Scpie (NYSE:SKP)
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SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare
liability insurance, today reported improved results for its second
quarter and six months ended June 30, 2007.
For the 2007 second quarter, net income rose 41% to $3.7 million, equal
to $0.38 per diluted share, from $2.6 million, or $0.27 per diluted
share, last year. Total revenues for the 2007 second quarter amounted to
$35.5 million, compared with $36.6 million a year ago.
Net income for the first half of 2007 increased to $7.4 million, equal
to $0.77 per diluted share, from $5.0 million, or $0.52 per diluted
share, for the corresponding period of 2006. Total revenues for the 2007
year-to-date period were $70.8 million, versus $73.2 million last year.
Core Operating Review
SCPIE’s direct healthcare liability operations
posted an underwriting profit of $2.7 million for the 2007 second
quarter, compared to $2.8 million in the corresponding prior-year
period. Net earned premiums for direct healthcare operations totaled
$29.8 million compared with $31.4 million a year earlier. The decrease
is primarily attributable to decreased renewal premiums from loss-rated
groups and a small decrease in the number of insureds. Net written
premiums for the quarter increased to $4.0 million from $3.4 million in
the 2006 second quarter.
The combined ratio for SCPIE’s core business
in the second quarter of 2007 improved to 90.7%, with a loss ratio of
69.1%. A year ago, the company’s combined
ratio for the second quarter was 91.2%, including a loss ratio of 70.9%.
The expense ratio for the core segment in the 2007 second quarter was
21.6%, compared with 20.3% at the same time last year. The increase in
the expense ratio is primarily attributable to the decline in earned
premium.
For the first half of 2007, SCPIE’s healthcare
liability operations registered an underwriting profit of $5.0 million,
up from $4.9 million a year earlier. Net earned premiums business
amounted to $60.0 million, compared with $62.6 million last year, and
net written premiums totaled $87.8 million, compared with $92.1 million
for the first half of 2006. The combined ratio for the first half of
2007 was 91.7%, including a loss ratio of 69.8%. This is improved from a
combined ratio for the first half of last year of 92.2%, with a loss
ratio of 71.0%.
SCPIE’s retention rate for its direct
healthcare liability business over the past 12 months totaled 96.5%.
“Our core business remains solid and our
balance sheet strong,” said Donald J. Zuk,
SCPIE President and Chief Executive Officer. “As
we proceed into the second half of 2007, the positive momentum is
continuing.”
Non-Core Review
SCPIE continues to run off its healthcare liability operations in states
other than California and Delaware. Outstanding net reserves in this
area declined to $28.6 million at June 30, 2007, from $37.7 million at
December 31, 2006. Open claims dropped to 100 at the end of the 2007
second quarter from 113 at the end of the preceding first quarter, 136
at year-end and 170 at the same time last year.
In the assumed reinsurance area, also in run-off, increased reserves and
commutation costs on some contracts produced an underwriting loss of
$2.8 million for the quarter and $4.7 million for the first six months
of 2007, compared to underwriting losses of $3.1 million and $5.9
million, respectively, for the same periods in 2006. Outstanding net
reserves for this reinsurance segment declined 13% to $42.8 million at
June 30, 2007, from $49.0 million at December 31, 2006, primarily as a
result of the commutation of several contracts.
Financial Summary
Revenues for the second quarter of 2007 included net investment income
of $5.5 million and a net realized investment loss of $50,000. Last year’s
second-quarter totals included net investment income of $5.2 million and
realized investment losses of $53,000. For the 2007 first half, net
investment income totaled $10.8 million, with a net realized gain of
$116,000, compared with net investment income of $10.2 million and
realized investment losses of $164,000 for the first half of 2006.
At June 30, 2007, SCPIE’s balance sheet
remained debt-free. Book value at the close of the 2007 second quarter
rose to $22.37 per share from $22.14 at the end of the preceding first
quarter, $21.63 at December 31, 2006 and $20.15 per share, a year ago.
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
second-quarter 2007 results will be held today, August 2, 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 will be available from
approximately 11 am PDT, Thursday, August 2, 2007 to 5 pm PDT, Thursday,
August 9, 2007. Listeners should call 888/286-8010 (domestic) or
617/801-6888 (international) and use Reservation Number 21034027.
