments, at fair value (cost 2006 - $1,832; 2005
- $1,934) 2,035 2,095 --------------- -------------- Total
securities available-for-sale 429,116 463,575 Cash and cash
equivalents 91,952 68,783 --------------- -------------- Total
investments 521,068 532,358 Accrued investment income 5,847 5,874
Premiums receivable 49,975 18,731 Assumed Reinsurance Receivables
8,802 6,960 Reinsurance recoverable 51,200 55,933 Deferred policy
acquisition costs 9,435 7,120 Deferred federal income taxes, net
51,706 51,214 Property and equipment, net 2,096 2,449 Other assets
5,709 6,325 --------------- -------------- Total assets $ 705,838 $
686,964 =============== ============== LIABILITIES Reserves: Loss
and loss adjustment expenses $ 420,396 $ 429,315 Unearned premiums
71,187 41,705 --------------- -------------- Total reserves 491,583
471,020 Amounts held for reinsurance - 4,818 Other liabilities
22,941 20,333 --------------- -------------- Total liabilities
514,524 496,171 Commitments and contingencies STOCKHOLDERS' EQUITY
Preferred stock - par value $1.00, 5,000,000 shares authorized, no
shares issued or outstanding - - Common stock - par value $.0001,
30,000,000 shares authorized, 12,792,091 shares issued, 2006 -
9,494,303 shares outstanding 2005 - 9,456,916 shares outstanding 1
1 Additional paid-in capital 37,127 37,127 Retained earnings
264,659 259,645 Treasury stock, at cost (96,321) (97,063) (2006 -
2,797,788 shares and 2005 - 2,835,175 shares) Subscription notes
receivable (2,627) (2,649) Accumulated other comprehensive income
(11,525) (6,268) --------------- -------------- Total stockholders'
equity 191,314 190,793 --------------- -------------- Total
liabilities and stockholders' equity $ 705,838 $ 686,964
=============== ============== SCPIE Holdings Inc. and Subsidiaries
Consolidated Statements of Operations (Dollars in Thousands, except
per-share data) Six Months Ended Three Months Ended
----------------------- ----------------------- June 30, June 30,
June 30, June 30, 2006 2005 2006 2005 -----------------------
----------------------- Revenues: Net premiums earned $ 63,082 $
65,037 $ 31,452 $ 32,451 Net investment income 10,211 8,799 5,198
4,132 Realized investment gains/(losses) (164) 6 (53) (10) Other
revenue 59 174 6 60 ---------- ---------- ---------- ----------
Total revenues 73,188 74,016 36,603 36,633 Expenses: Losses &
loss adjustment expenses incurred 50,906 53,058 25,701 27,147 Other
operating expenses 14,737 15,719 7,130 6,854 ---------- ----------
---------- ---------- Total expenses 65,643 68,777 32,831 34,001
---------- ---------- ---------- ---------- Income before federal
income taxes 7,545 5,239 3,772 2,632 Income tax expenses 2,531
1,863 1,136 927 ---------- ---------- ---------- ---------- Net
income $ 5,014 $ 3,376 $ 2,636 $ 1,705 ========== ==========
========== ========== Basic earnings per share of common stock $
0.53 $ 0.36 $ 0.28 $ 0.18 ========== ========== ==========
========== Diluted earnings per share of common stock $ 0.52 $ 0.35
$ 0.27 $ 0.18 ========== ========== ========== ========== Average
number of shares outstanding- basic 9,504,384 9,416,827 9,490,382
9,429,052 Average number of shares outstanding- diluted 9,619,110
9,580,095 9,605,108 9,592,320 SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data (Dollars in Thousands) Six Months Ended
June 30, 2006 -----------------------------------------------
Direct Healthcare Liability Assumed --------------- Core(2) Non-
Reinsurance Other(7) Total(6) Core (4)(5) (3)(4) -------- ------
----------- --------- --------- Net written premium(1) $92,054 $ -
$ 510 $ 92,564 Net earned premium 62,572 - 510 63,082 Net
investment income $ 10,211 10,211 Realized investment
gains/(losses) (164) (164) Other revenue 59 59 -------- ------
