SCPIE Holdings Announces 2002 Fourth-Quarter and Year-End Results.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--March 11, 2003 SCPIE SCPIE Southern California Physicians Insurance Exchange Holdings Inc. (NYSE NYSE See: New York Stock Exchange :SKP SKP Suomen Kommunistinen Puolue (Communist Party of Finland) SKP Sveriges Kommunistiska Parti (Communist Party of Sweden) SKP Sisemajanduse Koguproduktist (Estonian) ), a major provider of healthcare liability insurance, today reported results for its fourth quarter and year ended December December: see month. 31, 2002, which includes the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of its assumed reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. business and a renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. focus on the company's core book of business -- primarily physician and medical group professional liability in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). and Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). . During the fourth quarter of 2002, SCPIE successfully completed a previously announced transaction to cede substantially all of SCPIE's future assumed reinsurance earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. and related losses and acquisition expenses to GoshawK goshawk: see hawk. goshawk Any of the more powerful accipiters (hawks in the genus Accipiter), primarily short-winged, forest-dwelling bird catchers. Best known is the northern goshawk, which reaches about 2 ft (60 cm) in length with a 4.3-ft (1. Insurance Holdings plc, a London-based insurance and reinsurance business listed on the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. . GoshawKRe, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of GoshawK, will assume 98% of SCPIE's June June: see month. 30, 2002, unearned premiums and future written premiums related to its assumed reinsurance business for the 2001 and 2002 underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. years. For 2002, assumed reinsurance written premiums retroceded to GoshawK totaled $129.3 million. SCPIE also will pay an additional premium of 14.3% to GoshawK on the retroceded premiums. Net loss for the 2002 year totaled $38.4 million, or $4.12 per share. A year ago, SCPIE reported a net loss of $57.9 million, or $6.22 per share. On an operating basis, SCPIE reported a loss of $5.44 per share, compared with an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $6.61 per share for the prior-year period. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , which excludes realized investment gains and losses, is used by management and the investment community as an important metric of results from the company's core business. SCPIE's 2002 results include underwriting losses of $114.1 million. The company's non-core direct healthcare liability insurance programs (defined as business and premiums related primarily to the Brown & Brown and hospital programs) had $53.8 million in losses, its assumed reinsurance book had $47.8 million in losses, and its core book had losses of $12.5 million. SCPIE's 2001 results include underwriting losses of $133.3 million. The non-core book had losses of $82.5 million, its assumed reinsurance business had losses of $23.6 million, and its core book had losses of $27.2 million. Total revenues in 2002 reached $339.2 million, including $32.2 million of net investment income and $18.9 million of realized investment gains. This compares with total revenues of $279.7 million in 2001, including $35.9 million of net investment income and $5.7 million of realized investment gains. "SCPIE has two primary goals," said Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. J. Zuk, SCPIE President and Chief Executive Officer. "The first is to become profitable again, and the second is to return to our previous A.M. Best rating of excellent or better. The withdrawal of the company from all direct healthcare liability business other than our historical base of California and a small program in Delaware should result in significantly decreased underwriting losses in 2003. The divestiture of our reinsurance business, although expensive, significantly improves our leverage ratios under both the NAIC NAIC See National Association of Investors Corporation (NAIC). and A.M. Best