Scpie (NYSE:SKP)
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SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare liability
insurance, today reported its financial results for the year and fourth
quarter ended December 31, 2007.
In 2007, SCPIE had net income of $17.9 million, equal to $1.82 per
diluted share, compared with net income of $12.3 million, or $1.27 per
diluted share in 2006.
For the 2007 fourth quarter, SCPIE had net income of $6.3 million, or
$0.63 per diluted share. For the same period in 2006, the Company had
net income of $4.0 million, or $0.41 per diluted share.
Direct Healthcare Liability Review
Net earned premiums for SCPIE’s direct
healthcare liability insurance business in 2007 were $121.9 million, a
slight decrease from the 2006 total of $123.2 million. Net written
premiums for 2007 were $121.2 million, compared to $123.3 million the
previous year.
This segment produced an underwriting profit in 2007 of $20.1 million,
an increase over the 2006 underwriting profit of $10.8 million. The loss
and loss adjustment expense ratio decreased to 62.0% from 70.6% in the
previous year. In 2007, the combined ratio was 83.5%, compared with
91.3% in 2006.
For the 2007 fourth quarter, net earned premiums for SCPIE’s
healthcare liability insurance business increased slightly to $31.6
million from $30.1 million in 2006. Net written premiums were $25.4
million in the fourth quarter of 2007 versus $24.5 million a year
earlier.
In the 2007 fourth quarter, the business produced an underwriting profit
of $10.6 million, compared with $3.1 million in 2006. The loss ratio in
this segment for the last quarter of 2007 was 43.1 % compared to 69.2%
in 2006, and the combined ratio for the 2007 fourth quarter decreased to
66.5% from 89.7% in 2006.
Non-Core Review
SCPIE continued to run off its healthcare liability operations.
Outstanding reserves for this segment declined further in 2007 to $23.9
million from $37.7 million at year-end 2006. Open claims dropped to 75
at year-end 2007, compared to 136 at the end of 2006.
The Company reported losses for 2007 of $8.9 million—$2.5
million in the fourth quarter—in the assumed
reinsurance segment.
Financial Summary
For 2007, SCPIE had total revenues of $143.7 million, which included net
earned premiums of $121.7 million, net investment income of $21.9
million and a realized investment loss of $114,000. For 2006, total
revenues of $143.9 million included net earned premiums of $123.5
million, net investment income of $20.4 million and a realized
investment loss of $493,000.
Total revenues of $36.9 million for the 2007 fourth quarter include
$31.6 million of earned premiums, $5.3 million of net investment income
and $3,000 of realized investment losses. In the previous year fourth
quarter, total revenues of $35.6 million included $30.3 million of
earned premiums, $4.9 million of net investment income and $70,000 of
realized investment losses. Net written premiums for the 2007 fourth
quarter totaled $25.4 million, compared with $24.7 million a year
earlier.
SCPIE’s balance sheet remained debt-free at
December 31, 2007. Book value per share was $24.21 at year end, up from
$21.63 at December 31, 2006.
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 for the healthcare community.
On October 16, 2007, the Company announced that it has entered into a
definitive agreement to be acquired by The Doctors Company, a
physician-owned medical malpractice carrier headquartered in Napa,
California. The transaction is subject to the customary closing
conditions, including regulatory approvals and the approval of the
Company’s stockholders. A special meeting of
stockholders to approve this transaction is scheduled for March 26,
2008, at 10 am Pacific Time, at the Company’s
headquarters, 1888 Century Park East, Los Angeles, CA 90067.
Additional Information and Where to
Find It
On January 30, 2008, SCPIE filed a definitive proxy statement with the
Securities and Exchange Commission (SEC) in connection with its proposed
acquisition by The Doctors Company. The proxy statement has been mailed
to SCPIE’s stockholders, who are urged to
read the proxy statement and other relevant materials filed with the SEC
because they contain important information about the acquisition.
