SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare
liability insurance, today reported improved financial results for
its first quarter ended March 31, 2007. For the 2007 first quarter,
net income increased 55% to $3.7 million, equal to $0.38 per
diluted share, from $2.4 million, or $0.25 per diluted share, in
the same period last year. Total revenues for the 2007 first
quarter totaled $35.3 million, compared with $36.6 million in the
2006 first quarter. The improved performance in the quarter is
primarily attributable to reduced losses in the Company�s assumed
reinsurance business, which is in run-off. Core Operating Review In
the 2007 first quarter, earned premiums for SCPIE�s direct
healthcare liability operations totaled $30.2 million, compared
with $31.1 million a year earlier. Net written premiums for the
quarter decreased to $83.8 million from $88.6 million in the 2006
first quarter. This reduction is largely due to decreased renewal
premiums from loss-rated groups and a small decrease in the number
of insureds. The healthcare liability underwriting profit increased
slightly to $2.2 million in the 2007 first quarter, versus $2.1
million in the same year-earlier period. The combined ratio for
this business in the first quarter was 92.7%, with a loss ratio of
70.5%, compared with the 2006 first-quarter combined ratio of
93.2%, and a loss ratio of 71.0%. The expense ratio in the 2007
first quarter remained at 22.2%, the same as it was in the 2006
first quarter. SCPIE�s retention rate for its direct healthcare
liability business over the past 12 months was 96%. The majority of
SCPIE�s business renews annually during the first quarter of the
year. �Our results for the first quarter continue our excellent
track record over the past two years,� said Donald J. Zuk, SCPIE
President and Chief Executive Officer. �We believe these positive
results will continue throughout the year.� Run-Off Operations
Review The Company continues to run off its healthcare liability
operations in states other than California and Delaware.
Outstanding reserves for this segment declined to $32.0 million
from $37.7 million at December 31, 2006. Open claims dropped
further to 113 from 136 at year-end 2006. In the assumed
reinsurance segment, SCPIE reported an underwriting loss of $1.9
million, which is primarily attributable to an unfavorable
arbitration settlement and upward development on other contracts.
Financial Summary The 2007 first-quarter revenues include net
investment income of $5.2 million and a net realized investment
gain of $166,000. Last year�s first-quarter totals included net
investment income of $5.0 million and a net realized investment
loss of $111,000. At March 31, 2007, SCPIE�s balance sheet remained
debt-free. Book value per share at the close of the 2007 first
quarter was $22.14, compared with $21.63 at December 31, 2006.
Supplemental financial data relating to the Company�s performance
is contained in the detailed statements 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 first-quarter 2007
results will be conducted today, May 3, 2007, at 9 am PDT (12 noon
EDT). 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 (PDT), Thursday, May 3, to 5
pm (PDT), Thursday, May 10. Listeners should call 888/286-8010
(domestic) or 617/801-6888 (international) and use Reservation
Number 73673571. 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 service, 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, including, but not limited
to, the positive results continuing throughout the year, 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)
� March 31, 2007 December 31, 2006 ASSETS Securities
available-for-sale: Fixed maturities investments, at fair value
(amortized cost 2007 - $386,426; 2006 - $397,553) $ 380,964� $
389,954� Equity investments, at fair value (cost 2007 - $1,656;
2006 - $1,723) � 1,970� � 2,034� Total securities
available-for-sale 382,934� 391,988� Cash and cash equivalents �
156,623� � 145,815� Total investments 539,557� 537,803� � Accrued
investment income 4,742� 5,330� Premiums receivable 64,695� 18,697�
Assumed Reinsurance Receivables 18,912� 17,089� Reinsurance
