SKP Merrill Lynch

SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare liability insurance, reported improved net income for its third quarter and nine months ended September 30, 2006. For the 2006 third quarter, SCPIE reported net income of $3.3 million, or $0.34 per diluted share, on total revenues of $35.1 million. This compares to a net loss in the 2005 third quarter of $3.1 million, or a loss of $0.33 per diluted share, on total revenues of $37.0 million. For the first nine months of this year, SCPIE reported net income of $8.3 million, or $0.86 per diluted share, on revenues of $108.3 million. This compares to net income for the prior-year nine months of $254,000, or $0.03 per diluted share, on revenues of $111.0 million. Core Operating Review The Company has realized improvement in its core business throughout the first nine months of 2006, including the third quarter of 2006. This represents a continuation of the improvement that began early in 2005. In the 2006 third quarter, SCPIE�s core direct healthcare liability operations posted an underwriting profit of $2.8 million, compared to $4.4 million in the same period in 2005. In the 2005 third quarter, the Company recognized a significant reduction in claims frequency. The favorable trend in claims frequency has continued in 2006, but at a lower rate. Net earned premium for core direct healthcare operations totaled $30.5 million for the 2006 third quarter, compared with $32.0 million for the same period a year earlier. Net written premium for the 2006 third quarter was $6.7 million, compared with $6.9 million in the same prior-year period. The combined ratio for SCPIE�s core business in the 2006 third quarter was 90.9%, with a loss ratio of 71.1%. A year ago, the company�s combined ratio for the third quarter was 86.1%, including a loss ratio of 67.0%. The core expense ratio in the 2006 third quarter increased slightly to 19.8% from 19.1% in 2005. For the first three quarters of 2006, SCPIE�s core healthcare operations had an underwriting profit of $7.7 million, a 26.2% increase over the underwriting profit of $6.1 million in the first nine months of 2005. Net earned premiums for the core business decreased slightly to $93.1 million from $96.5 million a year earlier. Net written premiums totaled $98.8 million, compared with $102.3 million in the first nine months of 2005. The combined ratio for the nine-month 2006 period was 91.7%, including a loss ratio of 71.0%. This is improved from a combined ratio for the first nine months of 2005 of 93.7%, with a loss ratio of 72.8%. SCPIE�s retention rate for its core direct healthcare liability business over the past 12 months totaled 95.5%. �This quarter and the full nine months� results clearly demonstrate the improved financial condition of our company,� said Donald J. Zuk, SCPIE President and Chief Executive Officer. �Our core book has performed very well, and we expect to build on that in the months ahead.� 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 third quarter and first nine months of 2006. Net outstanding reserves for this segment declined to $45.3 million from $60.6 million at December 31, 2005. Open claims dropped to 156 from 229 at year-end 2005. In the assumed reinsurance area, which is also in run-off, there was an underwriting loss of $2.6 million for the quarter and $8.5 million for the first nine months of 2006, compared to losses of $17.3 million and $22.8 million, respectively, for the same periods in 2005. Financial Summary Revenues for the third quarter of 2006 included net investment income of $5.3 million and realized investment losses of $259,000, compared with net investment income in the 2005 third quarter of $4.6 million and realized investment losses of $264,000. For the first nine months of 2006, net investment income totaled $15.5 million and realized investment losses of $423,000. A year earlier, SCPIE reported nine-month net investment income of $13.4 million and realized investment losses of $258,000. The increase in net investment income in 2006 over comparable periods in 2005 is attributable to the general rise in shorter-term interest rates during 2006. At September 30, 2006, SCPIE�s balance sheet remained debt-free. Book value at the end of the third quarter was $21.08, 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 third-quarter 2006 results will be held today, November 3, 2006, at 9 am PST (12 noon EST). 