Investors and security holders may obtain free copies of these documents
and other documents filed with the SEC at the SEC’s
website at www.sec.gov. In addition,
investors and security holders may obtain free copies of the documents
filed with the SEC by SCPIE at the Investors/Media section on its
corporate website at www.scpie.com.
SCPIE’s executive officers and directors may
be participants in the solicitation of proxies from SCPIE stockholders
with respect to the acquisition. Information about SCPIE’s
executive officers and directors, and their ownership of SCPIE Holdings
common stock, is set forth in the definitive proxy statement SCPIE filed
with the SEC on January 30, 2008, and in the reports filed by the
executive officers and directors under Section 16 of the Securities
Exchange Act of 1934, as amended, since such date. Additional
information regarding the direct and indirect interests of SCPIE’s
executive officers and directors in the acquisition is in the definitive
proxy statement.
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.
Risks and uncertainties regarding the pending transaction with The
Doctors Company include the possibility that the closing does not occur,
or is delayed, due to the failure of closing conditions (including
approval by the Company’s stockholders and
regulatory authorities) and risks that the pending transaction could
disrupt current plans and opportunities of the Company. Other factors
that may cause actual results to differ from the forward-looking
statements contained herein and that may affect the Company’s
prospects are included in the Company’s other
filings with the Securities and Exchange Commission. 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, 2007
December 31, 2006
ASSETS
Securities available-for-sale:
Fixed maturities investments, at fair value
(amortized cost 2007 - $335,813; 2006 - $397,553)
$
337,784
$
389,954
Equity investments, at fair value
(cost 2007 - $1,428; 2006 - $1,723)
1,665
2,034
Total securities available-for-sale
339,449
391,988
Cash and cash equivalents
217,323
145,815
Total investments
556,772
537,803
Accrued investment income
5,029
5,330
Premiums receivable
13,142
18,697
Assumed reinsurance receivables
14,230
17,089
Reinsurance recoverable
36,194
45,564
Deferred policy acquisition costs
7,420
7,351
Deferred federal income taxes, net
31,946
44,661
Property and equipment, net
948
1,733
Other assets
7,055
7,281
Total assets
$
672,736
$
685,509
LIABILITIES
Reserves:
Loss and loss adjustment expenses
$
378,431
$
405,448
Unearned premiums
41,112
41,815
Total reserves
419,543
447,263
Amounts held for reinsurance
1,220
13,317
Other liabilities
19,934
18,285
Total liabilities
440,697
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 - 9,583,165 shares outstanding
2006 - 9,553,906 shares outstanding
1
1
Additional paid-in capital
36,704
37,127
Retained earnings
289,636
271,925
Treasury stock, at cost
(93,927
)
(95,278
)
(2007 - 2,708,926 shares and 2006 - 2,738,185 shares)
Subscription notes receivable
(1,509
)
(1,849
)
Accumulated other comprehensive income / (loss)
1,134
(5,282
)
Total stockholders' equity
232,039
206,644
Total liabilities and stockholders' equity
$
672,736
$
685,509
SCPIE Holdings Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in Thousands, except per-share data)
Twelve Months Ended
Three Months Ended
December 31,2007
December 31,2006
December 31,2007
December 31,2006
Revenues:
Net premiums earned
$
121,659
$
123,531
$
31,639
$
30,286
Net investment income
21,908
20,410
5,335
4,934
Realized investment losses
(114
)
(493
)
(3
)
(70
)
Other revenue / (loss)
283
461
(52
)
443
Total revenues
143,736
143,909
36,919
35,593
Expenses:
Losses & loss adjustment expenses incurred