----------- -------- -------- Total revenue 62,572 - 510 10,106
73,188 Incurred loss and LAE 44,404 - 6,502 50,906 Other expenses
13,263 - (92) 1,566 14,737 ------- ----- ---------- --------
-------- Net underwriting income/(loss) $ 4,905 $ - $ (5,900) (995)
======= ===== ========== Net investment income, other revenue &
expense $ 8,540 8,540 ======== -------- Income before federal
Income taxes $ 7,545 ======== Net cash provided/(used) in operating
activities $ (1,397) ======== Loss ratio 71.0% Expense ratio 21.2%
------- Combined ratio (GAAP) 92.2% ======= Six Months Ended June
30, 2005 ---------------------------------------------- Direct
Healthcare Liability Assumed --------------- Core(2) Non-
Reinsurance Other Total(6) Core (4)(5) (3)(4) -------- ------
------------ ------- --------- Net written premium(1) $95,376 $ 158
$ (849) $ 94,685 Net earned premium 64,457 170 410 65,037 Net
investment income $8,799 8,799 Realized investment gains/(losses) 6
6 Other revenue 174 174 -------- ------ ------------ ------
-------- Total revenue 64,457 170 410 8,979 74,016 Incurred loss
and LAE 48,762 (8) 4,304 53,058 Other expenses 14,030 77 1,612 -
15,719 ------- ----- ----------- ------ -------- Net underwriting
income/(loss) $ 1,665 $ 101 $ (5,506) (3,740) ======= =====
=========== Net investment income, other revenue & expense
$8,979 8,979 ====== -------- Income before federal Income taxes $
5,239 ======== Net cash provided/(used) in operating activities
$(34,877) ======== Loss ratio 75.6% Expense ratio 21.8% -------
Combined ratio (GAAP) 97.4% ======= 1) Net written premium is a
non-GAAP financial measure which represents the premiums charged on
policies issued during a fiscal period less any reinsurance. Net
written premium is a statutory measure of production levels. Net
earned premium, a comparable GAAP measure, represents the portion
of premiums written that is recognized as income in the financial
statements for the periods presented and earned on a pro-rata basis
over the term of the policies. A reconciliation of net written
premium to net earned premium is provided herein. 2) Core Direct
Healthcare Liability Business represents California and Delaware
excluding discontinued dental and hospital programs. 3) Non-Core
Direct Healthcare Liability Business represents other state
business and dental and hospital programs in California. 4) Ratios
are not shown for the Non-Core Healthcare Liability and Assumed
Reinsurance columns, because their run-off status produces ratios
which are not meaningful. 5) The expense component for the Assumed
Reinsurance segment includes the effect of the retrospective
accounting treatment required by Financial Accounting Standards
Board No. 113, more fully described in SCPIE's 2005 Annual Filing
in Form 10K, page 41. 6) Ratios are not shown for the Total column,
because inclusion of the discontinued Non-Core Healthcare Liability
and Assumed Reinsurance results produce ratios which are no longer
meaningful. 7) Other expenses in column relate to a proxy challenge
instituted in January 2006. SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data (Dollars in Thousands) Three Months
Ended June 30, 2006
------------------------------------------------ Direct Healthcare
Liability Assumed --------------- Core(2) Non- Reinsurance Other(7)
Total(6) Core (4)(5) (3)(4) -------- ------ ------------ ---------
--------- Net written premium(1) $ 3,428 $ - $ 13 $ 3,441 Net
earned premium 31,440 - 12 31,452 Net investment income $ 5,198
5,198 Realized investment losses (53) (53) Other revenue - 6 6
------- ------ ----------- -------- --------- Total revenue 31,440
- 12 5,151 36,603 Incurred loss and LAE 22,299 - 3,402 25,701 Other
expenses 6,367 - (246) 1,009 7,130 ------- ----- -----------
-------- -------- Net underwriting income/(loss) $ 2,774 $ - $