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 approximately 11 am PST, Friday, November 3, 2006, to 5 pm PST, Friday, November 10, 2006. Listeners should call 888/286-8010 (domestic) or 617/801-6888 (international) and use Reservation Number 55663379. Forward-Looking Statements 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. SCPIE Holdings Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in Thousands) � September 30, 2006 December 31, 2005 ASSETS Securities available-for-sale: Fixed maturities investments, at fair value (amortized cost 2006 - $424,653; 2005 - $469,350) $ 416,517� $ 461,480� Equity investments, at fair value (cost 2006 - $1,779; 2005 - $1,934) � 2,030� � 2,095� Total securities available-for-sale 418,547� 463,575� Cash and cash equivalents � 114,224� � 68,783� Total investments 532,771� 532,358� � Accrued investment income 5,038� 5,874� Premiums receivable 23,510� 18,731� Assumed Reinsurance Receivables 16,817� 6,960� Reinsurance recoverable 50,807� 55,933� Deferred policy acquisition costs 8,815� 7,120� Deferred federal income taxes, net 47,874� 51,214� Property and equipment, net 1,913� 2,449� Other assets � 6,671� � 6,325� Total assets $ 694,216� $ 686,964� � LIABILITIES Reserves: Loss and loss adjustment expenses $ 422,374� $ 429,315� Unearned premiums � 47,396� � 41,705� Total reserves 469,770� 471,020� Amounts held for reinsurance 7,005� 4,818� Other liabilities � 16,350� � 20,333� Total liabilities 493,125� 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 - 9,541,303 shares outstanding 2005 - 9,456,916 shares outstanding � � 1� 1� Additional paid-in capital 37,127� 37,127� Retained earnings 267,942� 259,645� Treasury stock, at cost (2006 - 2,750,788 shares and 2005 - 2,835,175 shares) (95,227) (97,063) � Subscription notes receivable (2,347) (2,649) Accumulated other comprehensive income � (6,405) � (6,268) Total stockholders' equity � 201,091� � 190,793� Total liabilities and stockholders' equity $ 694,216� $ 686,964� SCPIE Holdings Inc. and Subsidiaries Consolidated Statements of Operations (Dollars in Thousands, except per-share data) � Nine Months Ended Three Months Ended September 30, 2006 � September 30, 2005 September 30, 2006 � September 30, 2005 Revenues: Net premiums earned $ 93,245� $ 96,408� $ 30,163� $ 31,371� Net investment income 15,476� 13,355� 5,265� 4,556� Realized investment gains/(losses) (423) (258) (259) (264) Other revenue � 18� � 1,522� � (41) � 1,348� Total revenues 108,316� 111,027� 35,128� 37,011� Expenses: Losses & loss adjustment expenses incurred 74,584� 86,016� 23,678� 32,958� Other operating expenses � 21,071� � 24,501� � 6,334� � 8,782� Total expenses � 95,655� � 110,517� � 30,012� � 41,740� � Income before federal income taxes 12,661� 510� 5,116� (4,729) Income tax expenses � 4,364� � 256� � 1,833� � (1,607) � Net income $ 8,297� $ 254� $ 3,283� $ (3,122) � Basic earnings per share of common stock $ 0.87� $ 0.03� $ 0.35� $ (0.33) Diluted earnings per share of common stock $ 0.86� $ 0.03� $ 0.34� $ (0.33) � Average number of shares outstanding-basic 9,504,992� 9,416,827� 9,506,208� 9,429,052� Average number of shares outstanding-diluted 9,619,165� 9,593,713� 9,620,381� 9,605,938� SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) � Nine Months Ended September 30, 2006 Nine Months Ended September 30, 2005 Direct Healthcare Liability Assumed Direct Healthcare Liability Assumed Core(2) Non-Core (3)(4) Reinsurance (4)(5) Other(7) Total(6) Core(2) Non-Core (3)(4) Reinsurance (4)(5) Other Total(6) � Net written premium(1) $ 98,757� $ -� $ 179� $ 98,936� $ 102,287� $ 56� $ (1,524) $ 100,819� � � Net earned premium $ 93,066� $ -� $ 179� $ 93,245� $ 96,474� $ 73� $ (139) $ 96,408� � Net investment income $ 15,476� 15,476� $ 13,355� 13,355� Realized investment