capital adequacy models. "To illustrate the reduction of our non-core business, net earned premium in the fourth quarter of 2002 was only $7.1 million. Our focus going forward will be to continue our efforts to build our California physician book of business and continue to implement strict underwriting standards and pricing guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. ." In 2002, net earned premiums for the company's direct healthcare liability operations totaled $163.5 million compared with $156.4 million in 2001. Net written premiums in the direct healthcare segment totaled $138.9 million in 2002, versus $168.6 million the year before. For 2002, SCPIE's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). loss ratio was 112.0% compared with 129.1% the year before. The expense ratio in 2002 totaled 27.9% versus 27.4% in 2001. The combined ratio in 2002 was 139.9% compared with 156.5% the year before. For the current fourth quarter, net loss equaled $1.70 per share, compared with a net loss of $3.59 per share in the 2001 fourth quarter. On an operating basis, SCPIE reported a fourth quarter operating loss of $2.65 per share, compared with an operating loss of $3.71 per share in the fourth quarter a year ago. Net earned premiums for the fourth quarter of 2002 were $50.7 million, of which $39.4 million were from SCPIE's direct healthcare segment. A year ago, SCPIE reported earned premiums of $71.8 million, including $43.6 million from direct healthcare liability programs. Total revenues for 2002 fourth quarter, including $7.3 million of net investment income and $13.5 million of realized investment gains, were $72.2 million. In 2001, total fourth-quarter revenues of $82.7 million included $8.6 million of net investment income and $1.6 million of realized investment gains. At year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. December 31, 2002, total investments equaled $709.3 million compared with $713.9 million a year earlier. Total reserves stood at $718.2 million at the 2002 year-end, compared with $678.5 million at December 31, 2001. Book value per share at December 31, 2002, which includes unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. and losses, was $24.34 versus $27.85 at December 31, 2001. Excluding unrealized gains and losses, book value was $23.14 at December 31, 2002, compared with $27.64 at December 31, 2001. The company also reported that a hearing will begin today to review a requested rate increase of 15.6% for its California business in 2003. It is uncertain when the hearing will be completed and when a decision will be rendered. If, and when, a rate increase is approved, SCPIE will implement the increase on a prospective basis. About SCPIE Holdings SCPIE Holdings Inc. is a leading provider of healthcare liability insurance for physicians, oral and maxillofacial surgeons Oral and maxillofacial surgeon A dentist who is trained to perform surgery to correct injuries, defects, or conditions of the mouth, teeth, jaws, and face. Mentioned in: Jaw Wiring , and other healthcare providers, as well as medical groups and healthcare facilities. Since the company was founded in 1976, it has carved carve v. carved, carv·ing, carves v.tr. 1. a. To divide into pieces by cutting; slice: carved a roast. b. out a significant niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the 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 fourth-quarter 2002 results will be conducted today, Tuesday Tuesday: see week. , March 11, 2003, at 9 am (Pacific time). The call will be open to all interested investors through a live audio web broadcast via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.scpie.com and www.companyboardroom.com. Questions, which will be answered during the conference call as time permits, can be submitted prior to the call or during the call by clicking on the appropriate icon on the home page of SCPIE's website. Rebroadcast over the Internet will be available through 5 pm (Pacific time), Tuesday, March 25, on both websites. A telephonic playback Playback could mean:
In addition to historical information, this news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin estimates of losses and loss expenses and expectations concerning the company's ability to retain current insureds at profitable levels, successful completion of the reinsurance divestiture plan, obtaining necessary rate change regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals, and expansion of liability insurance business in its principal market are dependent upon a variety of factors, including future economic, competitive and market conditions, frequency and severity of catastrophic events, future legislative and regulatory changes, uncertainties of services and potential delays in contested rate approval proceedings, the level of ratings from recognized rating services, the inherent uncertainty of loss and loss expense estimates, and the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the property and casualty industry, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the company. In light of the significant uncertainties inherent in the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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, except share data)
December 31 December 31
2002 2001
------------ -----------
ASSETS
Securities available-for-sale:
Fixed maturities investments, at fair value
(amortized cost 2002 - $523,516;
2001 - $565,225) $538,675 $569,144
Equity investments, at fair value
(cost 2002 - $29,758; cost 2001 - $29,744) 34,237 29,098
------------ -----------
Total securities available-for-sale 572,912 598,242
Other investment 15,000 14,928
Short term investments 105,942 84,989
Real estate 15,407 15,766
------------ -----------
Total investments 709,261 713,925
Cash 9,845 10,162
Accrued investment income 8,157 8,673
Premiums receivable 117,335 82,490
Reinsurance recoverable on paid and unpaid 153,589 79,248
Deferred policy acquisition costs 6,858 19,465
Federal income taxes receivable 10,944 11,558
Deferred federal income taxes 32,356 36,661
Property and equipment, net 5,305 6,839
Other assets 10,116 8,625
------------ -----------
Total assets $1,063,766 $977,646
============ ===========
LIABILITIES
Reserves:
Loss and loss adjustment expenses $650,671 $576,636
Unearned premiums 67,556 101,868
------------ -----------
Total reserves 718,227 678,504
Bank loan payable 0 9,000
Amounts held for reinsurance 87,701 0
Other liabilities 30,672 30,754
------------ -----------
Total liabilities 836,600 718,258
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,
2002 - 9,333,807 shares outstanding
2001 - 9,318,066 shares outstanding 1 1
Additional paid-in capital 37,805 37,803
Retained earnings 280,609 322,734
Treasury stock, at cost
(2002 - 2,958,284 shares and
2001 - 2,974,025 shares) (98,830) (98,983)
Subscription notes receivable (3,592) (4,050)
Accumulated other comprehensive income 11,173 1,883
------------ -----------
Total stockholders' equity 227,166 259,388
------------ -----------
Total liabilities and stockholders' equity $1,063,766 $977,646
============ ===========
SCPIE Holdings Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per-share data)
(Unaudited)
Year Ended Three Months Ended
--------------------- ---------------------
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues:
Premiums earned $286,063 $235,935 $50,686 $71,840
Net investment income 32,231 35,895 7,328 8,556
Realized investment
gains 18,910 5,707 13,531 1,567
Income from affiliates 750 1,327 376 288
Other revenue 1280 875 258 460
---------- ---------- ---------- ----------
Total revenues 339,234 279,739 72,179 82,711
Expenses:
Losses and loss
adjustment expenses 320,516 304,473 75,444 109,252
Other operating
expenses 79,676 64,732 21,567 24,280
Interest expenses 66 1,416 - 176
---------- ---------- ---------- ----------
Total expenses 400,258 370,621 97,011 133,708
---------- ---------- ---------- ----------
Loss before federal income
tax benefit (61,024) (90,882) (24,832) (50,997)
Federal income tax benefit (22,642) (32,906) (8,958) (17,499)
---------- ---------- ---------- ----------
Net loss $(38,382) $(57,976) $(15,874) $(33,498)
========== ========== ========== ==========
Basic earnings per share
of common stock $(4.12) $(6.22) $(1.70) $(3.59)
========== ========== ========== ==========
Diluted earnings per
share of common stock $(4.12) $(6.22) $(1.70) $(3.59)
========== ========== ========== ==========
Average Number of Shares
Outstanding-Basic 9,322,249 9,333,425 9,326,667 9,314,045
Average Number of Shares
Outstanding-Diluted 9,322,249 9,333,425 9,326,667 9,314,045
