SKP Merrill Lynch

SCPIE Holdings Inc. (NYSE:SKP), a major provider of healthcare liability insurance, today reported its financial results for the year and fourth quarter ended December 31, 2007. In 2007, SCPIE had net income of $17.9 million, equal to $1.82 per diluted share, compared with net income of $12.3 million, or $1.27 per diluted share in 2006. For the 2007 fourth quarter, SCPIE had net income of $6.3 million, or $0.63 per diluted share. For the same period in 2006, the Company had net income of $4.0 million, or $0.41 per diluted share. Direct Healthcare Liability Review Net earned premiums for SCPIE�s direct healthcare liability insurance business in 2007 were $121.9 million, a slight decrease from the 2006 total of $123.2 million. Net written premiums for 2007 were $121.2 million, compared to $123.3 million the previous year. This segment produced an underwriting profit in 2007 of $20.1 million, an increase over the 2006 underwriting profit of $10.8 million. The loss and loss adjustment expense ratio decreased to 62.0% from 70.6% in the previous year. In 2007, the combined ratio was 83.5%, compared with 91.3% in 2006. For the 2007 fourth quarter, net earned premiums for SCPIE�s healthcare liability insurance business increased slightly to $31.6 million from $30.1 million in 2006. Net written premiums were $25.4 million in the fourth quarter of 2007 versus $24.5 million a year earlier. In the 2007 fourth quarter, the business produced an underwriting profit of $10.6 million, compared with $3.1 million in 2006. The loss ratio in this segment for the last quarter of 2007 was 43.1 % compared to 69.2% in 2006, and the combined ratio for the 2007 fourth quarter decreased to 66.5% from 89.7% in 2006. Non-Core Review SCPIE continued to run off its healthcare liability operations. Outstanding reserves for this segment declined further in 2007 to $23.9 million from $37.7 million at year-end 2006. Open claims dropped to 75 at year-end 2007, compared to 136 at the end of 2006. The Company reported losses for 2007 of $8.9 million�$2.5 million in the fourth quarter�in the assumed reinsurance segment. Financial Summary For 2007, SCPIE had total revenues of $143.7 million, which included net earned premiums of $121.7 million, net investment income of $21.9 million and a realized investment loss of $114,000. For 2006, total revenues of $143.9 million included net earned premiums of $123.5 million, net investment income of $20.4 million and a realized investment loss of $493,000. Total revenues of $36.9 million for the 2007 fourth quarter include $31.6 million of earned premiums, $5.3 million of net investment income and $3,000 of realized investment losses. In the previous year fourth quarter, total revenues of $35.6 million included $30.3 million of earned premiums, $4.9 million of net investment income and $70,000 of realized investment losses. Net written premiums for the 2007 fourth quarter totaled $25.4 million, compared with $24.7 million a year earlier. SCPIE�s balance sheet remained debt-free at December 31, 2007. Book value per share was $24.21 at year end, up from $21.63 at December 31, 2006. 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 the detailed financial statement accompanying this news release. About SCPIE Holdings 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 for the healthcare community. On October 16, 2007, the Company announced that it has entered into a definitive agreement to be acquired by The Doctors Company, a physician-owned medical malpractice carrier headquartered in Napa, California. The transaction is subject to the customary closing conditions, including regulatory approvals and the approval of the Company�s stockholders. A special meeting of stockholders to approve this transaction is scheduled for March 26, 2008, at 10 am Pacific Time, at the Company�s headquarters, 1888 Century Park East, Los Angeles, CA 90067. Additional Information and Where to Find It On January 30, 2008, SCPIE filed a definitive proxy statement with the Securities and Exchange Commission (SEC) in connection with its proposed acquisition by The Doctors Company. The proxy statement has been mailed to SCPIE�s stockholders, who are urged to read the proxy statement and other relevant materials filed with the SEC because they contain important information about the acquisition. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC at the SEC�s website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by SCPIE at the Investors/Media section on its corporate website at www.scpie.com. SCPIE�s executive officers and directors may be participants in the solicitation of proxies from SCPIE stockholders with respect to the acquisition. Information about SCPIE�s executive officers and directors, and their ownership of SCPIE Holdings common stock, is set forth in the definitive proxy statement SCPIE filed with the SEC on January 30, 2008, and in the reports filed by the executive officers and directors under Section 16 of the Securities Exchange Act of 1934, as amended, since such date. Additional information regarding the direct and indirect interests of SCPIE�s executive officers and directors in