<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2000          Commission File No. 1-12449

                              SCPIE HOLDINGS INC.
            (Exact name of registrant as specified in its charter)


                Delaware                                  95-4557980
      (State or other jurisdiction                     (I.R.S. Employer
    of incorporation or organization)                 Identification No.)

1888 Century Park East, Los Angeles, California              90067
   (Address of principal executive offices)                (Zip Code)


      Registrant's telephone number, including area code: (310) 551-5900


 Securities registered pursuant          Name of Exchange on which registered
   to Section 12(b) of the Act

Preferred Stock, par value $1.00 per share      New York Stock Exchange
Common Stock, par value $0.0001 per share       New York Stock Exchange
          (Title of Class)


          Securities registered pursuant to Section 12(g) of the Act

                                     NONE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  [X]  No  [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  [X]

The aggregate market value of the Registrant's voting stock held by non-
affiliates of the Registrant at March 12, 2001, was approximately $206,118,394
(based upon the closing sales price of such date, as reported by the Wall Street
Journal).

At March 12, 2001, the Registrant had issued and outstanding an aggregate of
9,838,627 shares of its Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Proxy statement for the Annual Meeting of Stockholders of Registrant to be
held on May 10, 2001 (only portions of which are incorporated by reference).
<PAGE>

                                    PART I


ITEM 1. BUSINESS
----------------

General
-------

     SCPIE Holdings Inc. (the "Company" or "SCPIE Holdings") is a holding
company owning subsidiaries engaged in providing insurance and reinsurance
products. The Company is a nationwide provider of medical malpractice insurance
and related liability insurance products to physicians, healthcare facilities
and others engaged in the healthcare industry. Since August 1999 the Company has
also been actively engaged in developing a diverse portfolio of assumed
reinsurance treaties to complement its direct insurance business. Reinsurance
treaties have principally included professional and automobile liability
coverages, commercial and residential property risks, accident and health
coverages, and a broad spread of marine insurance.

     The Company conducts its insurance business through three insurance company
subsidiaries. The largest, SCPIE Indemnity Company ("SCPIE Indemnity"), is
licensed to conduct a direct insurance business only in California, its state of
domicile. American Healthcare Indemnity Company ("AHI"), domiciled in Delaware,
is licensed to transact insurance in 47 states and the District of Columbia.
American Healthcare Specialty Insurance Company ("AHSIC"), domiciled in
Arkansas, is eligible to write policies as an excess and surplus lines insurer
in 34 states and the District of Columbia. All three companies generally have
the right to participate in domestic and international reinsurance treaties. The
Company also has an insurance agency subsidiary, SCPIE Insurance Services, Inc.,
two subsidiary corporations providing management services, and a recently
organized corporate member of Lloyd's of London ("Lloyd's"), SCPIE Underwriting
Limited, which commenced operations in January 2001 as a member of two Lloyd's
underwriting syndicates.

     The Company was founded in 1976 as Southern California Physicians Insurance
Exchange (the "Exchange"), a California reciprocal insurance company, and for
the next 20 years conducted its operations as a large policyholder-owned
California medical malpractice insurance company. SCPIE Holdings was organized
in Delaware in 1996 and acquired the business of the Exchange and the three
insurance company subsidiaries in a reorganization that was consummated on
January 29, 1997 (the "Reorganization"). The policyholders of the Exchange
became the stockholders of the SCPIE Holdings in the Reorganization, and SCPIE
Holdings concurrently sold additional shares of common stock in a public
offering. The common stock of SCPIE Holdings is listed on the New York Stock
Exchange under the trading symbol "SKP."

     For purposes of this Form 10-K report, the "Company" refers, at all times
prior to the effective date of the Reorganization to the Exchange and its
subsidiaries, collectively, and at all times after that date to SCPIE Holdings
and its subsidiaries, collectively; the term "SCPIE Holdings" refers at all
times to SCPIE Holdings Inc., excluding its subsidiaries. The term "Insurance
Subsidiaries" refers to SCPIE Indemnity, AHI and AHSIC.

Information about Segments
--------------------------

     The Company's insurance business is organized into two reportable business
segments: direct healthcare liability insurance written on a direct basis and
assumed reinsurance operations. In direct (or primary) insurance activities, the
insurer assumes the risk of loss from persons or organizations that are directly
subject to the risks. Such risks may relate to liability (or casualty),
property, life, accident, health, financial or other perils that may arise from
an insurable event. In reinsurance activities, the reinsurer assumes defined
portions of similar or dissimilar risks that primary insurers or other
reinsurers have assumed in their own insuring activities.

     Direct Healthcare Liability Insurance represents professional liability
insurance for physicians, oral and maxillofacial surgeons, hospitals and other
healthcare providers. Assumed Reinsurance represents the book of assumed
worldwide reinsurance of professional, commercial and personal liability
coverages, commercial and residential property risks, accident and health
coverages and marine coverages. Other includes items not directly related to the
operating segments such as net investment income, realized investment gains and
losses, and other revenue.

     The following table sets forth information concerning the Company's
revenues, operating income and identifiable assets attributable to each of its
business segments for the year ended December 31, 2000, the first year in which
assumed reinsurance operations became classified as a separate segment.

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                                      Direct Healthcare      Assumed
                                                                     Liability Insurance   Reinsurance     Other      Total
                                                                     --------------------  ------------  ---------  ----------
       (in thousands)
       <S>                                                           <C>                   <C>           <C>        <C>
       Year Ended December 31, 2000
       Premiums earned                                                          $149,404       $27,098   $     --    $176,502
       Net investment income                                                          --            --     34,152      34,152
       Realized investment gains (losses)                                             --            --       (400)       (400)
       Equity earnings from affiliate                                                 --            --        880         880
       Other revenue                                                                  --            --        342         342
                                                                                --------       -------   --------    --------
       Total revenues                                                            149,404        27,098     34,974     211,476

       Losses and loss adjustment expenses                                       129,307        23,295         --     152,602
       Other operating expenses                                                   32,333         4,150         --      36,483
                                                                                --------       -------   --------    --------
       Total expenses                                                            161,640        27,445         --     189,085
                                                                                --------       -------   --------    --------
       Segment (loss) income before income taxes                                 (12,236)         (347)    34,974      22,391
                                                                                ========       =======   ========    ========

       Combined ratio                                                             108.19%       101.28%        --      107.13%
       Segment assets                                                           $155,176       $13,931   $685,538    $854,645
</TABLE>

Direct Healthcare Liability Insurance Segment
---------------------------------------------

     Overview
     --------

     The Company is one of the nation's leading providers of medical malpractice
insurance based on direct premiums written in 2000. The Company currently
insures more than 17,000 physicians, other healthcare providers, oral and
maxillofacial surgeons and dentists practicing alone or in medical groups,
clinics or other healthcare organizations. The Company also insures a variety of
healthcare facilities, including hospitals, emergency departments, outpatient
surgery and hemodialysis centers, and clinical and pathology laboratories.

     Medical malpractice insurance, or medical professional liability insurance,
insures the physician, dentist, hospital or other healthcare provider or
facility against liabilities arising from the rendering of, or failure to render
professional medical services. Under the typical medical malpractice insurance
policy, the insurer also defends the insured against potentially covered claims.
Based on data compiled by A.M. Best & Co. ("A.M. Best"), total medical
malpractice premiums in the United States in 1999 were approximately $6.0
billion. In California, the second largest market for medical malpractice
insurance based on direct premiums written, approximately $589.9 million of
medical malpractice premiums were written in 1999. The Company's share of the
medical malpractice premiums written in California in 1999 was approximately
20.3%.

     The Company believes that its considerable market share for medical
malpractice insurance in California is in large part due to the loyalty of its
insured physicians. The Company attributes this loyalty to the high quality,
personalized service it provides and its traditional focus on the California
physician marketplace. Six county medical associations and several specialty
societies in California have endorsed the medical malpractice insurance offered
by the Company.