losses (423) (423) (258) (258) Other revenue � � � � 18� � 18� � � � � 1,522� � 1,522� � Total revenue 93,066� -� 179� 15,071� 108,316� 96,474� 73� (139) 14,619� 111,027� � Incurred loss and LAE 66,083� -� 8,501� 74,584� 70,229� (2,612) 18,399� 86,016� Other expenses � 19,294� � -� � 168� � 1,609� � 21,071� � 20,161� � 50� � 4,290� � -� � 24,501� � Net underwriting income/(loss) $ 7,689� $ -� $ (8,490) (801) $ 6,084� $ 2,635� $ (22,828) (14,109) � Net investment income, other revenue & expense $ 13,462� � 13,462� $ 14,619� � 14,619� � Income before federal Income taxes $ 12,661� $ 510� � Net cash provided/(used) in operating activities $ 2,350� $ (35,818) � Loss ratio 71.0% 72.8% Expense ratio � 20.7% � 20.9% � Combined ratio (GAAP) � 91.7% � 93.7% 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 September 30, 2006 Three Months Ended September 30, 2005 Direct Healthcare Liability Assumed Direct Healthcare Liability Assumed Core(2) Non-Core (3)(4) Reinsurance (4)(5) Other(7) Total(6) Core(2) Non-Core (3)(4) Reinsurance (4)(5) Other Total(6) � Net written premium(1) $ 6,703� $ -� $ (331) $ 6,372� $ 6,911� $ (102) $ (675) $ 6,134� � � Net earned premium $ 30,494� $ -� $ (331) $ 30,163� $ 32,017� $ (97) $ (549) $ 31,371� � Net investment income $ 5,265� 5,265� $ 4,556� 4,556� Realized investment losses (259) (259) (264) (264) Other revenue/(loss) � � � -� � (41) � (41) � � � � 1,347� � 1,347� � Total revenue 30,494� -� (331) 4,965� 35,128� 32,017� (97) (549) 5,639� 37,010� � Incurred loss and LAE 21,679� -� 1,999� 23,678� 21,467� (2,604) 14,095� 32,958� Other expenses � 6,031� � -� � 260� � 43� � 6,334� � 6,131� � (27) � 2,678� � -� � 8,782� � Net underwriting income/(loss) $ 2,784� $ -� $ (2,590) 194� $ 4,419� $ 2,534� $ (17,322) (10,369) � Net investment income, other revenue & expense $ 4,922� � 4,922� $ 5,639� � 5,639� � Income (loss) before federal Income taxes $ 5,116� $ (4,730) � Net cash provided/(used) in operating activities $ 3,747� $ (941) � Loss ratio 71.1% 67.0% Expense ratio � 19.8% � 19.1% � Combined ratio (GAAP) � 90.9% � 86.1% 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) � 9/30/2006� Fixed-maturity portfolio � U.S. government & agencies $ 175,219� 42.1% Mortgage & asset-backed 74,691� 17.9% Corporate � 166,607� � 40.0% Total $ 416,517� 100.0% � Average quality AAA� Effective duration 3.0� Yield to maturity 4.5% Weighted average combined maturity 3.8� Nine Months Ended Three Months Ended September 30,2006 September 30,2005 September 30,2006 September 30,2005 � Total premiums Net written premium $ 98,936� $ 100,819� $ 6,372� $ 6,134� Change in unearned premium (5,691) (4,411) 23,791� 25,237� � Net earned premium $ 93,245� $ 96,408� $ 30,163� $ 31,371� SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare liability insurance, reported improved net income for its third quarter and nine months ended September 30, 2006. For the 2006 third quarter, SCPIE reported net income of $3.3 million, or $0.34 per diluted share, on total revenues of $35.1 million. This compares to a net loss in the 2005 third quarter of $3.1 million, or a loss of $0.33 per diluted share, on total revenues of $37.0 million. For the first nine months of this year, SCPIE reported net income of $8.3 million, or $0.86 per diluted share, on revenues of $108.3 million. This compares to net income for the prior-year nine months of $254,000, or $0.03 per diluted share, on revenues of $111.0 million. Core Operating Review The Company has realized improvement in its core business throughout the first nine months of 2006, including the third quarter of 2006. This represents a continuation of the improvement that began early in 2005. In the 2006 third quarter, SCPIE's core direct healthcare liability operations posted an underwriting profit of $2.8 million, compared to $4.4 million in the same period in 2005. In the 2005 third quarter, the Company recognized a significant reduction in claims frequency. The favorable trend in claims frequency has continued in 2006, but at a lower rate. Net earned premium for core direct healthcare operations totaled $30.5 million