82,039
98,088
14,660
23,504
Other operating expenses
34,044
27,465
12,345
6,394
Total expenses
116,083
125,553
27,005
29,898
Income before federal income taxes
27,653
18,356
9,914
5,695
Income tax expense
9,714
6,076
3,656
1,712
Net income
$
17,939
$
12,280
$
6,258
$
3,983
Basic earnings per share of common stock
$
1.87
$
1.29
$
0.65
$
0.42
Diluted earnings per share of common stock
$
1.82
$
1.27
$
0.63
$
0.41
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
Twelve Months Ended December 31 2007
Twelve Months Ended December 31 2006
Direct Healthcare
Assumed
Direct Healthcare
Assumed
Liability
Reinsurance (2)(3)
Other (5)
Total (4)
Liability
Reinsurance (2)(3)
Other (6)
Total (4)
Net written premium (1)
$
121,169
$
(213
)
$
120,956
$
123,280
$
361
$
123,641
Net earned premium
$
121,872
$
(213
)
$
121,659
$
123,170
$
361
$
123,531
Net investment income
$
21,908
21,908
$
20,410
20,410
Realized investment losses
(114
)
(114
)
(493
)
(493
)
Other revenue
283
283
461
461
Total revenue
121,872
(213
)
22,077
143,736
123,170
361
20,378
143,909
Incurred loss and LAE
75,609
6,430
82,039
86,928
11,160
98,088
Other expenses
26,159
2,263
5,622
34,044
25,479
377
1,609
27,465
Net underwriting income / (loss)
$
20,104
$
(8,906
)
11,198
$
10,763
$
(11,176
)
(413
)
Net investment income, other revenue & expense
$
16,455
16,455
$
18,769
18,769
Income before federal Income taxes
$
27,653
$
18,356
Net cash provided in operating activities
$
11,831
$
7,557
Loss ratio
62.0
%
70.6
%
Expense ratio
21.5
%
20.7
%
Combined ratio (GAAP)
83.5
%
91.3
%
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 transaction expenses
associated with the auction process and subsequent merger agreement
executed with The Doctors Company.
6) 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 December 31 2007
Three Months Ended December 31 2006
Direct Healthcare
Assumed
Direct Healthcare
Assumed
Liability
Reinsurance (2)(3)
Other (5)
Total (4)
Liability
Reinsurance (2)(3)
Other (6)
Total (4)
Net written premium (1)
$
25,352
$
16
$
25,368
$
24,523
$
182
$
24,705
Net earned premium
$
31,623
$
16
$
31,639
$
30,104
$
182
$
30,286
Net investment income
$
5,335
5,335
$
4,934
4,934
Realized investment losses
(3
)
(3
)
(70
)
(70
)
Other revenue / (loss)
-
(52
)
(52
)
443
443
Total revenue
31,623
16
5,280
36,919
30,104
182
5,307
35,593
Incurred loss and LAE
13,625
1,035
14,660
20,845
2,659
23,504
Other expenses
7,395
1,481
3,469
12,345
6,185
209
-
6,394
Net underwriting income / (loss)
$
10,603
$
(2,500
)
8,103
$
3,074
$
(2,686
)
388
Net investment income, other revenue & expense
$
1,811
1,811
$
5,307
5,307
Income before federal Income taxes
$
9,914
$
5,695
Net cash provided in operating activities
$
10,951
$
5,207
Loss ratio
43.1
%
69.2
%
Expense ratio
23.4
%
20.5
%
Combined ratio (GAAP)
66.5
%
89.7
%
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) 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 transaction expenses
associated with the auction process and subsequent merger agreement
executed with The Doctors Company.
6) Other expenses in column relate to a proxy challenge in 2006.
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
December 31, 2007
Fixed-maturity portfolio
U.S. government & agencies
$
155,927
46.2
%
Mortgage & asset-backed
64,071
19.0
%
Corporate
117,786
34.8
%
Total
$
337,784
100.0
%
Average quality
AAA
Effective duration
2.8
Yield to maturity
4.3
%
Weighted average combined maturity
4.1
Twelve Months Ended
Three Months Ended
December 31,2007
December 31,2006
December 31,2007
December 31,2006
Total premiums
Net written premium
$
120,956
$
123,641
$
25,368
$
24,705
Change in unearned premium
703
(110
)
6,271
5,581
Net earned premium
$
121,659
$
123,531
$
31,639
$
30,286