A.M. Best Downgrades Rating of SCPIE Companies

November 17, 2003

A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Very Good) of Los Angeles-based SCPIE Companies. The rating outlook is negative.

This rating action follows SCPIE Holdings Inc.’s reported net loss in the third quarter of 2003 that exceeded A.M. Best’s expectations and included adverse reserve development of $8.5 million on its assumed reinsurance business and the write-down of the value of an equity investment in Goshawk by $9.6 million. As a result, the group’s financial flexibility has been restricted, causing greater exposure to surplus from adverse changes in loss reserves and creating greater execution risk associated with management’s expectation of improved operating results in the fourth quarter of 2003. If these operating results are achieved, the company will improve overall capitalization, but to a level that is still vulnerable.

This rating action reflects SCPIE’S weakened overall capitalization, poor operating results and ongoing exposure to further adverse loss development in its assumed reinsurance and non-core healthcare liability business. This rating action does acknowledge the group’s re-underwriting initiatives implemented as a means to restore and sustain operating profitability and overall balance sheet strength over the mid-term. However, A.M. Best remains concerned with the adequacy of loss reserves and marginal overall capitalization.

The financial strength rating of the following members of SCPIE Companies has been downgraded B (Fair) from B+ (Very Good):

American Healthcare Indemnity Company
American Healthcare Specialty Insurance Company
SCPIE Indemnity Company

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