     Since 1996, the Company has expanded and diversified its healthcare
liability insurance activities well beyond its traditional focus of medical
malpractice insurance for California physicians and medical groups. The Company
has significantly increased its medical malpractice premium volume in states
outside California and expanded its product offerings to include comprehensive
policy coverages for hospitals and large diversified healthcare systems, as well
as coverages designed to meet the needs of the smaller healthcare facilities.

     Geographic expansion has been accomplished principally through an
arrangement with Brown & Brown, Inc. ("Brown & Brown"), one of the nation's top
independent insurance agency organizations. AHI entered into an agreement with
Brown & Brown to market professional liability insurance to physicians and small
medical groups in selected states commencing January 1, 1998. The program now
has been expanded to encompass eight states, the largest in terms of premium
volume being Connecticut, Florida and Georgia. Continued expansion of this
relationship with Brown & Brown is an important element of the Company's
strategy for diversification into states outside California.

     AHI has also expanded its operations outside California through sales of
professional liability policies to physicians who do not meet the normal
underwriting criteria of the Company.  These policies are sold through various
brokers typically at a higher

                                       3
<PAGE>

premium. The broker relationships were developed from the medical malpractice
insurance businesses AHI acquired from Fremont Indemnity Company ("Fremont") and
a small midwestern insurance company in 1998 and 1999, respectively.

     In 2000, the Company derived approximately 37% of its healthcare liability
premium volume from policies issued outside the state of California.  There is
no assurance, however, that the Company will successfully retain or continue to
expand this business or that it will ultimately be profitable.

     The Company encountered intense price competition in its efforts to
significantly expand its large hospital and other healthcare facility writings.
From 1997 through 1999, the Company added more than 75 hospitals to its program.
These policies were written principally through national and regional brokers at
very competitive rates for the coverage provided. During 2000, the Company
incurred material adverse loss experience under many of these policies,
including policies issued to hospitals that had already left the Company for
lower rates offered by other insurers. The Company declined to renew a number of
its hospital policies or offered renewal only at substantially increased premium
rates. At the present time, the Company insures only 15 hospitals, at an
expected premium volume for 2001 of approximately $5 million.

     The Company believes that the highly price competitive market for hospital
coverage is undergoing some change, and that it will be able to eventually
increase its hospital writings at appropriate premium rates.  The Company is
therefore actively continuing its marketing efforts with brokers representing
those hospitals that meet the Company's current underwriting standards.

     During 2000, the Company entered into a separate arrangement with Brown &
Brown covering a portion of a dental liability insurance program developed by
Brown & Brown.  The Company directly insures dentists in Texas and California
under this program and also reinsures the entire risk of policies issued
nationally by another insurer to oral and maxillofacial surgeons marketed by
Brown & Brown.  Direct written premiums during 2000 under this program were
approximately $9.3 million.

     The Company continues to develop and market ancillary liability insurance
products for the healthcare industry, including directors and officers liability
insurance for healthcare entities, errors and omissions coverage for managed
care organizations and billing errors and omissions coverage for the medical
profession. These represent a small but growing part of the business.

     Products
     --------

     The Company underwrites professional and related liability policy coverages
for physicians (including oral and maxillofacial surgeons), physician medical
groups and clinics, hospitals, dentists, managed care organizations and other
providers in the healthcare industry. The following table summarizes, by
product, the direct premiums earned by the Company for the periods indicated:


<TABLE>
<CAPTION>
                                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                                                 -------------------------------
                                                                           2000              1999                1998
                                                                         --------          --------          ----------
                                                                                        (IN THOUSANDS)
           <S>                                                           <C>               <C>               <C>
           Physician and medical group liability:
             Physician and medical group
                standard professional
                liability.....................................           $124,577          $124,092          $  107,731
             Nonstandard physicians...........................              5,368             5,617               1,299
             Emergency medicine program.......................              2,880             2,243               2,012
             Urgent care centers..............................                111               234                 325
                                                                         --------          --------          ----------
                Subtotal medical liability....................            132,936           132,186             111,367

             Excess personal liability........................                673               705                 709
                                                                         --------          --------          ----------
                Subtotal physician and
                  medical group liability.....................            133,609           132,891             112,076

           Hospital liability.................................             13,618            12,351              10,296
           Healthcare provider liability......................              1,575             1,051                 761
           Healthcare facility liability......................              4,634             1,707                  --
           Dentist Liability                                                  707                --                  --
           Managed care organization errors
             and omissions....................................                665               699                 705
           Billing errors and omissions                                       368                --                  --
           Directors and officers'
             liability........................................                662               492                 239
                                                                         --------          --------          ----------
             Total............................................           $155,838          $149,191          $   24,077 (1)
                                                                         ========          ========          ==========
</TABLE>


                                       4
<PAGE>

(1)  During 1998, the Company reinsured 100% of the risk under certain physician
     and medical group liability policies, hospital liability policies, and
     healthcare provider and facility liability policies that were issued by
     other companies while the Company obtained certain regulatory licenses and
     approvals. Most of these policies were written directly by the Company
     during 1999. If these policies had been written directly by the Company
     during 1998, the total direct earned premiums for 1998 would have been
     approximately $160.7 million.

     Physician and Medical Group Liability.  The professional liability
     -------------------------------------
insurance for sole practitioners and for medical groups provides protection
against the legal liability of the insureds for such things as injury caused by
or as a result of the performance of patient treatment, failure to treat and
failure to diagnose a patient.  The Company offers separate policy forms for
physicians who are sole practitioners and for those who practice as part of a
medical group or clinic. The policy issued to sole practitioners includes
coverage for professional liability that arises in the medical practice and also
for certain other "premises" liabilities that may arise in the non-professional
operations of the medical practice, such as slip and fall accidents, and a
limited defense reimbursement benefit for proceedings instituted by state
licensing boards and other governmental entities.

     The policy issued to medical groups and their physician members includes
not only professional liability coverage and defense reimbursement benefits, but
also substantially more comprehensive coverages for commercial general liability
and employee benefit program liability and also provides a small medical payment
benefit to injured persons. The business liability coverage included in the
medical group policy includes coverage for certain employment-related
liabilities and for pollution, which are normally excluded under a standard
commercial general liability form. The Company also offers, as part of its
standard policy forms for both sole and group practitioners, optional excess
personal liability for the insured physicians. Excess personal liability
insurance provides coverage to the physician for personal liabilities in excess
of amounts covered under the physician's homeowners and automobile policies.
The Company has developed nonstandard programs which may exclude business
liability coverages for certain physicians.

     The professional liability coverages are issued primarily on a "claims made
and reported" basis. Coverage is provided for claims reported to the Company
during the policy period arising from incidents that occurred at any time the
insured was covered by the policy. The Company also offers "tail coverage" for
claims reported after the expiration of the policy for occurrences during the
coverage period. The price of the tail coverage is based on the length of time
the insured has been covered under the Company's claims made and reported form.
The Company provides free tail coverage for insured physicians who die or become
disabled during the coverage period of the policy and those who have been
insured by the Company for at least five consecutive years and retire completely
from the practice of medicine. Free tail coverage is automatically provided to
physicians with at least five consecutive years of coverage with the Company and
who are also at least 65 years old.

     Business liability coverage for medical groups and clinics and the excess
personal liability insurance is underwritten on an occurrence basis. Under
occurrence coverage, the coverage is provided for incidents that occur at any
time the policy is in effect, regardless of when the claim is reported. With
occurrence coverage, there is no need to purchase tail coverage.

     The Company offers limits of insurance up to $10.0 million per claim or
occurrence, with up to a $10.0 million aggregate policy limit for all claims
reported or occurrences for each calendar year or other 12-month policy period.
The most common limit is $1.0 million per claim or occurrence, subject to a $3.0
million aggregate policy limit. The Company's limit of liability under the
excess personal liability insurance coverage is $1.0 million per occurrence with
no aggregate limit. The defense reimbursement benefit for governmental
proceedings is $25,000, and the medical payments benefit for persons injured in
non-professional activities is $10,000.