recoverable 47,367� 45,564� Deferred policy acquisition costs
10,120� 7,351� Deferred federal income taxes, net 42,064� 44,661�
Property and equipment, net 1,501� 1,733� Other assets � 6,648� �
7,281� Total assets $ 735,606� $ 685,509� � LIABILITIES Reserves:
Loss and loss adjustment expenses $ 406,806� $ 405,448� Unearned
premiums � 95,420� � 41,815� Total reserves 502,226� 447,263�
Amounts held for reinsurance 4,502� 13,317� Other liabilities �
17,225� � 18,285� Total liabilities 523,953� 478,865� � 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, � 2007 - 9,557,906
shares outstanding 2006 - 9,553,906 shares outstanding 1� 1�
Additional paid-in capital 37,127� 37,127� Retained earnings
275,392� 271,925� Treasury stock, at cost (95,081) (95,278) (2007 -
2,734,185 shares and 2006 - 2,738,185 shares) Subscription notes
receivable (1,849) (1,849) Accumulated other comprehensive loss �
(3,937) � (5,282) Total stockholders' equity � 211,653� � 206,644�
Total liabilities and stockholders' equity $ 735,606� $ 685,509�
SCPIE Holdings Inc. and Subsidiaries Consolidated Statements of
Operations (Dollars in Thousands, except per-share data) � Three
Months Ended � March 31, 2007 � March 31, 2006 Revenues: Net
premiums earned $ 29,874� $ 31,630� Net investment income 5,220�
5,013� Realized investment gains/(losses) 166� (111) Other revenue
� 31� � 53� Total revenues 35,291� 36,585� Expenses: Losses &
loss adjustment expenses incurred 22,946� 25,205� Other operating
expenses � 6,606� � 7,607� Total expenses � 29,552� � 32,812� �
Income before federal income taxes 5,739� 3,773� Income tax expense
� 2,045� � 1,395� � Net income $ 3,694� $ 2,378� � Basic earnings
per share of common stock $ 0.39� $ 0.25� Diluted earnings per
share of common stock $ 0.38� $ 0.25� SCPIE Holdings Inc. and
Subsidiaries Supplemental Financial Data (Dollars in Thousands) �
Three Months Ended March 31, 2007 Three Months Ended March 31, 2006
Direct Healthcare Assumed Direct Healthcare Assumed Liability
Reinsurance(2)(3) Other Total(4) Liability Reinsurance(2)(3)
Other(5) Total(4) � Net written premium(1) $ 83,779� $ (301) $
83,478� $ 88,626� $ 497� $ 89,123� � � Net earned premium $ 30,175�
$ (301) $ 29,874� $ 31,132� $ 498� $ 31,630� � Net investment
income $ 5,220� 5,220� $ 5,013� 5,013� Realized investment
gains/(losses) 166� 166� (111) (111) Other revenue � � � 31� � 31�
� � � 53� � 53� � Total revenue 30,175� (301) 5,417� 35,291�
31,132� 498� 4,955� 36,585� � Incurred loss and LAE 21,266� 1,680�
22,946� 22,105� 3,100� 25,205� Other expenses � 6,699� � (93) � -�
� 6,606� � 6,896� � 154� � 557� � 7,607� � Net underwriting
income/(loss) $ 2,210� $ (1,888) 322� $ 2,131� $ (2,756) (625) �
Net investment income, other revenue & expense $ 5,417� �
5,417� $ 4,398� � 4,398� � Income before federal Income taxes $
5,739� $ 3,773� � Net cash provided in operating activities $ 369�
$ 5,677� � Loss ratio 70.5% 71.0% Expense ratio � 22.2% � 22.2% �
Combined ratio (GAAP) � 92.7% � 93.2% � 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) Ratios are
not shown for the Assumed Reinsurance columns, because of their
run-off status produces ratios which are not meaningful. � 3) 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 2006 Annual Filing in Form 10K, page 42. � 4) Ratios are
not shown for the Total column, because inclusion of the
discontinued Assumed Reinsurance results produce ratios which are
no longer meaningful. � 5) Other expenses in column relate to a
proxy challenge in 2006. SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data (Dollars in Thousands) � 3/31/2007�
Fixed-maturity portfolio � U.S. government & agencies $174,048�
45.7% Mortgage & asset-backed 62,421� 16.4% Corporate 144,495�
� 37.9% Total $380,964� 100.0% � Average quality AAA� Effective
duration 2.3� Yield to maturity 4.7% Weighted average combined
maturity 3.9� Three Months Ended March 31, 2007 March 31, 2006 �
Total premiums Net written premium $ 83,478� $ 89,123� Change in
unearned premium � (53,604) � (57,493) � Net earned premium $
29,874� $ 31,630�
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