Los Angeles-based SCPIE Holdings Inc., a provider of healthcare liability insurance, reported continued improved results for its second quarter and first half ended June 30, 2005.
For the 2005 second quarter, SCPIE reported net income of $1.7 million, or $0.18 per share, on total revenues of $36.6 million. This contrasts to a net loss in the year-earlier second quarter of $2.3 million, or $0.25 per share, on total revenues of $35.8 million.
The quarterly results continue to demonstrate the company’s progress over the past three years in winding down non-core healthcare liability and assumed reinsurance segments that were responsible for the majority of the 2004 second-quarter losses, as well as the beneficial impact rate increases in California have had on its core healthcare operations.
For the first six months of 2005, SCPIE reported net income of $3.4 million, or $0.35 per diluted share, on revenues of $74.0 million, versus a net loss in the first half of 2004 of $1.5 million, or $0.16 per share, on revenues of $80.3 million.
Core Operating Review
In the 2005 second quarter, SCPIE’s core direct healthcare liability operations posted an underwriting profit of $1.5 million, up from an underwriting loss a year earlier of $23,000. Net earned premiums for core direct healthcare operations totaled $32.4 million, compared with $30.9 million a year earlier. Net written premiums for the quarter rose to $4.0 million from $3.7 million in the 2004 second quarter. The improvement principally reflects the impact of a 6.5 percent rate increase instituted in California at the beginning of 2005.
The combined ratio for the company’s core business in the second quarter of 2005 improved to 95.3 percent with a loss ratio of 74.5 percent. A year ago, the company’s combined ratio for the second quarter totaled 100.1 percent, including a loss ratio of 79.8 percent. The expense ratio for the core segment in the 2005 second quarter rose slightly to 20.8 percent from 20.3 percent a year earlier.
For the first half of 2005, SCPIE’s core healthcare operations achieved an underwriting profit of $1.7 million, versus an underwriting loss of $2.1 million in the first six months of 2004. Net earned premiums for the core business rose slightly to $64.5 million from $62.5 million a year earlier, and net written premiums totaled $95.4 million in the 2005 first half compared with $96.2 million in the first half of 2004. The combined ratio for the 2005 first half stood at 97.4 percent, including a loss ratio of 75.6 percent. This is improved from a combined ratio for the first half of last year of 103.3 percent, when the loss ratio was 83.2 percent.
SCPIE’s retention rate for its core direct healthcare liability business over the past 12 months totaled 94.2 percent.
“SCPIE’s performance for the three months ended June 30, 2005, built on the promising results we delivered in the first quarter,” said Donald J. Zuk, SCPIE’s President and Chief Executive Officer. “The trends in California continue positive for our business, and our adherence to strong underwriting, risk management and policyholder services disciplines have clearly benefited our results.”
SCPIE’s continuing run-off of its non-core healthcare liability operations in states other than California and Delaware had minimal impact on the company’s financial results for the second quarter and first half of 2005. Outstanding reserves for the non-core healthcare liability operations declined to $75.2 million from $97.4 million at Dec. 31, 2004. Open claims dropped to 316 from 431 at year-end 2004.
In the assumed reinsurance area, which is also in run-off, upward developments on a few contracts created an underwriting loss of $3.1 million for the quarter and $5.5 million for the first half of 2005, down from $6.7 million and $8.4 million, respectively, for the corresponding periods in 2004.
Revenues for the second quarter of 2005 included net investment income of $4.1 million and realized investment losses of $10,000, compared with net investment income in the year-earlier second quarter of $5.1 million and realized investment losses of $631,000.
For the 2005 first half, net investment income totaled $8.8 million and realized investment gains were $6,000. A year earlier, the company reported first-half net investment income of $10.6 million and realized investment gains of $1.7 million.
Principally, the reductions in investment income are due to decreased invested assets and a lower rate of return.
At June 30, 2005, SCPIE’s balance sheet remained debt-free. Book value at the close of the 2005 second quarter rose to $20.82 per share, compared with $20.68 per share at Dec. 31, 2004.
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 specifically for the healthcare community.
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