SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare
liability insurance, today reported improved financial results for
the year and fourth quarter ended December 31, 2006. In 2006, SCPIE
had net income of $12.3 million, equal to $1.27 per diluted share �
a significant improvement from 2005 when the Company had net income
of $3.5 million, or $0.36 per diluted share. The improved
performance in 2006 was attributable, primarily, to reduced losses
in the Company�s assumed reinsurance business in run off. For the
2006 fourth quarter, SCPIE had net income of $4.0 million, or $0.41
per diluted share. For the same period in 2005, the Company had net
income of $3.2 million, or $0.33 per diluted share. Core Operating
Review Net earned premiums for SCPIE�s core healthcare liability
insurance business in 2006 was $123.2 million, a slight decrease
from the 2005 total of $127.6 million. Net written premiums for
2006 were $123.3 million, compared to $126.9 million the previous
year. The decrease in premiums for 2006 is largely due to
improvements in the claims experience related to loss-rated
policies. The core business produced an underwriting profit in 2006
of $10.8 million, comparable to the underwriting profit of $11.2
million in 2005. The core operation loss and loss adjustment
expense ratio decreased slightly to 70.6% from 70.9% in the
previous year. The combined ratio for 2006 was 91.3%, nearly the
same as 2005�s ratio of 91.2%. �Our 2006 results clearly
demonstrate the strength of our core business and the diminishing
impact of our segments in run off,� said Donald J. Zuk, SCPIE
President and Chief Executive Officer. �The solid core business,
combined with a 96% retention rate in 2006, provides solid momentum
as we proceed into 2007.� For the 2006 fourth quarter, net earned
premiums for SCPIE�s core healthcare liability insurance business
decreased slightly to $30.1 million from $31.1 million. Net written
premiums were largely unchanged with $24.5 million in the fourth
quarter of 2006 versus $24.6 million a year earlier. In the final
quarter of 2006, the core business produced an underwriting profit
of $3.1 million, down from $5.1 million in 2005. The loss ratio in
core operations for the 2006 fourth quarter was 69.2% compared to
65.1% in 2005, and the combined ratio for the 2006 fourth quarter
increased to 89.7% from 83.6% in 2005. Non-Core Review SCPIE
continued to run off its non-core healthcare liability operations.
Outstanding reserves for this segment declined further in 2006 to
$37.7 million from $60.6 million at year-end 2005. Open claims
dropped to 136 at the end of 2006, compared to 229 at the end of
2005. The Company reported losses for 2006 of $11.2 million � $2.7
million in the fourth quarter � in the assumed reinsurance segment.
The loss is attributable to upward development on reinsurance
programs currently in run off. Financial Summary For 2006, SCPIE�s
total revenues of $143.9 million include net earned premiums of
$123.5 million, net investment income of $20.4 million and a
realized investment loss of $493,000. For 2005, total revenues of
$151.5 million included net earned premiums of $128.4 million, net
investment income of $17.8 million and a realized investment gain
of $4.0 million. Total revenues of $35.6 million for the 2006
fourth quarter include $30.3 million of earned premiums, $4.9
million of net investment income and $70,000 of realized investment
losses. For the fourth quarter of 2005, revenues of $40.4 million
included $32.0 million of earned premiums, $4.5 million of
investment income and $4.3 million of realized investment gains.
Net written premiums for the 2006 fourth quarter totaled $24.7
million, compared with $25.5 million a year earlier. SCPIE�s
balance sheet remained debt-free at December 31, 2006. Book value
per share was $21.63 at year end, up from $20.05 at December 31,
2005. Supplemental financial data relating to the performance of
the Company�s non-core direct healthcare liability operations and
its assumed reinsurance business is contained in the detailed
financial statement accompanying this news release. 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 and fourth-quarter results
will be conducted today, March 8, 2007, at 9 am Pacific Time (noon
Eastern Time). 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 can be heard from approximately 11 am Pacific
Time today to 5 pm Pacific Time, March 15, 2007. Listeners should
call 888-286-8010 (domestic) or 617-801-6888 (international) and
use Reservation Number 94476567. 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 current levels
of profitability, 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 importance of brokerage business to
our growth, 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) � December 31, 2006 December 31, 2005 ASSETS Securities
available-for-sale: Fixed maturities investments, at fair value
(amortized cost 2006 - $397,553; 2005 - $469,350) $ 389,954� $
461,480� Equity investments, at fair value (cost 2006 - $1,723;
2005 - $1,934) � 2,034� � 2,095� Total securities
available-for-sale 391,988� 463,575� Cash and cash equivalents �
145,815� � 68,783� Total investments 537,803� 532,358� � Accrued
investment income 5,330� 5,874� Premiums receivable 18,697� 18,731�
Assumed Reinsurance Receivables 17,089� 24,160� Reinsurance
recoverable 45,564� 55,933� Deferred policy acquisition costs