for the 2006 third quarter, compared with $32.0 million for the same period a year earlier. Net written premium for the 2006 third quarter was $6.7 million, compared with $6.9 million in the same prior-year period. The combined ratio for SCPIE's core business in the 2006 third quarter was 90.9%, with a loss ratio of 71.1%. A year ago, the company's combined ratio for the third quarter was 86.1%, including a loss ratio of 67.0%. The core expense ratio in the 2006 third quarter increased slightly to 19.8% from 19.1% in 2005. For the first three quarters of 2006, SCPIE's core healthcare operations had an underwriting profit of $7.7 million, a 26.2% increase over the underwriting profit of $6.1 million in the first nine months of 2005. Net earned premiums for the core business decreased slightly to $93.1 million from $96.5 million a year earlier. Net written premiums totaled $98.8 million, compared with $102.3 million in the first nine months of 2005. The combined ratio for the nine-month 2006 period was 91.7%, including a loss ratio of 71.0%. This is improved from a combined ratio for the first nine months of 2005 of 93.7%, with a loss ratio of 72.8%. SCPIE's retention rate for its core direct healthcare liability business over the past 12 months totaled 95.5%. "This quarter and the full nine months' results clearly demonstrate the improved financial condition of our company," said Donald J. Zuk, SCPIE President and Chief Executive Officer. "Our core book has performed very well, and we expect to build on that in the months ahead." 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 third quarter and first nine months of 2006. Net outstanding reserves for this segment declined to $45.3 million from $60.6 million at December 31, 2005. Open claims dropped to 156 from 229 at year-end 2005. In the assumed reinsurance area, which is also in run-off, there was an underwriting loss of $2.6 million for the quarter and $8.5 million for the first nine months of 2006, compared to losses of $17.3 million and $22.8 million, respectively, for the same periods in 2005. Financial Summary Revenues for the third quarter of 2006 included net investment income of $5.3 million and realized investment losses of $259,000, compared with net investment income in the 2005 third quarter of $4.6 million and realized investment losses of $264,000. For the first nine months of 2006, net investment income totaled $15.5 million and realized investment losses of $423,000. A year earlier, SCPIE reported nine-month net investment income of $13.4 million and realized investment losses of $258,000. The increase in net investment income in 2006 over comparable periods in 2005 is attributable to the general rise in shorter-term interest rates during 2006. At September 30, 2006, SCPIE's balance sheet remained debt-free. Book value at the end of the third quarter was $21.08, 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 third-quarter 2006 results will be held today, November 3, 2006, at 9 am PST (12 noon EST). 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 approximately 11 am PST, Friday, November 3, 2006, to 5 pm PST, Friday, November 10, 2006. Listeners should call 888/286-8010 (domestic) or 617/801-6888 (international) and use Reservation Number 55663379. Forward-Looking Statements 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) September 30, 2006 December 31, 2005 ------------------ ----------------- ASSETS Securities available-for-sale: Fixed maturities investments, at fair value (amortized cost 2006 - $424,653; 2005 - $469,350) $ 416,517 $ 461,480 Equity investments, at fair value (cost 2006 - $1,779; 2005 - $1,934) 2,030 2,095 ------------------ ----------------- Total securities available- for-sale 418,547 463,575 Cash and cash equivalents 114,224 68,783 ------------------ ----------------- Total investments 532,771 532,358 Accrued investment income 5,038 5,874 Premiums receivable 23,510 18,731 Assumed Reinsurance Receivables 16,817 6,960 Reinsurance recoverable 50,807 55,933 Deferred policy acquisition costs 8,815 7,120 Deferred federal income taxes, net 