     The Company has written professional liability insurance for oral surgeons
in California for a number of years.  Oral surgeons are frequently licensed
physicians. In 2000, the Company began offering coverage to oral surgeons
nationally, under a program underwritten by another insurance company and
reinsured in its entirety by the Company.

     Hospital Liability.  The Company writes hospital liability insurance on
     -------------------
both a claims made and reported basis and a modified occurrence basis that in
effect includes a combination of occurrence coverage and tail coverage for up to
seven years after the policy terminates. The policy issued to hospitals provides
protection for professional liabilities related to the operation of a hospital
and its various staff committees, together with the same business liability,
medical payments and employee benefit program liability coverages included in
the policy for large medical groups. Prior to October 1, 1997, the limits of
coverage under the hospital policies issued by the Company, net of reinsurance,
were $500,000 for each claim or occurrence, with no aggregate limit.  Since
October 1, 1997, the Company has offered hospital coverage with limits up to
$50.0 million per occurrence with no aggregate limit.

                                       5
<PAGE>

     Healthcare Provider Liability/Healthcare Facilities Liability.  The Company
     -------------------------------------------------------------
offers its professional liability coverage to a variety of specialty provider
organizations, including hospital emergency departments, outpatient surgery
centers, medical urgent care facilities and hemodialysis, clinical and pathology
laboratories. The Company also offers its professional liability coverage to
healthcare providers such as chiropractors, podiatrists and nurse practitioners.
These policies include the standard professional liability coverage provided to
physicians and medical groups, with certain modifications to meet the special
needs of these healthcare providers. The policies are generally issued on a
claims made and reported basis with the limits of liability up to those offered
to larger medical groups. The limits of coverage under the current healthcare
provider policies issued by the Company are between $1.0 million and $5.0
million per incident, subject to $3.0 million to $10.0 million aggregate policy
limits.

     Dentist Liability.  In 2000, the Company initiated dental liability
     -----------------
insurance coverage under a program developed by Brown & Brown in Texas and
California.  The program provides claims-made coverage to dentists and small
dental groups.  Brown & Brown markets this program in other states through
another insurance company.

     Managed Care Organization Errors and Omissions. The Company offers a policy
     ----------------------------------------------
for managed care organizations.  The policy provides coverage for liability
arising from covered managed care incidents or vicarious liability for medical
services rendered by non-employed physicians. Covered services include peer
review, healthcare expense review, utilization management, utilization review
and claims and benefit handling in the operation of the managed care
organizations.  These policies are generally issued on a claims made and
reported basis. The annual aggregate limits of coverage under the current
managed care organization policies issued by the Company are between $1.0
million and $5.0 million.

     Directors and Officers' Liability.  In 1996, the Company began to directly
     ---------------------------------
write renewals of these policies previously underwritten by other companies,
accounting for approximately $264,000 in direct premiums written in 1998,
$809,000 in 1999, and $761,000 in 2000. In 1999, the Company began offering a
new directors and officers' liability policy, and expanded its marketing of this
program.  The directors and officers' liability policies are generally issued on
a claims made and reported basis. The limits of coverage on directors and
officers' liability policies written by the Company are between $1.0 million and
$5.0 million.

     Billing Errors and Omissions.  In late 1999, the Company began offering a
     ----------------------------
newly designed product that provides physicians and medical groups with
protection for defense expenses and certain liabilities related to governmental
investigations into billing errors and omissions to Medicare and other
governmentally subsidized healthcare programs.

     Marketing and Policyholder Services
     -----------------------------------

     Historically the Company marketed its physician professional liability
policies directly to physicians and medical groups in California.
Infrequently, larger medical groups were written through insurance brokers.
The Company actively marketed hospital policies through brokers when it
commenced offering this coverage in 1994.   Two years ago, brokered business
became the predominant source of new physician and medical group policies as a
result of the Brown & Brown marketing arrangement and a broker network obtained
through the Fremont acquisition.

     The Company's marketing organization has approximately 30 employees who
provide marketing support to brokers and service large physician medical groups
and hospital accounts.   In support of its broker network, the Company markets
to sole practitioner physicians and other prospective policyholders through its
relationships with medical associations, referrals by existing policyholders,
educational seminars, advertisements in medical journals plus direct mail
solicitation to licensed physicians and members of physician medical specialty
group organizations.

     The Company attracts new physicians through special rates for medical
residents and discounts for physicians just entering medical practice. In
addition, the Company participates as a sponsor and participant in various
medical group and hospital administrators' programs, medical association and
specialty society conventions and similar programs that provide visibility in
the healthcare community.

     The Company maintains marketing offices in Addison, Texas, Boca Raton,
Florida and Phoenix, Arizona to support broker's marketing and sales activities
and service direct hospital insureds.

                                       6
<PAGE>

     Underwriting
     ------------

     The underwriting department consists of a vice president in charge of
underwriting, three divisional underwriting managers, 13 underwriters and 14
technical and administrative assistants. Certain of these underwriters
specialize in underwriting hospitals, managed care organizations and directors
and officers' liability products. The Company's underwriting department is
responsible for the evaluation of applicants for professional liability and
other coverages, the issuance of policies and the establishment and
implementation of underwriting standards for all of the coverages underwritten
by the Company.

     The Company performs a continuous process of reunderwriting its insured
physicians, medical groups and healthcare facilities. Information concerning
insureds with large losses, a high frequency of claims or unusual practice
characteristics is developed through claims and risk management reports or
correspondence.

     Brown & Brown performs most of the underwriting functions with respect to
policies issued by the Company under its arrangement with Brown & Brown for
physician professional liability and other coverages.  Brown & Brown has an
experienced, fully staffed underwriting department that has underwritten the
program for a number of years.  The Company has coordinated with Brown & Brown
to provide assurance that the underwriting standards and their application are
consistent.

     Rates
     -----

     The Company establishes, through its own actuarial staff and independent
actuaries, rates and rating classifications for its physician and medical group
insureds based on the loss and loss adjustment expense (LAE) experience it has
developed over the past 20 years and upon rates charged by its competitors. The
Company has various rating classifications based on practice, location, medical
specialty, limits and other factors. The Company utilizes various discounts,
including discounts for part-time practice, physicians just entering medical
practice and large medical groups. The Company has developed nonstandard
programs for physicians who have unfavorable loss history or practice
characteristics, but whom the Company considers insurable. Policies issued in
this program have significant surcharges. The Company has established its
premium rates and rating classifications for hospitals and managed care
organizations utilizing data publicly filed by other insurers, and based in part
on its recent experience. The data for managed care organization errors and
omissions liability is extremely limited, as tort exposures for these
organizations are only recently beginning to develop. The rates for directors
and officers' liability are developed using historical data publicly filed by
other insurers, financial analysis and loss history.  All rates for liability
insurance in California are subject to the prior approval of the Insurance
Commissioner.

     Between 1993 and 1999, the Company instituted annual overall rate increases
ranging from 3.7% to 9.2% on its physician professional liability policies in
order to improve its underwriting results. These rate increases were higher than
those implemented by most of its competitors. As a result, the Company has lost
some of its policyholders, in part due to these rate increases, but realized a
modest increase in its premium volume through 1998 and has improved its
underwriting results.   In 1999, the Company experienced a small decrease in
earned premium volume as a result of its 3.7% rate increase.  The Company
instituted no rate increase for 2000 on its physicians professional liability
policies, but instituted a 10.6% average rate increase for 2001 for its
California physicians and medical groups and is instituting similar increases in
other states.  The effect of these rate increases on the Company's ability to
retain and expand its healthcare liability business will depend, in large part,
on the magnitude of rate changes instituted by its competitors.

     Claims
     ------

     The claims department of the Company is responsible for claims
investigation, establishment of appropriate case reserves for loss and LAE,
defense planning and coordination, control of attorneys engaged by the Company
to defend a claim and negotiation of the settlement or other disposition of a
claim. Under most of the Company's policies, except managed care organization
errors and omissions policies, directors and officers' liability policies, the
Company is obligated to defend its insureds, which is in addition to the limit
of liability under the policy. Medical malpractice claims often involve the
evaluation of highly technical medical issues, severe injuries and conflicting
expert opinions. In almost all cases, the person bringing the claim against the
physician is already represented by legal counsel when the Company learns of the
potential claim.