7,351� 7,120� Deferred federal income taxes, net 44,661� 51,214�
Property and equipment, net 1,733� 2,449� Other assets � 7,281� �
6,325� Total assets $ 685,509� $ 704,164� � LIABILITIES Reserves:
Loss and loss adjustment expenses $ 405,448� $ 429,315� Unearned
premiums � 41,815� � 41,705� Total reserves 447,263� 471,020�
Amounts held for reinsurance 13,317� 22,018� Other liabilities �
18,285� � 20,333� Total liabilities 478,865� 513,371� � 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 - 9,553,906
shares outstanding 2005 - 9,456,916 shares outstanding 1� 1�
Additional paid-in capital 37,127� 37,127� Retained earnings
271,925� 259,645� Treasury stock, at cost (95,278) (97,063) (2006 -
2,738,185 shares and 2005 - 2,835,175 shares) Subscription notes
receivable (1,849) (2,649) Accumulated other comprehensive loss �
(5,282) � (6,268) Total stockholders' equity � 206,644� � 190,793�
Total liabilities and stockholders' equity $ 685,509� $ 704,164�
SCPIE Holdings Inc. and Subsidiaries Consolidated Statements of
Operations (Dollars in Thousands, except per-share data) � Twelve
Months Ended Three Months Ended � December 31, 2006 � December 31,
2005 December 31, 2006 � December 31, 2005 Revenues: Net premiums
earned $ 123,531� $ 128,436� $ 30,286� $ 32,028� Net investment
income 20,410� 17,818� 4,934� 4,463� Realized investment
gains/(losses) (493) 4,018� (70) 4,276� Other revenue/(loss) � 461�
� 1,183� � 443� � (339) Total revenues 143,909� 151,455� 35,593�
40,428� Expenses: Losses & loss adjustment expenses incurred
98,088� 111,156� 23,504� 25,140� Other operating expenses � 27,465�
� 34,807� � 6,394� � 10,306� Total expenses � 125,553� � 145,963� �
29,898� � 35,446� � Income before federal income taxes 18,356�
5,492� 5,695� 4,982� Income tax expense � 6,076� � 2,024� � 1,712�
� 1,768� � Net income $ 12,280� $ 3,468� $ 3,983� $ 3,214� � Basic
earnings per share of common stock $ 1.29� $ 0.37� $ 0.42� $ 0.34�
Diluted earnings per share of common stock $ 1.27� $ 0.36� $ 0.41�
$ 0.33� SCPIE Holdings Inc. and Subsidiaries Supplemental Financial
Data (Dollars in Thousands) � Twelve Months Ended December 31, 2006
Twelve Months Ended December 31, 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) $
123,280� $ -� $ 361� $ 123,641� $ 126,872� $ 377� $ (918) $
126,331� � � Net earned premium $ 123,170� $ -� $ 361� $ 123,531� $
127,556� $ 393� $ 487� $ 128,436� � Net investment income $ 20,410�
20,410� $ 17,818� 17,818� Realized investment gains/(losses) (493)
(493) 4,018� 4,018� Other revenue � � � � 461� � 461� � � � �
1,183� � 1,183� � Total revenue 123,170� -� 361� 20,378� 143,909�
127,556� 393� 487� 23,019� 151,455� � Incurred loss and LAE 86,928�
-� 11,160� 98,088� 90,463� (2,297) 22,990� 111,156� Other expenses
� 25,479� � -� � 377� � 1,609� � 27,465� � 25,900� � 78� � 8,829� �
-� � 34,807� � Net underwriting income/(loss) $ 10,763� $ -� $
(11,176) (413) $ 11,193� $ 2,612� $ (31,332) (17,527) � Net
investment income, other revenue & expense $ 18,769� � 18,769�
$ 23,019� � 23,019� � Income before federal Income taxes $ 18,356�
$ 5,492� � Net cash provided/(used) in operating activities $
7,557� $ (30,233) � Loss ratio 70.6% 70.9% Expense ratio � 20.7% �
20.3% � Combined ratio (GAAP) � 91.3% � 91.2% � (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 December
31, 2006 Three Months Ended December 31, 2005 Direct Healthcare
Liability Assumed Direct Healthcare Liability Assumed Core(2)
Non-Core (3)(4) Reinsurance (4)(5) Other Total(6) Core(2) Non-Core
(3)(4) Reinsurance (4)(5) Other Total(6) � Net written premium(1) $
24,523� $ -� $ 182� $ 24,705� $ 24,585� $ 321� $ 606� $ 25,512� � �
Net earned premium $ 30,104� $ -� $ 182� $ 30,286� $ 31,082� $ 320�
$ 626� $ 32,028� � Net investment income $ 4,934� 4,934� $ 4,463�
4,463� Realized investment gains/(losses) (70) (70) 4,276� 4,276�
Other revenue/(loss) � � � -� � 443� � 443� � � � � (339) � (339) �
Total revenue 30,104� -� 182� 5,307� 35,593� 31,082� 320� 626�
8,400� 40,428� � Incurred loss and LAE 20,845� -� 2,659� 23,504�
20,234� 315� 4,591� 25,140� Other expenses � 6,185� � -� � 209� �
-� � 6,394� � 5,739� � 28� � 4,539� � -� � 10,306� � Net
underwriting income/(loss) $ 3,074� $ -� $ (2,686) 388� $ 5,109� $
(23) $ (8,504) (3,418) � Net investment income, other revenue &
expense $ 5,307� � 5,307� $ 8,400� � 8,400� � Income before federal
Income taxes $ 5,695� $ 4,982� � Net cash provided in operating
activities $ 5,207� $ 5,585� � Loss ratio 69.2% 65.1% Expense ratio
� 20.5% � 18.5% � Combined ratio (GAAP) � 89.7% � 83.6% � (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. SCPIE Holdings
Inc. and Subsidiaries Supplemental Financial Data (Dollars in
Thousands) � 12/31/2006� Fixed-maturity portfolio � U.S. government
& agencies $ 173,320� 44.4% Mortgage & asset-backed 68,975�
17.7% Corporate � 147,659� 37.9% Total $ 389,954� 100.0% � Average
quality AAA� Effective duration 2.5� Yield to maturity 5.0%
Weighted average combined maturity 3.8� Twelve Months Ended Three
Months Ended December 31, 2006 December 31, 2005 December 31, 2006
December 31, 2005 � Total premiums Net written premium $ 123,641� $
126,331� $ 24,705� $ 25,512� Change in unearned premium � (110) �
2,105� � 5,581� � 6,516� � Net earned premium $ 123,531� $ 128,436�
$ 30,286� $ 32,028�
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