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Los Angeles, California — March 9, 2004 — SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare liability insurance, today reported results for its fourth quarter and full year ended December 31, 2003. The company also announced that its Board of Directors has suspended the regular quarterly cash dividend, reflecting SCPIE's commitment to strengthen its financial position.
For the 2003 fourth quarter, SCPIE reported net income of $2.6 million, or $0.28 per share, compared with a net loss a year ago of $15.9 million or $1.70 per share. The positive results reflect the benefit of a rate increase implemented on October 1, 2003 in California, together with the progress the company continues to make in its strategic plan, commenced in 2002, to focus on its core California and Delaware healthcare liability insurance business while reducing its exposure to noncore healthcare liability and assumed reinsurance markets.
For the full year, SCPIE recorded a net loss of $12.8 million, or $1.37 per share, compared with a net loss a year ago of $38.4 million, or $4.12 per share. The losses in 2003 and 2002 stemmed almost entirely from SCPIE's noncore healthcare liability and assumed reinsurance businesses.
Financial and Operational Highlights
- The renewal rate for SCPIE's core direct healthcare liability insurance continued strong in 2003 at 92%.
- Although SCPIE's request for a rate increase in California was challenged, the company was ultimately successful in securing a 9.9% increase that took effect October 1, 2003.
- The company intends to submit its next rate application in California after the full 2003 results have been evaluated.
- A rate increase of 34.9% was implemented in Delaware in June 2003.
- Following SCPIE's withdrawal from noncore direct healthcare liability business in 2002, the company's exposure in those states continues to decline. During 2003 the number of in-force policies decreased by 2,433 to 379 as of December 31, 2003. Outstanding claims for the related business decreased from 1,033 as of December 31, 2002 to 739 as of December 31, 2003.
- SCPIE began 2003 with an agreement in place to cede to GoshawK Reinsurance Ltd. (Bermuda) substantially all of SCPIE's future assumed reinsurance earned premiums, a key element in the company's strategic plan to improve its financial strength and enhance its leverage ratios.
- SCPIE's balance sheet remains debt-free.
"SCPIE ended 2003 on a positive note," said Donald J. Zuk, President and Chief Executive Officer. "Despite the setback in the third quarter that dampened our full-year performance, the positive effects of the measures we have taken to get SCPIE back on a solid financial footing were demonstrated in our better loss ratios and fourth-quarter profits. With a full year of higher rates ahead of us, and as we gain the advantage of further distance from our noncore businesses, we are optimistic about our ability to demonstrate continuing improvement as 2004 unfolds."
"While we regret the suspension of the cash dividend," Zuk added, "the Board and management agree that this action is a prudent measure, consistent with our strategic plan to strengthen SCPIE's financial position."
Core Operating Review
Net earned premium for the company's core direct healthcare liability insurance business in the fourth quarter of 2003 totaled $29.8 million, down from $32.3 million a year earlier. Net written premiums were $20.9 million in the 2003 fourth quarter, compared with $25.4 million in last year's fourth quarter. The core business incurred a net underwriting loss of $1.6 million in the 2003 fourth quarter, an improvement from an underwriting loss of $4.1 million in the final quarter of 2002. The fourth quarter GAAP combined ratio for the core business improved to 105.2%, compared with 112.7% in 2002, primarily reflecting the benefit of the rate increase effective October 1, 2003.
For the full 2003 year, net earned premium for the company's core direct healthcare liability insurance business totaled $119.1 million, compared with $116.1 million for the same period a year earlier. Net written premiums for the core direct healthcare liability insurance business rose to $123.3 million from $117.0 million. For the full 2003 year, the core business incurred an underwriting loss of $10.8 million narrowed from a loss of $12.5 million for the same period last year. The GAAP combined ratio equaled 109.1%, compared with 110.8% in 2002.
Supplemental financial data relating to the performance of the company's noncore direct healthcare liability operations and its assumed reinsurance business are contained in a detailed statement accompanying this news release.
Financial Summary
Revenues and premiums declined throughout 2003 compared with 2002, reflecting the significant reduction of noncore business during 2003.
Total revenues for the fourth quarter of 2003 were $45.1 million, compared with total revenues of $72.2 million in the final quarter of 2002. Net earned premiums for the fourth quarter of 2003 were $34.3 million, compared with net earned premiums of $50.7 million in the fourth quarter of 2002.