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)
June 30,
2007
December 31,
2006
ASSETS
Securities available-for-sale:
Fixed maturities investments, at fair value (amortized cost 2007 -
$353,633; 2006 - $397,553)
$
345,263
$
389,954
Equity investments, at fair value (cost 2007 - $1,604; 2006 - $1,723)
1,972
2,034
Total securities available-for-sale
347,235
391,988
Cash and cash equivalents
184,585
145,815
Total investments
531,820
537,803
Accrued investment income
5,235
5,330
Premiums receivable
41,712
18,697
Assumed reinsurance receivables
20,456
17,089
Reinsurance recoverable
45,230
45,564
Deferred policy acquisition costs
9,437
7,351
Deferred federal income taxes, net
41,352
44,661
Property and equipment, net
1,321
1,733
Other assets
5,893
7,281
Total assets
$
702,456
$
685,509
LIABILITIES
Reserves:
Loss and loss adjustment expenses
$
397,503
$
405,448
Unearned premiums
69,681
41,815
Total reserves
467,184
447,263
Amounts held for reinsurance
3,311
13,317
Other liabilities
17,754
18,285
Total liabilities
488,249
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 - 9,575,333 shares outstanding
2006 - 9,553,906 shares outstanding
1
1
Additional paid-in capital
37,127
37,127
Retained earnings
279,120
271,925
Treasury stock, at cost
(94,611
)
(95,278
)
(2007 - 2,716,758 shares and 2006 - 2,738,185 shares)
Subscription notes receivable
(1,569
)
(1,849
)
Accumulated other comprehensive loss
(5,861
)
(5,282
)
Total stockholders' equity
214,207
206,644
Total liabilities and stockholders' equity
$
702,456
$
685,509
SCPIE Holdings Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, except per-share data)
Six Months Ended
Three Months Ended
June 30,
2007
June 30,
2006
June 30,
2007
June 30,
2006
Revenues:
Net premiums earned
$
59,711
$
63,082
$
29,837
$
31,452
Net investment income
10,769
10,211
5,549
5,198
Realized investment gains/(losses)
116
(164
)
(50
)
(53
)
Other revenue
194
59
163
6
Total revenues
70,790
73,188
35,499
36,603
Expenses:
Losses & loss adjustment expenses incurred
46,203
50,906
23,257
25,701
Other operating expenses
13,280
14,737
6,674
7,130
Total expenses
59,483
65,643
29,931
32,831
Income before federal income taxes
11,307
7,545
5,568
3,772
Income tax expense
3,885
2,531
1,840
1,136
Net income
$
7,422
$
5,014
$
3,728
$
2,636
Basic earnings per share of common stock
$
0.78
$
0.53
$
0.39
$
0.28
Diluted earnings per share of common stock
$
0.77
$
0.52
$
0.38
$
0.27
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
Six Months Ended June 30, 2007
Six Months Ended June 30, 2006
Direct Healthcare Liability
Assumed Reinsurance
(2)(3)
Other
Total(4)
Direct Healthcare Liability
Assumed Reinsurance
(2)(3)
Other(5)
Total(4)
Net written premium(1)
$
87,797
$
(220
)
$
87,577
$
92,054
$
510
$
92,564
Net earned premium
$
59,931
$
(220
)
$
59,711
$
62,572
$
510
$
63,082
Net investment income
$
10,769
10,769
$
10,211
10,211
Realized investment gains/(losses)
116
116
(164
)
(164
)
Other revenue
194
194
59
59
Total revenue
59,931
(220
)
11,079
70,790
62,572
510
10,106
73,188
Incurred loss and LAE
41,837
4,366
46,203
44,404
6,502
50,906
Other expenses
13,140
140
-
13,280
13,263
(92
)
1,566
14,737
Net underwriting income/(loss)
$
4,954
$
(4,726
)
228
$
4,905
$
(5,900
)
(995
)
Net investment income, other revenue & expense
$
11,079
11,079
$
8,540
8,540
Income before federal Income taxes
$
11,307
$
7,545
Net cash used in operating activities
$
(4,367
)
$
(1,397
)
Loss ratio
69.8
%
71.0
%
Expense ratio
21.9
%
21.2
%
Combined ratio (GAAP)
91.7
%
92.2
%
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
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)
Three Months Ended June 30, 2007
Three Months Ended June 30, 2006
Direct Healthcare Liability
Assumed Reinsurance
(2)(3)
Other
Total(4)
Direct Healthcare Liability
Assumed Reinsurance
(2)(3)
Other(5)
Total(4)
Net written premium(1)
$
4,018
$
81
$
4,099
$
3,428
$
13
$
3,441
Net earned premium
$
29,756
$
81
$
29,837
$
31,440
$
12
$
31,452
Net investment income
$
5,549
5,549
$
5,198
5,198
Realized investment losses
(50
)
(50
)
(53
)
(53
)
Other revenue
-
163
163
6
6
Total revenue
29,756
81
5,662
35,499
31,440
12
5,151
36,603
Incurred loss and LAE
20,571
2,686
23,257
22,299
3,402
25,701
Other expenses
6,441
233
-
6,674
6,367
(246
)
1,009
7,130
Net underwriting income/(loss)
$
2,744
$
(2,838
)
(94
)
$
2,774
$
(3,144
)
(370
)
Net investment income, other revenue & expense
$
5,662
5,662
$
4,142
4,142
Income before federal Income taxes
$
5,568
$
3,772
Net cash used in operating activities
$
(4,728
)
$
(7,073
)
Loss ratio
69.1
%
70.9
%
Expense ratio
21.6
%
20.3
%
Combined ratio (GAAP)
90.7
%
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)
Ratios are not shown for the Assumed Reinsurance columns, because
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 Non-Core Healthcare Liability and Assumed Reinsurance
results produce ratios which are not meaningful.
5)
Other expenses in column relate to a proxy challenge in 2006.
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
6/30/2007
Fixed-maturity portfolio
U.S. government & agencies
$
167,592
48.5
%
Mortgage & asset-backed
43,482
12.6
%
Corporate
134,189
38.9
%
Total
$
345,263
100.0
%
Average quality
AAA
Effective duration
2.3
Yield to maturity
5.2
%
Weighted average combined maturity
3.5
Six Months Ended
Three Months Ended
June 30, 2007
June 30, 2006
June 30, 2007
June 30, 2006
Total premiums
Net written premium
$
87,577
$
92,564
$
4,099
$
3,441
Change in unearned premium
(27,866
)
(29,482
)
25,738
28,011
Net earned premium
$
59,711
$
63,082
$
29,837
$
31,452