     The claims department staff includes managers, litigation supervisors,
investigators and other experienced professionals trained in the evaluation and
resolution of medical professional liability and general liability claims. The
claims department staff consists of approximately 57 employees, including 14
clerical personnel. The Company has seven unit managers and three branch
managers responsible for specific geographic areas, and additional units for
specialty areas such as hospitals, birth injuries and policy

                                       7
<PAGE>

coverage issues. The Company also occasionally uses independent claims
adjusters, primarily to investigate claims in remote locations. The Company
selects legal counsel from among a group of law firms in the geographic area in
which the action is filed.

     The Company vigorously defends its insureds against claims, but seeks to
resolve expediently cases with high exposure potential. The defense of a
healthcare professional liability claim requires significant cooperation between
the litigation supervisor or claims department manager responsible for the claim
and the insured physician.  The Company's policies require that a healthcare
professional liability claim cannot generally be settled without the consent of
the physician or the professional insured. California law requires that the
insurer report such settlements to a medical disciplinary board, and Federal law
requires that any claim payment, regardless of amount, be reported to a national
data bank which can be accessed by various state licensing and disciplinary
boards and medical peer evaluation committees. Thus, the physician or other
healthcare professional is often placed in a difficult position of knowing that
a settlement may result in the initiation of a disciplinary proceeding or some
other impediment to his or her ability to practice. The claims department
supervisor must be able to fully evaluate considerations of settlement or trial
and to communicate effectively the Company's recommendation to its insured. If
the insured will not consent to a settlement offer, the Company may be exposed
to a larger judgment if the case proceeds to trial.

Assumed Reinsurance Segment
---------------------------

     In November 1999, the Company established a separate Assumed Reinsurance
Division under the direction of two newly hired officers.

     Reinsurance Industry Overview
     -----------------------------

     Reinsurance is an arrangement in which an insurance company, the reinsurer,
agrees to indemnify another insurance company, the ceding company, against all
or a portion of the insurance risks underwritten by the ceding company under one
or more insurance contracts. Reinsurance can provide a ceding company with
several benefits, including a reduction in net liability on individual risks,
catastrophe protection from large or multiple losses and assistance in
maintaining acceptable financial ratios. Reinsurance also provides a ceding
company with additional underwriting capacity by permitting it to accept larger
risks and write more business than would be possible without a concomitant
increase in capital and surplus.

     Reinsurance contracts are normally classified as treaty or facultative
contracts.  Treaty reinsurance refers to automatic reinsurance coverage for all
or a portion of a specified class of risks ceded by the primary insurer or a
reinsurer, while facultative reinsurance involves underwriting of individual
risks.  Coverage of the risks assumed under reinsurance contracts may be
classified as quota-share or excess.  Under quota-share (or pro-rata)
reinsurance, the reinsurer shares proportionally in the original premiums,
losses of the primary insurer or reinsurer.  Excess (or non-proportional)
reinsurance provides for the indemnification of the primary insurer or reinsurer
for all or a portion of the loss in excess of an agreed upon amount or
"retention."  Both quota-share and excess reinsurance may provide for aggregate
limits of indemnification.

     Company Strategy
     ----------------

     The Company has concentrated the majority of its assumed reinsurance
portfolio on treaty reinsurance.  Treaty reinsurers, including the Company, do
not separately evaluate each of the individual risks assumed under their
treaties and, consequently, after a review of the ceding company's underwriting
practices, are largely dependent on the original risk underwriting decisions
made by the ceding company.  Such dependence subjects reinsurers in general to
the possibility that the ceding companies have not adequately evaluated the
risks to be reinsured and, therefore, that the premiums ceded under the treaty
may not adequately compensate the reinsurer for the risks assumed.  The
reinsurer's evaluation of the ceding company's risk management and underwriting
practices will usually impact the pricing of the treaty.

     The Company has focused its assumed reinsurance portfolio on pro rata
agreements in which the ceding company bears a proportional share of the risk
and therefore has the incentive to underwrite and price the business
appropriately.  Further, the Company's pro rata participations are structured to
take advantage of all reinsurance protections purchased by the ceding company.
The Company has treaties principally with those ceding companies with which the
Company's officers have had past experience and can demonstrate that the ceding
company has outperformed its peers in its areas of expertise.  The Company also
participates in excess of loss reinsurance arrangements, following the same
approach outlined above, where the subject exposures can be completely
identified, segmented geographically, priced accordingly and underwritten by
specific individuals within the ceding company in whom the Company has
confidence.

                                       8
<PAGE>

     The principal reinsurance programs in which the Company is a participant
are the following.

     Casualty Programs.  Approximately 36% of the Company's expected assumed
     ------------------
reinsurance premium written on treaties currently in effect is derived from a
limited number of pro rata and excess of loss treaties for United States based
ceding companies writing automobile, general liability, workers compensation and
certain professional liability lines of business.

     Property Programs.  Approximately 22% of the Company's expected assumed
     ------------------
reinsurance premium written on treaties currently in effect is derived from a
limited number of pro rata and excess of loss treaties for United States and
international based ceding companies writing personal and commercial property
coverage throughout the world.

     Accident and Health Programs.  Approximately 31% of the Company's expected
     -----------------------------
assumed reinsurance premium written on treaties currently in effect is derived
from a limited number of pro rata treaties for United States based ceding
companies coming from a single source, Reinsurance Management Group, Summit, New
Jersey, in which the Company has a 20% ownership interest.  Reinsurance
Management Group is a specialist underwriting management firm writing various
forms of accident and health reinsurance covering reinsurance risks.  In
addition, the Company writes a small portfolio of international personal
accident business on a pro rata treaty basis.

     Marine Program.  Approximately 11% of the Company's expected assumed
     ---------------
reinsurance premium written on treaties currently in effect is derived from pro
rata treaties from a single Lloyd's syndicate that specializes in writing marine
insurance and reinsurance on a worldwide basis.  The syndicate is managed by an
affiliate of GoshawK Insurance Holdings plc ("GoshawK").  In November 1999, the
Company purchased approximately 9.5% of the outstanding common stock of GoshawK,
which is a publicly traded Lloyd's underwriter.  As part of this transaction,
the Company entered into a quota share reinsurance treaty effective January 1,
2000, under which the Company has assumed 7.5% of GoshawK's annual premium.

     Corporate Name at Lloyd's.  In addition to the foregoing programs,
     --------------------------
effective January 1, 2001, the Company formed SCPIE Underwriting Limited, a
limited liability corporate underwriting syndicate member at Lloyd's which
provides underwriting capacity to two Lloyd's syndicates for the 2001
underwriting year.  One syndicate will write a varied portfolio of property and
casualty insurance and reinsurance, while the other syndicate will write a
portfolio of professional liability risks.

     Distribution and Underwriting
     -----------------------------

     The Company's predominant source of business is through professional
reinsurance intermediaries.  At the present time the Company writes through
approximately eleven intermediaries located throughout the United States and in
London.

     Underwriting
     ------------

     All underwriting of the assumed reinsurance portfolio is the responsibility
of the two senior officers who head the division.  Likewise, these individuals
are directly responsible for all on site audits of assumed reinsurance clients.
The vast majority of assumed reinsurance treaties are written for a twelve-month
term and are subject to a process of reunderwriting at the end of each period
prior to renewal agreement.

     Claims
     ------

     All individual excess of loss claims are reviewed by the two senior
officers managing the reinsurance division, who recommend cash reserves and
other action to be taken with respect to these claims.  With respect to claims
under pro rata treaties which are submitted in conjunction with monthly or
quarterly premium accounts, the officers conduct periodic audits of these claims
to confirm they fall within the scope of the respective reinsurance treaties.

