SCPIE Holdings Unveils Q3 Numbers

Los Angeles-based SCPIE Holdings Inc., a provider of healthcare liability insurance, reported results for its third quarter and nine months ended Sept. 30, 2005.

For the 2005 third quarter, SCPIE reported a net loss of $3.1 million, or $0.33 per share, principally attributable to losses of $14.8 million in the company’s run-off operations. SCPIE’s core California and Delaware healthcare liability insurance business delivered a strong performance in the quarter, reflecting, among other factors, a 6.5% rate increase in California that was implemented in January 2005. For the third quarter a year ago, the company reported a net loss of $3.0 million, or $0.32 per share.

Total revenues for the current third quarter were $37.0 million, down from $40.7 million in the corresponding year-earlier period as the company continued to wind down its non-core healthcare liability and assumed reinsurance operations.

For the first nine months of 2005, SCPIE posted net income of $0.3 million, or $0.03 per share, on total revenue of $111.0 million. In the same period a year ago, the company recorded a net loss of $4.5 million, or $0.48 per share, on total revenues of $120.9 million.

The company’s core healthcare liability insurance business produced an underwriting profit of $4.4 million in the 2005 third quarter contrasted to an underwriting loss a year ago of $604,000. In addition to the rate increase, the company has recently experienced markedly improved loss trends. The 2005 third-quarter combined ratio equaled 86.1% — significantly better than the 101.9% ratio in the 2004 third quarter. The third-quarter loss ratio attributable to core operations continued to improve, dropping to 67.0% from 79.7% a year ago, while the expense ratio of 19.1% attributable to core operations compared favorably with 22.2% in the 2004 third quarter.

“The outstanding performance of our core operations is a direct reflection of the success we are achieving in our turnaround plan,” said Donald Zuk, SCPIE president and CEO. “Our unwavering focus on underwriting, claims evaluation and customer service continues to attract and retain a quality insured base of healthcare professionals.”

Net earned premiums for the core business in the third quarter of 2005 totaled $32.0 million, compared with $30.8 million a year earlier. Net written premiums were $6.9 million for the third quarter of 2005 versus $7.4 million in the 2004 third quarter.

SCPIE’s cumulative retention rate on core business for the 12 months ended Sept. 30, 2005, was 94%.

For the current nine-month period, the core business produced an underwriting profit of $6.1 million, contrasted to a net underwriting loss of $2.7 million in the comparable 2004 period. The 2005 nine-month combined ratio totaled 93.7% versus 102.9% for the 2004 nine-month period. The loss ratio attributable to core operations totaled 72.8% year-to-date 2005, compared with 82.1% for the 2004 year-to-date period. The expense ratio attributable to core operations totaled 20.9% compared with 20.8% a year earlier.

For the first nine months of 2005, net earned premiums for the company’s core direct healthcare liability insurance business totaled $96.5 million, up from $93.3 million a year earlier. Net written premiums for the core direct healthcare liability insurance business equaled $102.3 million, compared with $103.6 million a year earlier.

SCPIE continued to run off its non-core healthcare liability operations in states other than California and Delaware. The business produced a $2.5 million benefit in the 2005 third quarter, contrasted to a loss of $3.8 million in the prior-year period. The benefit in the third quarter resulted from a reduction in reserves of $2.6 million due to better experience in 2005 in resolving out-of-state physician claims and fewer-than-projected claims reported. Outstanding reserves for non-core healthcare liability operations declined to $66.3 million from $97.4 million at Dec. 31, 2004. Open claims dropped to 273 from 431 at year-end 2004.

The company incurred losses in the 2005 third quarter in the assumed reinsurance segment of $17.3 million. The loss was attributable to adjustments made during the quarter to amounts ceded by the company to its principal reinsurer in connection with a review by the parties, additional reported claims and increased loss estimates received by the company during the quarter from its reinsureds, including in large part London-based insurers and reinsurers, and some additional losses and loss adjustment expenses recorded under bail bond reinsurance treaties that are in dispute.

“We are disappointed with the loss in this segment,” said Zuk. “Company management has recently held a number of meetings with our reinsureds to discuss commutation of the treaties. Although results to date are modest, we should have more success as this process moves forward.”

SCPIE’s total revenues of $37.0 million for the 2005 third quarter included net earned premiums of $31.4 million, net investment income of $4.6 million and a realized investment loss of $0.3 million. In the 2004 third quarter, SCPIE’s total revenues of $40.7 million included net earned premiums of $36.1 million, net investment income of $4.5 million and realized investment losses of $0.1 million. Net premiums written for the 2005 third quarter totaled $6.1 million compared with $10.0 million in the same period a year earlier.

Total revenues for the first nine months of 2005 of $111.0 million comprised $96.4 million of earned premiums, $13.4 million of net investment income and $0.3 million of realized investment losses.

For the first nine months of 2004, revenues of $120.9 million included $103.7 million of earned premiums, $15.0 million of net investment income and $1.6 million of realized investment gains. Net written premiums for the first nine months of 2005 totaled $100.8 million, compared with $102.3 million a year earlier.