Also included in fourth-quarter total revenues for 2003 are $6.9 million of net investment income, compared with $7.3 million of net investment income in the fourth quarter of 2002. Realized gains of $4.5 million in the fourth quarter of 2003 and $13.5 million in the fourth quarter of 2002 contributed $0.31 and $0.94 to earnings per share, respectively.
During the fourth quarter of 2003, SCPIE's GAAP loss ratio declined to 99.5%, compared with 148.8% for last year's fourth quarter. The GAAP expense ratio for the 2003 fourth quarter was 21.3% versus 42.6% a year ago. The company's GAAP combined ratio for the quarter was 120.8% compared with 191.4% a year ago.
Total revenues for 2003 were $187.0 million, compared with total revenues of $339.2 million in 2002. Net earned premiums for 2003 were $163.9 million, compared with net earned premiums of $286.1 million in 2002.
Net written premiums for 2003 totaled $147.0 million compared with net written premiums of $251.8 million in 2002.
Also included in total revenues for 2003 is $22.0 million of net investment income, compared with $32.2 million of net investment income in 2002. Realized investment gains of $216,000 in 2003 and $18.9 million in 2002 contributed $0.02 and $1.32 to earnings per share, respectively.
For all of 2003, SCPIE's GAAP loss ratio equaled 98.5%, compared with 112.0% for 2002. The GAAP expense ratio for the full 2003 year was 28.0% versus 27.9% for 2002. The company's GAAP combined ratio for the 2003 year was 126.5% compared with 139.9% in 2002.
As of December 31, 2003, SCPIE's balance sheet remained debt free. Book value per share at December 31, 2003, was $21.79 compared with $24.34 at December 31, 2002.
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 fourth-quarter and year-end 2003 results will be conducted today, March 9, 2004, at 9:00 a.m. Pacific Time (12 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.fulldisclosure.com. Questions, which will be answered during the conference call as time permits, can be submitted prior to the call or during the call by clicking on the icon on the homepage of SCPIE's website.
Rebroadcast over the Internet will be available for one year on both websites. A telephonic playback of the call will be available from approximately 11:00 a.m. (Pacific Time), Tuesday, March 9, to 5:00 p.m. (Pacific Time), Tuesday, March 16. Listeners should call 800-633-8284 (domestic) or 402-977-9140 (international) and use Reservation Number 21186623.
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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, obtaining necessary rate change regulatory approvals, and expansion of liability insurance business in its principal market 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 premium 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 noncore business (including a contingent liability related to Highlands Insurance Company), and the cyclical nature of the property and casualty 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, including statutory restrictions on dividends and other intercompany transactions within the company's holding structure. In light of the significant uncertainties inherent in the forward-looking information herein, the inclusion of such information should not be regarded as a representation by the company or any other person that the company's objectives or plans will be realize.
SCPIE Holdings Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars In thousands)
Dec. 31, Dec. 31,
2003 2002
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ASSETS
Securities available-for-sale:
Fixed maturities investments, at fair value
(amortized cost 2003 - $550,794;
2002 - $523,516) $554,141 $538,675
Equity investments, at fair value
(cost 2003 - $15,766; cost 2002 - $29,758) 20,543 34,237
Total securities available-for-sale 574,684 572,912
Other investment 0 15,000
Mortgages & Real estate 10,400 15,407
Cash and Cash Equivalents 62,095 115,787
Total investments 647,179 719,106
Accrued investment income 7,526 8,157
Premiums receivable 120,112 117,335
Reinsurance recoverable on paid and unpaid 151,829 153,589
Deferred policy acquisition costs 9,416 6,858
Federal income taxes receivable -- 10,944
Deferred federal income taxes 43,725 32,356
Property and equipment, net 3,816 5,305
Other assets 7,647 10,116
Total assets $991,250 $1,063,766
LIABILITIES