Loss and LAE Reserves
---------------------

     The determination of loss reserves is a projection of ultimate losses
through an actuarial analysis of the claims history of the Company and other
professional liability insurers, subject to adjustments deemed appropriate by
the Company due to changing circumstances. Included in its claims history are
losses and LAE paid by the Company in prior periods and case reserves for
anticipated losses and LAE developed by the Company's claims department as
claims are reported and investigated. Actuaries rely primarily on such
historical loss experience in determining reserve levels on the assumption that
historical loss experience provides a

                                       9
<PAGE>

good indication of future loss experience despite the uncertainties in loss cost
trends and the delays in reporting and settling claims. As additional
information becomes available, the estimates reflected in earlier loss reserves
may be revised. Any increase in the amount of reserves, including reserves for
insured events of prior years, could have an adverse effect on the Company's
results for the period in which the adjustments are made.

     The uncertainties inherent in estimating ultimate losses on the basis of
past experience have grown significantly in recent years principally as a result
of judicial expansion of liability standards and expansive interpretations of
insurance contracts. These uncertainties may be further affected by, among other
factors, changes in the rate of inflation and changes in the propensities of
individuals to file claims. The inherent uncertainty of establishing reserves is
relatively greater for companies writing long-tail casualty insurance, including
medical malpractice insurance, due primarily to the longer-term nature of the
resolution of claims.  There can be no assurance that the ultimate liability of
the Company will not exceed the amounts reserved.

     The Company utilizes both its internal actuarial staff and independent
actuaries in establishing its reserves. The Company's independent actuaries
review the Company's reserves for losses and LAE at the end of each fiscal year
and prepare a report that includes a recommended level of reserves. The Company
considers this recommendation as well as other factors, such as known,
anticipated or estimated changes in frequency and severity of claims, loss
retention levels and premium rates, in establishing the amount of its reserves
for losses and LAE. The Company continually refines reserve estimates as
experience develops and further claims are reported and settled. The Company
reflects adjustments to reserves in the results of the periods in which such
adjustments are made. Since medical malpractice insurance is a long-tail line of
business for which the initial loss and LAE estimates may be adversely impacted
by events occurring long after the reporting of the claim, such as sudden severe
inflation or adverse judicial or legislative decisions, the Company has
attempted to establish its loss and LAE reserves what it believes are
conservative levels.

     The Company's loss reserve experience is shown in the following table,
which sets forth a reconciliation of beginning and ending reserves for unpaid
losses and LAE for the periods indicated:

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                     --------------------------------
                                                                                       2000        1999        1998
                                                                                     --------    --------    --------
                                                                                              (IN THOUSANDS)
         <S>                                                                         <C>         <C>         <C>
         Reserves for losses and LAE at beginning
          of year.................................................................   $499,864    $477,631    $454,971
          Less reinsurance recoverables...........................................     45,007      24,899      21,531
                                                                                     --------    --------    --------
         Reserves for losses and LAE, net of
          related reinsurance recoverable, at beginning of year...................    404,857     452,732     433,440
                                                                                     --------    --------    --------
         Reserves from purchase of Fremont
         Indemnity Company........................................................         --          --      36,972
         Provision for losses and LAE for claims
         occurring in the current year, net of
         reinsurance..............................................................    194,717     183,959     197,870
         Decrease in estimated losses and LAE for
         claims occurring in prior years, net of
         reinsurance..............................................................    (42,115)    (61,179)    (65,662)
                                                                                     --------    --------    --------
         Incurred losses during the year, net of
         reinsurance..............................................................    152,602     122,780     132,208
                                                                                     --------    --------    --------
         Deduct losses and LAE payments for
         claims, net of reinsurance, occurring
         during:
             Current year.........................................................     15,181      13,742      14,408
             Prior years..........................................................    148,889     156,913     135,480
                                                                                     --------    --------    --------
                                                                                      164,070     170,655     149,888
                                                                                     --------    --------    --------
         Reserve for losses and LAE, net of
         related reinsurance recoverable, at
         end of year..............................................................    393,389     404,857     452,732
         Reinsurance recoverable for losses
         and LAE, at end of year..................................................     40,152      45,007      24,899
                                                                                     --------    --------    --------
         Reserves for losses and LAE, gross
         of reinsurance recoverable, at end
         of year..................................................................   $433,541    $449,864    $477,631
                                                                                     ========    ========    ========
</TABLE>

     In 1999 and 2000, the Company experienced a number of large paid losses
under its physician and medical group and hospital policies that were in excess
of the limits of insurance retained by the Company.  In addition, the Company
established significant

                                       10
<PAGE>

reserves for such excess losses for certain claims reported under its hospital
policies. These reserve increases resulted in the higher levels of reinsurance
recoverable at the end of 1999 and 2000.

     The following table reflects the development of losses and LAE reserves for
the periods indicated at the end of that year and each subsequent year. The line
entitled "Loss and LAE reserves" reflects the reserves, net of reinsurance
recoverables, as originally reported at the end of the stated year. Each
calendar year-end reserve includes the estimated unpaid liabilities for that
report or accident year and for all prior report or accident years. The section
under the caption "Liability reestimated as of" shows the original recorded
reserve as adjusted as of the end of each subsequent year to reflect the
cumulative amounts paid and all other facts and circumstances discovered during
each year. The line "Cumulative redundancy" reflects the difference between the
latest reestimated reserve amount and the reserve amount as originally
established. The section under the caption "Cumulative amount of liability paid
through" shows the cumulative amounts paid related to the reserve as of the end
of each subsequent year.

     In evaluating the information in the table below, it should be noted that
each amount includes the effects of all changes in amounts of prior periods. For
example, if a loss determined in 2000 to be $100,000 was first reserved in 1990
at $150,000, the $50,000 redundancy (original estimate minus actual loss) would
be included in the cumulative redundancy in each of the years 1990 through 2000
shown below. This table presents development data by calendar year and does not
relate the data to the year in which the claim was reported or the incident
actually occurred. Conditions and trends that have affected the development of
these reserves in the past will not necessarily recur in the future.

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                          ----------------------------------------------------------------------------------------------------------
                            1990      1991      1992     1993      1994      1995      1996      1997     1998     1999      2000
                          --------  --------  -------- --------  --------  --------  --------  -------- -------- -------- ---------
                                                                    (IN THOUSANDS)
<S>                       <C>        <C>        <C>     <C>       <C>        <C>      <C>       <C>       <C>      <C>     <C>
Loss and LAE
  Reserves.............   $427,049  $439,908  $465,423 $472,129  $449,566  $446,627  $440,301  $433,440 $452,732 $404,857  $393,389
Liability reestimated
  as of:
  One year later.......    401,878   409,966   421,994  411,915   391,733   386,879   387,094   339,672  391,553  362,742
  Two years later......    368,124   364,105   368,521  363,562   337,441   337,760   301,794   283,276  325,282
  Three years later....    324,370   316,220   325,073  315,712   304,063   264,813   259,022   250,962
  Four years later.....    284,628   282,291   292,801  293,711   254,004   236,609   237,059
  Five years later.....    264,582   261,344   274,304  262,879   239,372   221,537
  Six years later......    251,335   252,077   257,864  254,502   231,129
  Seven years later....    245,745   243,216   252,353  248,522
  Eight years later ...    241,533   240,306   248,420
  Nine years later.....    239,883   238,546
  Ten years later......    238,546
Cumulative
  Redundancy...........    188,503   201,362   217,003  223,607   218,437   225,090   203,243   182,479  127,450   42,115
Cumulative
  Amount of
  Liability paid
  Through:
  One year later.......    103,983   101,001   105,678  121,106   109,481   101,844   118,307   107,748  156,912  148,891
  Two years later......    171,327   171,429   184,883  192,519   170,603   170,032   181,116   179,016  219,219
  Three years later....    206,499   205,829   219,649  217,484   202,660   195,265   207,141   204,773
  Four years later.....    221,654   221,884   232,379  231,794   213,431   207,454   217,460
  Five years later.....    230,606   227,692   237,879  237,272   221,409   211,934
  Six years later......    232,410   231,277   240,363  241,904   224,555
  Seven years later....    232,912   232,416   242,698  242,736
  Eight years later....    233,263   233,784   242,818
  Nine years later.....    234,010   233,552
  Ten years later......    233,766
Net reserves--
  December 31..........                                                               440,301  $433,440 $452,732 $404,857  $393,389
Reinsurance
  Recoverables.........                                                                19,266    21,531   24,899   45,007    40,152
                                                                                     --------  -------- -------- -------- ---------
Gross reserves.........                                                              $459,567  $454,971 $477,631 $449,864  $433,541
                                                                                     ========  ======== ======== ======== =========
</TABLE>

