Scpie (NYSE:SKP)
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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