Reserves:
Loss and loss adjustment expenses $643,046 $650,671
Unearned premiums 50,707 67,556
Total reserves 693,753 718,227
Bank loan payable 0
Amounts held for reinsurance 67,223 87,701
Other liabilities 26,086 30,672
Total liabilities 787,062 836,600
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,
2003 - 9,371,933 shares outstanding
2002 - 9,333,807 shares outstanding 1 1
Additional paid-in capital 37,281 37,805
Retained earnings 264,063 280,609
Treasury stock, at cost (98,006) (98,830)
(2003 - 2,920,158 shares and
2002 - 2,958,284 shares)
Subscription notes receivable (3,312) (3,592)
Accumulated other comprehensive income 4,161 11,173
Total stockholders' equity 204,188 227,166
Total liabilities and
stockholders' equity $991,250 $1,063,766
SCPIE Holdings Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars In thousands, except per-share data)
Twelve Months Ended Three Months Ended
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Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003 2002
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Revenues:
Net premiums earned $163,887 $286,063 $34,285 $50,686
Net investment income 21,954 32,231 6,904 7,328
Realized investment
gains 216 18,910 4,480 13,531
Other revenue 936 2,030 (592) 634
Total revenues 186,993 339,234 45,077 72,179
Expenses:
Losses & loss adjustment
expenses incurred 161,366 320,516 34,104 75,444
Other operating expenses 45,844 79,676 7,311 21,567
Interest expense -- 66 -- --
Total expenses 207,210 400,258 41,415 97,011
Income / (loss) before
federal income taxes (20,217) (61,024) 3,662 (24,832)
Federal income tax expense
/ (benefit) (7,411) (22,642) 1,042 (8,958)
Net income /
(loss) $(12,806) $(38,382) $2,620 $(15,874)
Basic earnings / (loss)
per share of common stock $(1.37) $(4.12) $0.28 $(1.70)
Diluted earnings / (loss)
per share of common stock $(1.37) $(4.12) $0.28 $(1.70)
Average Number of Shares
Outstanding-Basic 9,352,070 9,322,249 9,364,690 9,326,667
Average Number of Shares
Outstanding-Diluted 9,352,070 9,322,249 9,364,690 9,326,667
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
Twelve Months Ended Dec. 31, 2003
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Direct Healthcare
Liability Assumed
------------------
Core (2) Non-Core Reinsurance Other Total
(3)(4) (4)
-------- -------- ----------- ----- -----
Net written
premium (1) $123,251 $5,338 $18,450 $147,039
Net earned premium 119,148 12,312 32,427 163,887
Net Investment Income $21,954 21,954
Realized investment gains 216 216
Income from Affiliates -- --
Other Revenue 936 936
Total Revenue 119,148 12,312 32,427 23,106 186,993
Incurred loss
and LAE 105,530 27,504 28,332 161,366
Other Expenses 24,402 3,832 17,610 45,844
Interest Expense --
Net Underwriting
Gain/(Loss) $(10,784) $(19,024) $(13,515) (43,323)
Net Investment income
and other revenue $23,106 23,106
Segment Income / (loss) before
federal Income taxes $(20,217)
Net cash provided by (used in)
operating activities $(31,771)
Loss Ratio 88.6% 98.5%
Expense Ratio 20.5% 28.0%
Combined Ratio (GAAP) 109.1% 126.5%
Twelve Months Ended Dec. 31, 2002
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Direct Healthcare
Liability Assumed
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Core (2) Non-Core Reinsurance Other Total
(3)(4) (4)
-------- -------- ----------- ----- -----
Net written
premium (1) $116,984 $21,917 $112,849 $251,750
Net earned premium 116,126 47,393 122,544 286,063
Net Investment Income $32,231 32,231
Realized investment gains 18,910 18,910
Income from Affiliates --
Other Revenue 2,030 2,030
Total Revenue 116,126 47,393 122,544 53,171 339,234
Incurred loss
and LAE 105,852 91,604 123,060 320,516
Other Expenses 22,786 9,612 47,278 79,676
Interest Expense 66 66
Net Underwriting
Gain/(Loss) $(12,512) $(53,823) $(47,794) (114,129)
Net Investment income and
other revenue $53,105 53,105
Segment Income / (loss)
before federal Income taxes $(61,024)
Net cash provided by (used
in) operating activities $(24,468)
Loss Ratio 91.2% 112.0%
Expense Ratio 19.6% 27.9%
Combined Ratio (GAAP) 110.8% 139.9%
1) Net written premiums is a non-GAAP financial measure which
represents the premiums charged on policies issued during a fiscal
period less any reinsurance. Net written premiums is a statutory
measure to determine production levels. Net Earned Premiums, 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.