     The Company has consistently experienced favorable development in loss and
LAE reserves established for prior years.  The Company believes, based on its
analysis of annual statements filed with state regulatory authorities, that its
principal California competitors have experienced similar favorable reserve
development in past years.  During 2000, the Company experienced adverse loss
development in its prior years reserves for hospitals and significant ongoing
losses in this program.  The Company also experienced less favorable loss
development in its other insurance lines than in prior years.  While the Company
believes that its reserves for losses and LAE are adequate, there can be no
assurance that the Company's ultimate losses and LAE will not deviate, perhaps
substantially, from the estimates reflected in the Company's financial
statements. If the Company's reserves should prove inadequate, the Company will
be required to increase reserves, which could have a material adverse effect on
the Company's financial condition or results of operation.

Ceded Reinsurance
-----------------

     The Company follows customary industry practice by reinsuring a portion of
its risks. The Company cedes to reinsurers a portion of its risks and pays a fee
based upon premiums received on all policies subject to such reinsurance.
Insurance is ceded principally to reduce net liability on individual risks and
to provide protection against large losses. Although reinsurance does not
legally discharge the ceding insurer from its primary liability for the full
amount of the policies reinsured, it does make the reinsurer liable to the
insurer to the extent of the reinsurance ceded. The Company determines how much
reinsurance to purchase based upon its evaluation of the risks it has insured,
consultations with its reinsurance brokers and market conditions, including the
availability and pricing of reinsurance. In 2000, the Company ceded $12.7
million of its earned premiums to reinsurers.

     The Company's reinsurance arrangements are generally placed through its
exclusive reinsurance broker, Guy Carpenter & Company, Inc.  For 1999 and prior
years, the Company retained the first $1.0 million of losses incurred per
incident for its physician and medical group policies and had various
reinsurance treaties covering losses in excess of $1.0 million up to $20.0
million per

                                       12
<PAGE>

incident for physician coverage. The reinsurers also were obligated to bear
their proportionate share of allocated loss adjustment expenses (ALAE). For
hospital coverage, the Company reinsured 90% of all losses incurred above a $1.0
million retention, and the Company retained all LAE. For 2000, the Company
consolidated these treaties into a program in which the Company retains the
first $2.0 million of losses and ALAE per incident and the reinsurers cover
losses in excess of this amount up to $70.0 million. The Company is currently
negotiating its reinsurance arrangements for 2001.

     The Company often has more than one insured named as a defendant in a
lawsuit or claim arising from the same incident, and, therefore, multiple
policies and limits of liability may be involved.  The Company's reinsurance
program is purchased in several layers, the limits of which may be reinstated
under certain circumstances, at the Company's option subject to the payment of
additional premiums.

     Reinsurance is placed under reinsurance treaties and agreements with a
number of individual companies and syndicates at Lloyd's to avoid concentrations
of credit risk. The following table identifies the Company's most significant
reinsurers, their percentage participation in the Company's aggregate reinsured
risk based upon premiums paid by the Company and their rating as of December 31,
2000. No other single reinsurer's percentage participation in 2000 exceeded 5%
of total reinsurance premiums.

<TABLE>
<CAPTION>
                                            PREMIUMS CEDED                        PERCENTAGE OF
                                            FOR YEAR ENDED                      TOTAL REINSURANCE
                                          DECEMBER 31, 2000      RATING(1)           PREMIUMS
                                          ------------------     ---------    --------------------
                                            (IN THOUSANDS)
    <S>                                   <C>                    <C>        <C>
    Hannover Ruckversicherungs..........         $5,190             A+                  42%
    Lloyd's of London Syndicates........          3,720             A                   30%
    Zurich Re...........................            969             A                    8%
    CNA International Reinsurance Co....            684             A                    6%
</TABLE>
____________
(1)  All ratings are assigned by A.M. Best. The Company's minimum requirement
     for ratings of its reinsurers is B or better from A.M. Best.

     The Company analyzes the credit quality of its reinsurers and relies on its
brokers and intermediaries to assist it in such analysis. To date, the Company
has not experienced any material difficulties in collecting reinsurance
recoverables. No assurance can be given, however, regarding the future ability
of any of the Company's reinsurers to meet their obligations. Among the
reinsurers to which the Company cedes reinsurance are certain Lloyd's
syndicates. In recent years, Lloyd's has reported substantial aggregate losses
that have had adverse effects on Lloyd's in general and on certain syndicates in
particular. In addition, there has been a decrease in the underwriting capacity
of Lloyd's syndicates in recent years. The substantial losses and other adverse
developments could affect the ability of certain syndicates to continue to trade
and the ability of insureds to continue to place business with particular
syndicates. It is not possible to predict what effects the circumstances
described above may have on Lloyd's and the Company's contractual relationship
with Lloyd's syndicates in future years. The Company understands that Lloyd's
syndicates have created new trust funds to hold reserves for reinsurance
purchased by United States reinsureds gross of outward reinsurance. This
arrangement applies to all purchases on or after August 1, 1995.

Investment Portfolio
---------------------

     An important component of the Company's operating results has been the
return on its invested assets. Investments of the Company are made by investment
managers under policies established and supervised by the Board. The Company's
investment policy has placed primary emphasis on investment grade, fixed
maturity securities and maximization of after-tax yields. The investment manager
for the portfolio of the Company is Brown Brothers Harriman & Co.

     All of the fixed maturity securities are classified as available-for-sale
and carried at estimated fair value.  For these securities, temporary unrealized
gains and losses, net of tax, are reported directly through stockholders'
equity, and have no effect on net income. The following table sets forth the
composition of the investment portfolio of the Company at the dates indicated.

                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 2000           DECEMBER 31, 1999
                                                         ------------------------------  ---------------------------
                                                              COST OR                        COST OR
                                                             AMORTIZED         FAIR         AMORTIZED        FAIR
                                                               COST            VALUE          COST           VALUE
                                                               ----            -----          ----           -----
                                                                                  (IN THOUSANDS)
    <S>                                                  <C>                   <C>          <C>              <C>
    Fixed maturity securities:
        U.S. Government and
          Agencies.....................................       $185,476        $187,790       $141,274        $134,090
        State, municipalities and
          political subdivisions.......................        180,528         181,880        253,741         247,384
        Mortgage-backed securities, U.S.
          Government...................................         42,734          42,831         49,800          48,841

        Corporate......................................        158,345         153,682        126,886         118,618
        Other..........................................             83              83             91              91
                                                              --------        --------       --------        --------
          Total fixed maturity
           securities                                          567,166         566,266        571,792         549,024
      Common stocks....................................         25,874          24,403         33,428          33,464
                                                              --------        --------       --------        --------
    Total..............................................       $593,040        $590,669       $605,220        $582,488
                                                              ========        ========       ========        ========
</TABLE>


     The Company's current policy is to limit its investment in equity
securities and real estate to no more than 8% of the total market value of its
investments.  The Company's portfolio of unaffiliated equity securities was
$24.4 million at December 31, 2000.

