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Los Angeles, California — March 8, 2007 — 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.
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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 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, December 31,
2006 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, December 31, December 31, December 31,
2006 2005 2006 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
---------------------------------------------------
Direct Healthcare
Liability Assumed
------------------
Non-
Core Reinsurance
Core(2) (3)(4) (4)(5) Other(7) Total(6)
--------- -------- ------------ --------- ---------
Net written
premium(1) $123,280 $ - $ 361 $123,641
Net earned
premium $123,170 $ - $ 361 $123,531
Net investment
income $ 20,410 20,410
Realized
investment
gains/(losses) (493) (493)
Other revenue 461 461
--------- -------- ------------ --------- ---------
Total revenue 123,170 - 361 20,378 143,909
Incurred loss and
LAE 86,928 - 11,160 98,088
Other expenses 25,479 - 377 1,609 27,465
--------- -------- ------------ --------- ---------
Net underwriting
income/(loss) $ 10,763 $ - $ (11,176) (413)
========= ======== ============
Net investment
income, other
revenue &
expense $ 18,769 18,769
========= ---------
Income before
federal Income
taxes $ 18,356
=========
Net cash
provided/(used)
in operating
activities $ 7,557
=========
Loss ratio 70.6%
Expense ratio 20.7%
---------
Combined ratio
(GAAP) 91.3%
=========
Twelve Months Ended December 31, 2005
--------------------------------------------------
Direct Healthcare
Liability Assumed
------------------
Non-
Core Reinsurance
Core(2) (3)(4) (4)(5) Other Total(6)
--------- -------- ------------ -------- ---------
Net written
premium(1) $126,872 $ 377 $ (918) $126,331
Net earned premium $127,556 $ 393 $ 487 $128,436
Net investment
income $17,818 17,818
Realized investment
gains/(losses) 4,018 4,018
Other revenue 1,183 1,183
--------- -------- ------------ -------- ---------
Total revenue 127,556 393 487 23,019 151,455
Incurred loss and
LAE 90,463 (2,297) 22,990 111,156
Other expenses 25,900 78 8,829 - 34,807
--------- -------- ------------ -------- ---------
Net underwriting
income/(loss) $ 11,193 $ 2,612 $ (31,332) (17,527)
========= ======== ============
Net investment
income, other
revenue & expense $23,019 23,019
======== ---------
Income before
federal Income
taxes $ 5,492
=========
Net cash
provided/(used) in
operating
activities $(30,233)
=========
Loss ratio 70.9%
Expense ratio 20.3%
---------
Combined ratio
(GAAP) 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
------------------------------------------------
Direct
Healthcare
Liability Assumed
-----------------
Non-
Core Reinsurance
Core(2) (3)(4) (4)(5) Other Total(6)
-------- -------- ------------ ------- ---------
Net written
premium(1) $24,523 $ - $ 182 $ 24,705
Net earned premium $30,104 $ - $ 182 $ 30,286
Net investment
income $4,934 4,934
Realized investment
gains/(losses) (70) (70)
Other revenue/(loss) - 443 443
-------- -------- ------------ ------- ---------
Total revenue 30,104 - 182 5,307 35,593
Incurred loss and
LAE 20,845 - 2,659 23,504
Other expenses 6,185 - 209 - 6,394
-------- -------- ------------ ------- ---------
Net underwriting
income/(loss) $ 3,074 $ - $ (2,686) 388
======== ======== ============
Net investment
income, other
revenue & expense $5,307 5,307
======= ---------
Income before
federal Income
taxes $ 5,695
=========
Net cash provided in
operating
activities $ 5,207
=========
Loss ratio 69.2%
Expense ratio 20.5%
--------
Combined ratio
(GAAP) 89.7%
========
Three Months Ended December 31, 2005
------------------------------------------------
Direct
Healthcare
Liability Assumed
-----------------
Non-
Core Reinsurance
Core(2) (3)(4) (4)(5) Other Total(6)
-------- -------- ------------ ------- ---------
Net written
premium(1) $24,585 $ 321 $ 606 $ 25,512
Net earned premium $31,082 $ 320 $ 626 $ 32,028
Net investment income $4,463 4,463
Realized investment
gains/(losses) 4,276 4,276
Other revenue/(loss) (339) (339)
-------- -------- ------------ ------- ---------
Total revenue 31,082 320 626 8,400 40,428
Incurred loss and LAE 20,234 315 4,591 25,140
Other expenses 5,739 28 4,539 - 10,306
-------- -------- ------------ ------- ---------
Net underwriting
income/(loss) $ 5,109 $ (23) $ (8,504) (3,418)
======== ======== ============
Net investment
income, other
revenue & expense $8,400 8,400
======= ---------
Income before federal
Income taxes $ 4,982
=========
Net cash provided in
operating activities $ 5,585
=========
Loss ratio 65.1%
Expense ratio 18.5%
--------
Combined ratio (GAAP) 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%
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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, December 31, December 31, December 31,
2006 2005 2006 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
============ ============= ============ ============
# # #
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
Vice President, Communications
SCPIE Holdings Inc.
310/551-5948
e-mail:
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