the acquisition is in the definitive proxy statement. In addition to historical information, this news release contains forward-looking statements 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 estimates of losses and loss expenses and expectations concerning the Company�s ability to retain current insureds at profitable levels, successful withdrawal from the assumed reinsurance business, continued solvency of the Company�s reinsurers, obtaining rate change regulatory approvals, expansion of liability insurance business in its principal market, and improved performance and profitability are dependent upon a variety of factors, including future economic, competitive and market conditions, frequency and severity of catastrophic events, future legislative and regulatory actions, uncertainties and potential delays in obtaining rate approvals, the level of ratings from recognized rating services, the inherent uncertainty of loss and loss expense estimates in both the core business and discontinued non-core business and the cyclical nature of the property and casualty insurance industry, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. The Company is also subject to certain structural risks as an insurance holding company, including statutory restrictions on dividends and other intercompany transactions. Risks and uncertainties regarding the pending transaction with The Doctors Company include the possibility that the closing does not occur, or is delayed, due to the failure of closing conditions (including approval by the Company�s stockholders and regulatory authorities) and risks that the pending transaction could disrupt current plans and opportunities of the Company. Other factors that may cause actual results to differ from the forward-looking statements contained herein and that may affect the Company�s prospects are included in the Company�s other filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking 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) � � December 31, 2007 December 31, 2006 ASSETS Securities available-for-sale: Fixed maturities investments, at fair value (amortized cost 2007 - $335,813; 2006 - $397,553) $ 337,784 $ 389,954 Equity investments, at fair value (cost 2007 - $1,428; 2006 - $1,723) � 1,665 � � 2,034 � Total securities available-for-sale 339,449 391,988 Cash and cash equivalents � 217,323 � � 145,815 � Total investments 556,772 537,803 � Accrued investment income 5,029 5,330 Premiums receivable 13,142 18,697 Assumed reinsurance receivables 14,230 17,089 Reinsurance recoverable 36,194 45,564 Deferred policy acquisition costs 7,420 7,351 Deferred federal income taxes, net 31,946 44,661 Property and equipment, net 948 1,733 Other assets � 7,055 � � 7,281 � Total assets $ 672,736 � $ 685,509 � � LIABILITIES Reserves: Loss and loss adjustment expenses $ 378,431 $ 405,448 Unearned premiums � 41,112 � � 41,815 � Total reserves 419,543 447,263 Amounts held for reinsurance 1,220 13,317 Other liabilities � 19,934 � � 18,285 � Total liabilities 440,697 478,865 � 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, 2007 - 9,583,165 shares outstanding 2006 - 9,553,906 shares outstanding 1 1 Additional paid-in capital 36,704 37,127 Retained earnings 289,636 271,925 Treasury stock, at cost (93,927 ) (95,278 ) (2007 - 2,708,926 shares and 2006 - 2,738,185 shares) Subscription notes receivable (1,509 ) (1,849 ) Accumulated other comprehensive income / (loss) � 1,134 � � (5,282 ) Total stockholders' equity � 232,039 � � 206,644 � Total liabilities and stockholders' equity $ 672,736 � $ 685,509 � SCPIE Holdings Inc. and Subsidiaries Consolidated Statements of Income (Dollars in Thousands, except per-share data) � � � � Twelve Months Ended Three Months Ended � December 31,2007 � December 31,2006 December 31,2007 � December 31,2006 Revenues: Net premiums earned $ 121,659 $ 123,531 $ 31,639 $ 30,286 Net investment income 21,908 20,410 5,335 4,934 Realized investment losses (114 ) (493 ) (3 ) (70 ) Other revenue / (loss) � 283 � � 461 � � (52 ) � 443 � Total revenues 143,736 143,909 36,919 35,593 Expenses: Losses & loss adjustment expenses incurred 82,039 98,088 14,660 23,504 Other operating expenses � 34,044 � � 27,465 � � 12,345 � � 6,394 � Total expenses � 116,083 � � 125,553 � � 27,005 � � 29,898 � � Income before federal income taxes 27,653 18,356 9,914 5,695 Income tax expense � 9,714 � � 6,076 � � 3,656 � � 1,712 � � Net income $ 17,939 � $ 12,280 � $ 6,258 � $ 3,983 � � Basic earnings per share of common stock $ 1.87 � $ 1.29 � $ 0.65 � $ 0.42 � Diluted earnings per share of common stock $ 1.82 � $ 1.27 � $ 0.63 � $ 0.41 � SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) � � � � � � � � Twelve Months Ended December 31 2007 Twelve Months Ended December 31 2006 Direct Healthcare Assumed Direct Healthcare Assumed Liability Reinsurance (2)(3) Other (5) Total (4) Liability Reinsurance (2)(3) Other (6) Total (4) � Net written premium (1) $ 121,169 $ (213 ) $ 120,956 $ 123,280 $ 361 $ 123,641 � � Net earned premium $ 121,872 $ (213 ) $ 121,659 $ 123,170 $ 361 $ 123,531 � Net investment income $ 21,908 21,908 $ 20,410 20,410 Realized investment losses (114 ) (114 ) (493 ) (493 ) Other revenue � � � 283 � � 283 � � � � 461 � � 461 � � Total revenue 121,872 (213 ) 22,077 143,736 123,170 361 20,378 143,909 � Incurred loss and LAE 75,609 6,430 82,039 86,928 11,160 98,088 Other expenses � 26,159 � � 2,263 � � 5,622 � � 34,044 � � 25,479 � � 377 � � 1,609 � � 27,465 � � Net underwriting income / (loss) $ 20,104 � $ (8,906 ) 11,198 $ 10,763 � $ (11,176 ) (413 ) � Net investment income, other revenue & expense $ 16,455 � � 16,455 � $ 18,769 � � 18,769 � � Income before federal Income taxes $ 27,653 � $ 18,356 � � Net cash provided in operating activities $ 11,831 � $ 7,557 � � Loss ratio 62.0 % 70.6 % Expense ratio � 21.5 % � 20.7 % � Combined ratio (GAAP) � 83.5 % � 91.3 % � 1) Net written premium is a non-GAAP financial measure which represents the premiums charged on policies issued during a fiscal period less any reinsurance. Net written premium is a statutory measure of production levels. Net earned premium, a comparable GAAP measure, represents the portion of premiums written that is recognized as income in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies. A reconciliation of net written premium to net earned premium is provided herein. � 2) Ratios are not shown for the Assumed Reinsurance columns, because of their run-off status produces ratios which are not meaningful. � 3) The expense component for the Assumed Reinsurance segment includes the effect of the retrospective accounting treatment required by Financial Accounting Standards Board No. 113, more fully described in SCPIE's 2006 Annual Filing in Form 10K, page 42. � 4) Ratios are not shown for the Total column, because inclusion of the discontinued Assumed Reinsurance results produce ratios which are no longer meaningful. � 5) Other expenses in column relate to transaction expenses associated with the auction process and subsequent merger agreement executed with The Doctors Company. � 6) Other expenses in column relate to a proxy challenge in 2006. SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) � � � � � � � � Three Months Ended December 31 2007 Three Months Ended December 31 2006 Direct Healthcare Assumed Direct Healthcare Assumed Liability � Reinsurance (2)(3) Other (5) Total (4) Liability Reinsurance (2)(3) Other (6) Total (4) � Net written premium (1) $ 25,352 $ 16 $ 25,368 $ 24,523 $ 182 $ 24,705 � � Net earned premium $ 31,623 $ 16 $ 31,639 $ 30,104 $ 182 $ 30,286 � Net investment income $ 5,335 5,335 $ 4,934 4,934 Realized investment losses (3 ) (3 ) (70 ) (70 ) Other revenue / (loss) � � - � � (52 ) � (52 ) � � � 443 � � 443 � � Total revenue 31,623 16 5,280 36,919 30,104 182 5,307 35,593 � Incurred loss and LAE 13,625 1,035 14,660 20,845 2,659 23,504 Other expenses � 7,395 � � 1,481 � � 3,469 � � 12,345 � � 6,185 � � 209 � � - � � 6,394 � � Net underwriting income / (loss) $ 10,603 � $ (2,500 ) 8,103 $ 3,074 � $ (2,686 ) 388 � Net investment income, other revenue & expense $ 1,811 � � 1,811 � $ 5,307 � � 5,307 � � Income before federal Income taxes $ 9,914 � $ 5,695 � � Net cash provided in operating activities $ 10,951 � $ 5,207 � � Loss ratio 43.1 % 69.2 % Expense ratio � 23.4 % � 20.5 % � Combined ratio (GAAP) � 66.5 % � � 89.7 % � 1) Net written premium is a non-GAAP financial measure which represents the premiums charged on policies issued during a fiscal period less any reinsurance. Net written premium is a statutory measure of production levels. Net earned premium, a comparable GAAP measure, represents the portion of premiums written that is recognized as income in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies. A reconciliation of net written premium to net earned premium is provided herein. � 2) Ratios are not shown for the Assumed Reinsurance columns, because their run-off status produces ratios which are not meaningful. � 3) The expense component for the Assumed Reinsurance segment includes the effect of the retrospective accounting treatment required by Financial Accounting Standards Board No. 113, more fully described in SCPIE's 2006 Annual Filing in Form 10K, page 42. � 4) Ratios are not shown for the Total column, because inclusion of the discontinued Non-Core Healthcare Liability and Assumed Reinsurance results produce ratios which are not meaningful. � 5) Other expenses in column relate to transaction expenses associated with the auction process and subsequent merger agreement executed with The Doctors Company. � 6) Other expenses in column relate to a proxy challenge in 2006. SCPIE Holdings Inc. and Subsidiaries Supplemental Financial Data (Dollars in Thousands) December 31, 2007 � � Fixed-maturity portfolio � U.S. government & agencies $ 155,927 46.2 % Mortgage & asset-backed 64,071 19.0 % Corporate � 117,786 � 34.8 % Total $ 337,784 100.0 % � Average quality AAA Effective duration 2.8 Yield to maturity 4.3 % Weighted average combined maturity 4.1 � � � � � Twelve Months Ended Three Months Ended December 31,2007 December 31,2006 December 31,2007 December 31,2006 � Total premiums Net written premium $ 120,956 $ 123,641 $ 25,368 $ 24,705 Change in unearned premium � 703 � � (110 ) � � 6,271 � � 5,581 � Net earned premium $ 121,659 � $ 123,531 � � $ 31,639 � $ 30,286