47,874 51,214 Property and equipment, net 1,913 2,449 Other assets 6,671 6,325 ------------------ ----------------- Total assets $ 694,216 $ 686,964 ================== ================= LIABILITIES Reserves: Loss and loss adjustment expenses $ 422,374 $ 429,315 Unearned premiums 47,396 41,705 ------------------ ----------------- Total reserves 469,770 471,020 Amounts held for reinsurance 7,005 4,818 Other liabilities 16,350 20,333 ------------------ ----------------- Total liabilities 493,125 496,171 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 - 9,541,303 shares outstanding 2005 - 9,456,916 shares outstanding 1 1 Additional paid-in capital 37,127 37,127 Retained earnings 267,942 259,645 Treasury stock, at cost (2006 - (95,227) (97,063) 2,750,788 shares and 2005 - 2,835,175 shares) Subscription notes receivable (2,347) (2,649) Accumulated other comprehensive income (6,405) (6,268) ------------------ ----------------- Total stockholders' equity 201,091 190,793 ------------------ ----------------- Total liabilities and stockholders' equity $ 694,216 $ 686,964 ================== ================= *T -0- *T SCPIE Holdings Inc. and Subsidiaries Consolidated Statements of Operations (Dollars in Thousands, except per-share data) Nine Months Ended Three Months Ended ----------------------- ----------------------- September September September September 30, 2006 30, 2005 30, 2006 30, 2005 ----------------------- ----------------------- Revenues: Net premiums earned $ 93,245 $ 96,408 $ 30,163 $ 31,371 Net investment income 15,476 13,355 5,265 4,556 Realized investment gains/(losses) (423) (258) (259) (264) Other revenue 18 1,522 (41) 1,348 ----------- ----------- ----------- ----------- Total revenues 108,316 111,027 35,128 37,011 Expenses: Losses & loss adjustment expenses incurred 74,584 86,016 23,678 32,958 Other operating expenses 21,071 24,501 6,334 8,782 ----------- ----------- ----------- ----------- Total expenses 95,655 110,517 30,012 41,740 ----------- ----------- ----------- ----------- Income before federal income taxes 12,661 510 5,116 (4,729) Income tax expenses 4,364 256 1,833 (1,607) ----------- ----------- ----------- ----------- Net income $ 8,297 $ 254 $ 3,283 $ (3,122) =========== =========== =========== =========== Basic earnings per share of common stock $ 0.87 $ 0.03 $ 0.35 $ (0.33) =========== =========== =========== =========== Diluted earnings per share of common stock $ 0.86 $ 0.03 $ 0.34 $ (0.33) =========== =========== =========== =========== Average number of shares outstanding- basic 9,504,992 9,416,827 9,506,208 9,429,052 Average number of shares outstanding- diluted 9,619,165 9,593,713 9,620,381 9,605,938 *T -0- *T SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) Nine Months Ended September 30, 2006 --------------------------------------------------- Direct Healthcare Liability Assumed ------------------ Non-Core Reinsurance Core(2) (3)(4) (4)(5) Other(7) Total(6) -------- --------- ------------ --------- --------- Net written premium(1) $98,757 $ - $ 179 $ 98,936 Net earned premium $93,066 $ - $ 179 $ 93,245 Net investment income $ 15,476 15,476 Realized investment losses (423) (423) Other revenue 18 18 -------- --------- ------------ --------- --------- Total revenue 93,066 - 179 15,071 108,316 Incurred loss and LAE 66,083 - 8,501 74,584 Other expenses 19,294 - 168 1,609 21,071 -------- --------- ------------ --------- --------- Net underwriting income/(loss) $ 7,689 $ - $ (8,490) (801) ======== ========= ============ Net investment income, other revenue & expense $ 13,462 13,462 ========= --------- Income before federal Income taxes $ 12,661 ========= Net cash provided/(used) in operating activities $ 2,350 ========= Loss ratio 71.0% Expense ratio 20.7% -------- Combined ratio (GAAP) 91.7% ======== Nine Months Ended September 30, 2005 ---------------------------------------------------- Direct Healthcare Liability Assumed -------------------- Non-Core Reinsurance Core(2) (3)(4) (4)(5) Other Total(6) --------- ---------- ------------ -------- --------- Net written premium(1) $102,287 $ 56 $ (1,524) $100,819 Net