2) Core Direct Healthcare Liability Business represents California
and Delaware excluding the Brown & Brown Dental program and
Hospital business.
3) Non-Core Direct Healthcare Liability Business represents other
state business related to the Brown & Brown and Hospital programs
including those 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.
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
Three Months Ended Dec. 31, 2003
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Direct Healthcare
Liability Assumed
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Core (2) Non-Core Reinsurance Other Total
(3)(4) (4)
-------- -------- ----------- ----- -----
Net written
premium (1) $20,887 $352 $6,040 $27,279
Net earned premium 29,806 1,501 2,978 34,285
Net Investment Income $6,904 6,904
Realized investment gains 4,480 4,480
Income from Affiliates -- --
Other Revenue (592) (592)
Total Revenue 29,806 1,501 2,978 10,792 45,077
Incurred loss and LAE 24,534 12,945 (3,375) 34,104
Other Expenses 6,835 398 78 7,311
Interest Expense -- --
Net Underwriting
Gain/(Loss) $(1,563) $(11,842) $6,275 (7,130)
Net Investment income and
other revenue $10,792 10,792
Income / (loss) before federal
Income taxes $3,662
Net cash provided by (used in)
operating activities $7,151
Loss Ratio 82.3% 99.5%
Expense Ratio 22.9% 21.3%
Combined Ratio (GAAP) 105.2% 120.8%
Three Months Ended Dec. 31, 2002
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Direct Healthcare
Liability Assumed
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Core (2) Non-Core Reinsurance Other Total
(3)(4) (4)
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Net written
premium (1) $25,440 $630 $(15,400) $10,670
Net earned premium 32,306 7,130 11,250 50,686
Net Investment Income $7,328 7,328
Realized investment gains 13,531 13,531
Income from Affiliates --
Other Revenue 634 634
Total Revenue 32,306 7,130 11,250 21,493 72,179
Incurred loss and LAE 31,620 28,567 15,257 75,444
Other Expenses 4,794 3,468 13,305 21,567
Interest Expense -- --
Net Underwriting
Gain/(Loss) $(4,108) $(24,905) $(17,312) (46,325)
Net Investment income and
other revenue $21,493 21,493
Income / (loss) before
federal Income taxes $(24,832)
Net cash provided by (used
in) operating activities $(19,065)
Loss Ratio 97.9% 148.8%
Expense Ratio 14.8% 42.6%
Combined Ratio (GAAP) 112.7% 191.4%
1) Net written premiums is a non-GAAP financial measure which
represents the premiums charged on policies issued during a fiscal
period less any reinsurance. Net written premiums is a statutory
measure to determine production levels. Net Earned Premiums, 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.
2) Core Direct Healthcare Liability Business represents California
and Delaware excluding the Brown & Brown Dental program and
Hospital business.
3) Non-Core Direct Healthcare Liability Business represents other
state business related to the Brown & Brown and Hospital programs
including those 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.
SCPIE Holdings Inc. and Subsidiaries
Reconciliation of Non-GAAP Disclosures
December 31, 2003
(Dollars In Thousands, except per-share data)
Twelve Months Ended Quarter Ended
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12/31/2003 12/31/2002 12/31/2003 12/31/2002
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Total Premiums
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Net Written Premiums $147,039 $251,750 $27,279 $10,670
Change in Unearned
Premiums 16,848 34,313 7,006 40,016
Net Earned Premiums $163,887 $286,063 $34,285 $50,686
Supplemental Financial Data
Fixed-Income Portfolio
U.S. Government
& Agencies $198,284 35.8%
Mortgage
& Asset-Backed 95,541 17.2%
Corporate 260,316 47.0%
Total $554,141 100.0%
Average Quality AA
Effective Duration 4.3
Yield to Maturity 3.9%
Weighted average combined
maturity 5.21
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Contact:
| Investors: |
Robert B. Tschudy
Senior Vice President & CFO
SCPIE Holdings Inc.
310/557-8739
e-mail:
Cecilia A. Wilkinson
Pondel/Wilkinson MS&L
323/866-6060
e-mail:
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Media: |
Greg Harrison
Vice President, Communications
SCPIE Holdings Inc.
310/551-5973
e-mail:
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