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Los Angeles, California — November 3, 2006 — 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.
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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, 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 - (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
================== =================
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
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%
=========
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
----------------------------------------------------
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%
=========
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, 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
============= ============= ============= =============
# # #
Contact:
| Investors: |
Robert B. Tschudy
Senior Vice President & CFO
SCPIE Holdings Inc.
310/557-8739
e-mail:
Roger Pondel
PondelWilkinson Inc.
310/279-5980
e-mail:
|
Media: |
Howard Bender
SCPIE Holdings Inc.
310/551-5948
e-mail:
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