(3,144) (370) ======= ===== =========== Net investment income,
other revenue & expense $ 4,142 4,142 ======== --------- Income
(loss) before federal Income taxes $ 3,772 ========= Net cash
provided/(used) in operating activities $ (7,073) ========= Loss
ratio 70.9% Expense ratio 20.3% ------- Combined ratio (GAAP) 91.2%
======= Three Months Ended June 30, 2005
---------------------------------------------- Direct Healthcare
Liability Assumed --------------- Core(2) Non- Reinsurance Other
Total(6) Core (4)(5) (3)(4) -------- ------ ------------ -------
--------- Net written premium(1) $ 4,025 $ 15 $ (291) $ 3,749 Net
earned premium 32,413 18 20 32,451 Net investment income $4,132
4,132 Realized investment losses (10) (10) Other revenue 60 60
--------- ----- ------------ ------ -------- Total revenue 32,413
18 20 4,182 36,633 Incurred loss and LAE 24,135 (23) 3,035 27,147
Other expenses 6,734 2 118 - 6,854 ------- ---- ----------- ------
-------- Net underwriting income/(loss) $ 1,544 $ 39 $ (3,133)
(1,550) ======= ==== =========== Net investment income, other
revenue & expense $4,182 4,182 ====== -------- Income (loss)
before federal Income taxes $ 2,632 ======== Net cash
provided/(used) in operating activities $(15,843) ======== Loss
ratio 74.5% Expense ratio 20.8% ------- Combined ratio (GAAP) 95.3%
======= 1) Net written premium is a non-GAAP financial measure
which represents the premiums charged on policies issued during a
fiscal period less any reinsurance. Net written premium is a
statutory measure of production levels. Net earned premium, a
comparable GAAP measure, represents the portion of premiums written
that is recognized as income in the financial statements for the
periods presented and earned on a pro-rata basis over the term of
the policies. A reconciliation of net written premium to net earned
premium is provided herein. 2) Core Direct Healthcare Liability
Business represents California and Delaware excluding discontinued
dental and hospital programs. 3) Non-Core Direct Healthcare
Liability Business represents other state business and dental and
hospital programs in California. 4) Ratios are not shown for the
Non-Core Healthcare Liability and Assumed Reinsurance columns,
because their run-off status produces ratios which are not
meaningful. 5) The expense component for the Assumed Reinsurance
segment includes the effect of the retrospective accounting
treatment required by Financial Accounting Standards Board No. 113,
more fully described in SCPIE's 2005 Annual Filing in Form 10K,
page 41. 6) Ratios are not shown for the Total column, because
inclusion of the discontinued Non-Core Healthcare Liability and
Assumed Reinsurance results produce ratios which are not
meaningful. 7) Other expenses in column relate to a proxy challenge
instituted in January 2006. SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data (Dollars in Thousands) 6/30/2006
------------------------------- Fixed-maturity portfolio
------------------------------------- U.S. government &
agencies $ 171,894 40.2% Mortgage & asset-backed 78,172 18.3%
Corporate 177,015 41.5% ---------------- -------------- Total $
427,081 100.0% Average quality AAA Effective duration 3.5 Yield to
maturity 5.0% Weighted average combined maturity 2.7 Six Months
Three Months Ended Ended ------------------- ----------------- June
30, June 30, June 30, June 30, 2006 2005 2006 2005 ---------
--------- -------- -------- Total premiums
-------------------------------- Net written premium $ 92,564 $
94,685 $ 3,441 $ 3,749 Change in unearned premium (29,482) (29,648)
28,011 28,702 -------- -------- ------- ------- Net earned premium
$ 63,082 $ 65,037 $31,452 $32,451 ======== ======== ======= =======
*T
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