SCPIE Holdings Notes Q2 Results

SCPIE Holdings Inc., a provider of healthcare liability insurance, reported results for its second quarter and six months ended June 30, 2003, reportedly representing continued progress in its efforts to return the company to sound financial performance.

For the 2003 second quarter, SCPIE recorded net income of $612,000, or $0.07 per diluted share, contrasted to a net loss of $12.0 million, or $1.29 per share, a year ago.

Donald Zuk, SCPIE president and CEO, said, “SCPIE is continuing to execute its turnaround strategies and seeing a steady rate of improvement in its performance. Our core California and Delaware healthcare liability business performed as we had anticipated, despite not being able to implement our 2003 California rate increase. Additionally, we have continued to significantly reduce our exposure to our non-core healthcare liability operations. For the first time in several quarters, there were no additions to reserves in our non-core healthcare business for prior periods. Further, the impact of the assumed reinsurance business on our leverage ratios has been substantially reduced. Our overall profitability is continuing evidence that our actions are taking hold and the problem areas we had identified are under control.”

Zuk noted that the elimination of SCPIE’s non-core healthcare business and assumed reinsurance segment has significantly improved the company’s leverage ratios under both the NAIC and A.M. Best capital adequacy models.

Net earned premium for the company’s core direct healthcare liability insurance business in the second quarter of 2003 totaled $28.7 million, up from $25.8 million a year earlier. The core business incurred an underwriting loss of $2.9 million compared with an underwriting loss of $2.7 million in the second quarter of 2002. The combined ratio remained relatively steady at 110 percent, with the expense ratio attributable to core operations declining to 17.8 percent from 18.7 percent.

For the first half of 2003, net earned premium for the company’s core direct healthcare liability insurance business totaled $58.3 million, up from $54.1 million a year earlier. Net written premiums for the core direct healthcare liability insurance business rose to $92.6 million from $87.7 million.

For the six months, the core business incurred an underwriting loss of $6.1 million compared with a loss of $5.5 million in the first half of 2002. The six-month combined ratio also remained relatively steady at 110 percent, with the expense ratio attributable to core operations declining to 17.3 percent from 20.8 percent.

SCPIE’s request for a rate increase is pending before the California Department of Insurance, and the company expects a decision during the third quarter of 2003. Zuk added: “As we move forward, we remain optimistic that the California Department of Insurance will grant us a rate increase in 2003. If approved, a rate increase will improve our operating performance for the fourth quarter of this year and position us for stronger results in 2004.”

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 a detailed financial statement accompanying this news release.

Financial Summary
SCPIE recorded total revenues of $47.4 million for the 2003 second quarter, including net premiums earned of $39.7 million, net investment income of $5.3 million and realized investment gains of $837,000. A year ago, SCPIE’s second-quarter revenues of $88.6 million included $78.8 million of earned premiums, net investment income of $7.9 million and realized investment gains of $1.0 million.

Net premiums written for the 2003 second quarter totaled $12.3 million. A year earlier, net written premiums totaled $51.0 million. The decline in earned and written premiums demonstrates the measures the company has taken to curtail business in the non-core direct healthcare liability and assumed reinsurance areas.

Overall, the company produced a net pretax profit of $1.3 million for the three months ended June 30, 2003, contrasted to a net pretax loss of $18.9 million for the three months ended June 30, 2002.

During the second quarter of 2003, SCPIE’s GAAP loss ratio improved to 86.4 percent, compared with 112.1 percent last year. The GAAP expense ratio for the 2003 second quarter was 29.8 percent versus 24.3 percent a year ago. The company’s combined GAAP ratio for the quarter was 116.2 percent compared with 136.4 percent last year.

For the six months ended June 30, 2003, the company reported a net loss of $610,000 or $0.07 per share, compared with a net loss of $11.1 million, or $1.19 per share, in the first six months a year ago.

Total revenues for the first six months of 2003 reached $110.9 million, including premiums earned of $94.0 million, net investment income of $10.9 million and realized gains of $3.9 million. In the 2002 first half, total revenues equaled $178.9 million, including net premiums earned of $159.9 million, net investment income of $16.5 million and realized gains of $1.4 million.

SCPIE’s loss ratio for the first six months of 2003 was 88.2 percent, improved from 98.2 percent a year ago. The expense ratio for the first half of the year was 31.1 percent versus 25.0 percent last year. The combined ratio for the first six months of 2003 equaled 119.3 percent compared with 123.2 percent in the comparable 2002 period.

Book value per share at June 30, 2003, was $24.79 compared with $24.34 at Dec. 31, 2002.