     The Company's investment portfolio of fixed maturity securities consists
primarily of intermediate-term, investment-grade securities. The Company's
investment policy provides that fixed maturity investments are limited to
purchases of investment-grade securities or unrated securities which, in the
opinion of a national investment advisor, should qualify for such rating. The
table below contains additional information concerning the investment ratings of
the Company's fixed maturity investments at December 31, 2000:

<TABLE>
<CAPTION>
                                                                          AMORTIZED       FAIR        PERCENTAGE OF
                       TYPE/RATING OF INVESTMENT (1)                         COST         VALUE        FAIR VALUE
                       -----------------------------                    --------------  ---------     --------------
                                                                                (IN THOUSANDS)
      <S>                                                               <C>             <C>           <C>
      AAA (including U.S. Government
          and Agencies).......................................             $361,943      $363,696           64.2 %
      AA......................................................               80,109        80,232           14.2
      A.......................................................               91,133        90,782           16.0
      BBB.....................................................               26,729        24,304            4.3
      Non rated(2)............................................                7,252         7,252            1.3
                                                                           --------      --------          -----
                                                                           $567,166      $566,266          100.0%
                                                                           ========      ========          =====
</TABLE>

____________
(1)  The ratings set forth above are based on the ratings, if any, assigned by
     Standard & Poor's Corporation ("S&P"). If S&P's ratings were unavailable,
     the equivalent ratings supplied by Moody's Investors Services, Inc. were
     used.

(2)  Includes a credit note received from a catastrophe reinsurance limited
     liability company controlled by Hannover Re with an amortized cost and fair
     value of $5.0 million. See "Reinsurance."

     The following table sets forth certain information concerning the
maturities of fixed maturity securities in the Company's investment portfolio as
of December 31, 2000:

<TABLE>
<CAPTION>
                                                                       AMORTIZED               FAIR            PERCENTAGE OF
                                                                          COST                 VALUE            FAIR VALUE
                                                                          ----                 -----            ----------
                                                                                           (IN THOUSANDS)
      <S>                                                              <C>                     <C>             <C>
      Years to maturity:
        One or less.............................................         $  7,380              $  7,388                1.3%
        After one through five..................................           97,767                97,110               17.1%
        After five through ten..................................          248,517               250,167               44.2%
        After ten...............................................          170,768               168,770               29.8%
      Mortgage-backed securities                                           42,734                42,831                7.6%
                                                                         --------              --------              -----
                Totals..........................................         $567,166              $566,266              100.0%
                                                                         ========              ========              =====
</TABLE>

     The average weighted maturity of the securities in the Company's fixed
maturity portfolio as of December 31, 2000 was 6.2 years. The average duration
of the Company's fixed maturity portfolio as of December 31, 2000 was 5.98
years.

                                       14
<PAGE>

     The Company also maintains cash and highly liquid short-term investments,
which at December 31, 2000 totaled $94.9 million.

     The following table summarizes the Company's investment results for the
three years ended December 31:

<TABLE>
<CAPTION>
                                                                                FOR THE YEAR ENDED DECEMBER 31
                                                                                ------------------------------
                                                                            2000               1999             1998
                                                                            ----               ----             ----
                                                                                          (IN THOUSANDS)
            <S>                                                             <C>               <C>              <C>
            FIXED MATURITY SECURITIES:
            Average invested assets (includes short-  term cash
             investments)(1).........................................       $648,156          $689,036         $739,734
            Net investment income:
              Before income taxes....................................         33,653            36,711           39,654
              After income taxes.....................................         24,857            28,557           30,733
            Average annual return on investments:
              Before income taxes....................................           5.19%             5.34%            5.36%
              After income taxes.....................................           3.84%             4.14%            4.15%
            Net realized investment gains (losses) after income tax..       $   (149)         $   (255)        $  5,804

            EQUITY SECURITIES:
            Average invested assets(2)...............................       $ 28,934          $ 35,239         $ 30,269
            Net investment income:
              Before income taxes....................................            499               927              713
              After income taxes.....................................            381               742              564
            Average annual return on investments:
              Before income taxes....................................           1.73%             2.63%            2.36%
              After income taxes.....................................           1.32%             2.11%            1.86%
            Net realized investment gains after income tax...........       $   (112)         $     63         $  1,430

</TABLE>

__________

(1) Fixed maturity securities at cost.

(2) Equities at market.

Competition
-----------

     The property and casualty insurance and reinsurance markets in which the
Company competes are highly competitive.  All of these markets have experienced
severe price competition and expanding terms of coverage over the past several
years.

     In the California healthcare liability insurance market, the Company
competes principally with three physician-owned mutual or reciprocal insurance
companies and a physician-owned mutual protection trust for physician and
medical group insureds.  Each of these companies is actively soliciting insureds
in Southern California, the Company's primary area of operations, and each has
offered very competitive rates during the past few years.  The Company believes
that the principal competitive factors, in addition to pricing, include
financial stability, breadth and flexibility of coverage and the quality and
level of services provided.  In addition, large commercial insurance companies
actively compete in this market, particularly for larger medical groups,
hospitals and other healthcare facilities.  These include the Farmers Group,
Inc., the St. Paul Companies, Inc., the Chubb Insurance Companies and the CNA
Insurance Companies.

     The Company encounters similar competition from local physician-owned
insurance companies and commercial companies in other states as it carries out
its expansion plans. The Company competes in other states principally through
independent agents and brokers, such as its relationship with Brown & Brown, and
by offering superior policyholder services.  All markets in which the Company
now writes insurance and in which it expects to enter have certain competitors
with pre-existing relationships with prospective customers, name recognition in
those states and in many cases greater financial and operating resources than
the Company.  Marketing efforts in states other than California will take
substantial time and resources in order for prospective customers to become
familiar with the Company and its insurance products.

     The Company competes in the United States and international reinsurance
markets with numerous international and domestic reinsurance and insurance
companies.  These competitors include independent reinsurance companies,
subsidiaries or affiliates of large

                                       15
<PAGE>

established insurance companies, reinsurance departments of primary insurance
companies and underwriting syndicates in Lloyd's. A large majority of these
competitors have greater financial resources than the Company, have been
operating for considerably longer than the Company, and have established long-
term and continuing business relationships throughout the industry. The Company
competes in this large market through the relationships developed by its senior
management over many years and the underwriting expertise and services that the
Company provides. The Company considers its A.M. Best "A (Excellent)" rating to
be extremely important to its ability to compete in this segment. (See "A.M.
Best Rating.")

Regulation
----------

     General
     -------

     Insurance companies are regulated by government agencies in each state in
which they transact insurance. The extent of regulation varies by state, but
such regulation usually includes: (i) regulating premium rates and policy forms;
(ii) setting minimum capital and surplus requirements; (iii) regulating guaranty
fund assessments; (iv) licensing companies and agents; (v) approving accounting
methods and methods of setting statutory loss and expense reserves; (vi) setting
requirements for and limiting the types and amounts of investments; (vii)
establishing requirements for the filing of annual statements and other
financial reports; (viii) conducting periodic statutory examinations of the
affairs of insurance companies; (ix) approving proposed changes of control; and
(x) limiting the amounts of dividends that may be paid without prior regulatory
approval. Such regulation and supervision are primarily for the benefit and
protection of policyholders and not for the benefit of investors.

     Licenses
     --------

     SCPIE Indemnity, AHI and AHSIC are licensed in their respective states of
domicile, California, Delaware and Arkansas respectively.  AHI is also licensed
to transact insurance and reinsurance in 47 states and the District of Columbia.
This permits ceding company clients to take credit on their regulatory financial
statements for reinsurance ceded to AHI in jurisdictions in which it is
authorized as a reinsurer.  AHSIC is licensed to write policies as an excess and
surplus lines insurer in 34 states and the District of Columbia.  SCPIE
Indemnity is not licensed in any jurisdiction in addition to California.

     SCPIE Underwriting Limited is authorized under the laws of the United
Kingdom to participate as a corporate member of Lloyd's underwriting syndicates.

     Most of the Company's healthcare liability insurance policies are written
in California where SCPIE Indemnity is domiciled. California laws and
regulations, including the tort liability laws, and laws relating to
professional liability exposures and reports, have the most significant impact
on the Company and its operations.

     Insurance Guaranty Associations
     -------------------------------

     Most states, including California, require admitted property and casualty
insurers to become members of insolvency funds or associations that generally
protect policyholders against the insolvency of such insurers. Members of the
fund or association must contribute to the payment of certain claims made
against insolvent insurers. Maximum contributions required by law in any one
year vary by state, and California permits a maximum assessment of 1% of annual
premiums written by a member in that state during the preceding year. The
largest assessment paid by the Company was $697,000 in 1994. However, such
payments are recoverable through policy surcharges.