earned premium $ 96,474 $ 73 $ (139) $ 96,408 Net investment income $13,355 13,355 Realized investment losses (258) (258) Other revenue 1,522 1,522 --------- ---------- ------------ -------- --------- Total revenue 96,474 73 (139) 14,619 111,027 Incurred loss and LAE 70,229 (2,612) 18,399 86,016 Other expenses 20,161 50 4,290 - 24,501 --------- ---------- ------------ -------- --------- Net underwriting income/(loss) $ 6,084 $ 2,635 $ (22,828) (14,109) ========= ========== ============ Net investment income, other revenue & expense $14,619 14,619 ======== --------- Income before federal Income taxes $ 510 ========= Net cash provided/(used) in operating activities $(35,818) ========= Loss ratio 72.8% Expense ratio 20.9% --------- Combined ratio (GAAP) 93.7% ========= *T -0- *T 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. *T -0- *T SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) Three Months Ended September 30, 2006 ---------------------------------------------------- Direct Healthcare Liability Assumed ------------------- Non-Core Reinsurance Core(2) (3)(4) (4)(5) Other(7) Total(6) --------- --------- ------------ --------- --------- Net written premium(1) $ 6,703 $ - $ (331) $ 6,372 Net earned premium $ 30,494 $ - $ (331) $ 30,163 Net investment income $ 5,265 5,265 Realized investment losses (259) (259) Other revenue/(loss) - (41) (41) --------- --------- ------------ --------- --------- Total revenue 30,494 - (331) 4,965 35,128 Incurred loss and LAE 21,679 - 1,999 23,678 Other expenses 6,031 - 260 43 6,334 --------- --------- ------------ --------- --------- Net underwriting income/(loss) $ 2,784 $ - $ (2,590) 194 ========= ========= ============ Net investment income, other revenue & expense $ 4,922 4,922 ========= --------- Income (loss) before federal Income taxes $ 5,116 ========= Net cash provided/(used) in operating activities $ 3,747 ========= Loss ratio 71.1% Expense ratio 19.8% --------- Combined ratio (GAAP) 90.9% ========= Three Months Ended September 30, 2005 ---------------------------------------------------- Direct Healthcare Liability Assumed --------------------- Non-Core Reinsurance Core(2) (3)(4) (4)(5) Other Total(6) --------- ----------- ------------ ------- --------- Net written premium(1) $ 6,911 $ (102) $ (675) $ 6,134 Net earned premium $ 32,017 $ (97) $ (549) $ 31,371 Net investment income $4,556 4,556 Realized investment losses (264) (264) Other revenue/(loss) 1,347 1,347 --------- ----------- ------------ ------- --------- Total revenue 32,017 (97) (549) 5,639 37,010 Incurred loss and LAE 21,467 (2,604) 14,095 32,958 Other expenses 6,131 (27) 2,678 - 8,782 --------- ----------- ------------ ------- --------- Net underwriting income/(loss) $ 4,419 $ 2,534 $ (17,322) (10,369) ========= =========== ============ Net investment income, other revenue & expense $5,639 5,639 ======= --------- Income (loss) before federal Income taxes $ (4,730) ========= Net cash provided/(used) in operating activities $ (941) ========= Loss ratio 67.0% Expense ratio 19.1% --------- Combined ratio (GAAP) 86.1% ========= *T -0- *T 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. *T -0- *T SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) 9/30/2006 ------------------------------- Fixed-maturity portfolio -------------------------------------- U.S. government & agencies $ 175,219 42.1% Mortgage & asset-backed 74,691 17.9% Corporate 166,607 40.0% ------------------------------- Total $ 416,517 100.0% Average quality AAA Effective duration 3.0 Yield to maturity 4.5% Weighted average combined maturity 3.8 *T -0- *T Nine Months Ended Three Months Ended --------------------------- --------------------------- September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ------------- ------------- ------------- ------------- Total premiums -------------- Net written premium $98,936 $100,819 $6,372 $6,134 Change in unearned premium (5,691) (4,411) 23,791 25,237 ------------- ------------- ------------- ------------- Net earned premium $93,245 $96,408 $30,163 $31,371 ============= ============= ============= ============= *T