GAAP Loss Ratio 112.0% 129.1% 148.8% 152.1%
GAAP Expense Ratio 27.9% 27.4% 42.6% 33.8%
---------- ---------- ---------- ----------
GAAP Combined Ratio 139.9% 156.5% 191.4% 185.9%
Operating Earnings Per
Share $(5.44) $(6.61) $(2.65) $(3.70)
========== ========== ========== ==========
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
Twelve Months Ended December 31, 2002
Direct Healthcare Assumed
Liability
------------------
Core Non-Core Re- Total
insurance
----------------------------------------
Gross written premium $131,804 $28,298 $175,991 $336,093
Net written premium 116,984 21,917 112,849 251,750
Gross earned premium 127,426 57,294 155,197 339,917
Net earned premium 116,126 47,393 122,544 286,063
Incurred loss and LAE 105,852 91,604 123,060 320,516
Other Expenses 22,786 9,612 47,278 79,676
--------- --------- --------- ----------
Net Underwriting Gain/(Loss) $(12,512) $(53,823) $(47,794) $(114,129)
========= ========= ========= ==========
Net cash provided by (used
in) operating activities $(24,468)
==========
Loss Ratio 91.2% 193.3% 100.4% 112.0%
Expense Ratio 19.6% 20.3% 38.6% 27.9%
--------- --------- --------- ----------
Combined Ratio (GAAP) 110.8% 213.6% 139.0% 139.9%
========= ========= ========= ==========
Three Months Ended December 31, 2002
Gross written premium $28,801 $2,168 $24,691 $55,660
Net written premium 25,440 630 (15,400) 10,670
Gross earned premium 32,147 12,189 33,925 78,261
Net earned premium 32,306 7,130 11,250 50,686
Incurred loss and LAE 31,620 28,567 15,257 75,444
Other Expenses 4,794 3,468 13,305 21,567
--------- --------- --------- ----------
Net Underwriting Gain/(Loss) $(4,108) $(24,905) $(17,312) $(46,325)
========= ========= ========= ==========
Net cash provided by (used
in) operating activities $(19,065)
==========
Loss Ratio 97.9% 400.7% 135.6% 148.8%
Expense Ratio 14.8% 48.6% 118.3% 42.6%
--------- --------- --------- ----------
Combined Ratio (GAAP) 112.7% 449.3% 253.9% 191.4%
========= ========= ========= ==========
Twelve Months Ended December 31, 2001
Direct Healthcare Assumed
Liability
------------------
Core Non-Core Re- Total
insurance
----------------------------------------
Gross written premium $122,732 $63,401 $134,666 $320,799
Net written premium 111,655 56,945 112,207 280,807
Gross earned premium 118,552 55,760 90,054 264,366
Net earned premium 106,547 49,895 79,493 235,935
Incurred loss and LAE 112,024 108,287 84,162 304,473
Other Expenses 21,749 24,071 18,912 64,732
--------- --------- --------- ----------
Net Underwriting Gain/(Loss) $(27,226) $(82,463) $(23,581) $(133,270)
========= ========= ========= ==========
Net cash provided by (used
in) operating activities $36,801
==========
Loss Ratio 105.1% 217.0% 105.9% 129.1%
Expense Ratio 20.4% 48.2% 23.8% 27.4%
--------- --------- --------- ----------
Combined Ratio (GAAP) 125.5% 265.2% 129.7% 156.5%
========= ========= ========= ==========
Three Months Ended December 31, 2001
Gross written premium $32,023 $17,449 $60,038 $109,510
Net written premium 30,619 14,169 41,755 86,543
Gross earned premium 35,365 12,910 35,883 84,158
Net earned premium 33,032 10,559 28,249 71,840
Incurred loss and LAE 19,750 50,084 39,418 109,252
Other Expenses 2,207 8,961 13,112 24,280
--------- --------- --------- ----------
Net Underwriting Gain/(Loss) $11,075 $(48,486) $(24,281) $(61,692)
========= ========= ========= ==========
Net cash provided by (used
in) operating activities $16,352
==========
Loss Ratio 59.8% 474.3% 139.5% 152.1%
Expense Ratio 6.7% 84.9% 46.4% 33.8%
--------- --------- --------- ----------
Combined Ratio (GAAP) 66.5% 559.2% 185.9% 185.9%
========= ========= ========= ==========
SCPIE Holdings Inc. and Subsidiaries
Supplemental Financial Data
(Dollars in Thousands)
December 31, 2002 December 31, 2001
----------------- -----------------
Fixed-Income Portfolio
U.S. Government and Agencies $244,804 45.5% $177,717 31.3%
State, Municipalities - 0.0% 126,516 22.2%
Mortgage-Backed Securities 64,286 11.9% 73,673 12.9%
Corporate 229,585 42.6% 191,238 33.6%
--------- ------- --------- -------
Total $538,675 100.0% $569,144 100.0%
Average Quality AAA AAA
Effective Duration 4.31 4.83
Current yield 3.7% 5.6%
Weighted average combined maturity 4.81 5.58
years years
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