     Holding Company Regulation
     --------------------------

     SCPIE Holdings is subject to the California Insurance Holding Company
System Regulatory Act (the "Holding Company Act"). The Holding Company Act
requires the Company periodically to file information with the California
Department of Insurance and other state regulatory authorities, including
information relating to its capital structure, ownership, financial condition
and general business operations. Certain transactions between an insurance
company and its affiliates of an "extraordinary" type may not be effected if the
California Commissioner disapproves the transaction within 30 days after notice.
Such transactions include, but are not limited to, certain reinsurance
transactions and sales, purchases, exchanges, loans and extensions of credit and
investments, in the net aggregate, involving more than the lesser of 3% of the
insurer's admitted assets or 25% of surplus as to policyholders, as of the
preceding December 31.

                                       16
<PAGE>

     The Holding Company Act also provides that the acquisition or change of
"control" of a California insurance company or of any person or entity that
controls such an insurance company cannot be consummated without the prior
approval of the California insurance commissioner. In general, a presumption of
"control" arises from the ownership of voting securities and securities that are
convertible into voting securities, which in the aggregate constitute 10% or
more of the voting securities of a California insurance company or of a person
or entity that controls a California insurance company, such as SCPIE Holdings.
A person or entity seeking to acquire "control," directly or indirectly, of the
Company is generally required to file with the insurance commissioner an
application for change of control containing certain information required by
statute and published regulations and provide a copy of the application to the
Company. The Holding Company Act also effectively restricts the Company from
consummating certain reorganizations or mergers without prior regulatory
approval.

     The Company is also subject to insurance holding company laws in other
states that contain similar provisions and restrictions.

     Regulation of Dividends from Insurance Subsidiaries
     ---------------------------------------------------

     The Holding Company Act also limits the ability of SCPIE Indemnity to pay
dividends to the Company. Without prior notice to and approval of the Insurance
Commissioner, SCPIE Indemnity may not declare or pay an extraordinary dividend,
which is defined as any dividend or distribution of cash or other property whose
fair market value together with other dividends or distributions made within the
preceding 12 months exceeds the greater of such subsidiary's statutory net
income of the preceding calendar year or 10% of statutory surplus as of the
preceding December 31. Applicable regulations further require that an insurer's
statutory surplus following a dividend or other distribution be reasonable in
relation to its outstanding liabilities and adequate to meet its financial
needs, and permit the payment of dividends only out of statutory earned
(unassigned) surplus unless the payment out of other funds is approved by the
Insurance Commissioner. In addition, an insurance company is required to give
the California Department of Insurance notice of any dividend after declaration,
but prior to payment.

     The other Insurance Subsidiaries are subject to similar provisions and
restrictions under the insurance holding company laws of the other states in
which they are organized.

     Risk-Based Capital
     ------------------

     The National Association of Insurance Commissioners ("NAIC") has developed
a methodology for assessing the adequacy of statutory surplus of property and
casualty insurers which includes a risk-based capital ("RBC") formula that
attempts to measure statutory capital and surplus needs based on the risks in a
company's mix of products and investment portfolio. The formula is designed to
allow state insurance regulators to identify potentially under-capitalized
companies. Under the formula, a company determines its RBC by taking into
account certain risks related to the insurer's assets (including risks related
to its investment portfolio and ceded reinsurance) and the insurer's liabilities
(including underwriting risks related to the nature and experience of its
insurance business). The RBC rules provide for different levels of regulatory
attention depending on the ratio of a company's total adjusted capital to its
"authorized control level" of RBC. At December 31, 2000, each of the Insurance
Subsidiaries' RBC substantially exceeded the threshold requiring the least
regulatory attention.

     Regulation of Investments
     -------------------------

     The Insurance Subsidiaries are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories such as below investment grade
fixed income securities, real estate and equity investments. Failure to comply
with these laws and regulations would cause investments exceeding regulatory
limitations to be treated as nonadmitted assets for purposes of measuring
statutory surplus and, in some instances, would require divestiture of such non-
qualifying investments over specified time periods unless otherwise permitted by
the state insurance authority under certain conditions.

     Prior Approval of Rates and Policies
     ------------------------------------

     Pursuant to the California Insurance Code, the Company must submit rating
plans, rates, policies and endorsements to the Insurance Commissioner for prior
approval. The possibility exists that the Company may be unable to implement
desired rates, policies, endorsements, forms or manuals if the Insurance
Commissioner does not approve such items.  In the past, all of the Company's
rate applications have been approved in the normal course of review. AHI is
similarly required to make certain policy form

                                       17
<PAGE>

and rate filings in most of the other states to permit the Company to write
medical malpractice insurance in these states. AHSIC is required in many states
to obtain approval to issue policies as a non-admitted excess and surplus lines
insurer, but it is typically not required to obtain rate approvals.

     Medical Malpractice Tort Reform
     -------------------------------

     The California Medical Injury Compensation Reform Act ("MICRA"), enacted in
1975, has been one of the most comprehensive medical malpractice tort reform
measures in the United States. MICRA currently provides for limitations on
damages for pain and suffering of $250,000, limitations on fees for plaintiffs'
attorneys according to a specified formula, periodic payment of medical
malpractice judgments and the introduction of evidence of collateral source
benefits payable to the injured plaintiff. The Company believes that this
legislation has brought stability to the medical malpractice insurance
marketplace in California by making it more feasible for insurers to assess the
risks involved in underwriting this line of business.  Bills have been
introduced in the California Legislature from time to time to modify or limit
certain of the tort reform benefits provided to physicians and other healthcare
providers by MICRA.  Neither the proponents nor opponents have been able to
enact significant changes. The Company cannot predict what changes, if any, to
MICRA may be enacted during the next few years or what effect such changes might
have on the Company's medical malpractice insurance operations.

     Medical Malpractice Reports
     ---------------------------

     The Company has been required to report detailed information with regard to
settlements or judgments against its California physician insureds in excess of
$30,000 to the Medical Board of California, which has responsibility for
investigations and initiation of proceedings relating to professional medical
conduct in California. Since January 1, 1998, all judgments, regardless of
amount, must be reported to the Medical Board, which now publishes on the
Internet all judgments reported.  In addition, all payments must also be
reported to the Federal National Practitioners' Data Bank and such reports are
accessible by state licensing and disciplinary authorities, hospital and other
peer review committees and other providers of medical care. A California statute
also requires that defendant physicians must consent to all medical professional
liability settlements in excess of $30,000, unless the physician waives this
requirement. The Company's policy provides the physician with the right to
consent to any such settlement, regardless of the amount, but that either party
may submit the matter of consent to a medical review board. In virtually all
instances, the Company must obtain the consent of the insured physician prior to
any settlement.

A.M. Best Rating
----------------

     A.M. Best, which rates insurance companies based on factors of concern to
policyholders, currently assigns the Company an "A (Excellent)" rating. Such
rating is the third highest rating of 15 ratings that A.M. Best assigns to
insurance companies, which currently range from "A++ (Superior)" to "F (In
Liquidation)." Publications of A.M. Best indicate that the A rating is assigned
to those companies that in A.M. Best's opinion have a strong ability to meet
their obligations to policyholders over a long period of time. In evaluating a
company's financial and operating performance, A.M. Best reviews the company's
profitability, leverage and liquidity, as well as its book of business, the
adequacy and soundness of its reinsurance, the quality and estimated market
value of its assets, the adequacy of its loss reserves, the adequacy of its
surplus, its capital structure, the experience and competence of its management
and its market presence. A.M. Best's ratings reflect its opinion of an insurance
company's financial strength, operating performance and ability to meet its
obligations to policyholders and are not evaluations directed to purchasers of
an insurance company's securities.

     The Insurance Subsidiaries have entered into a pooling arrangement and each
of the Insurance Subsidiaries has been assigned the same "pooled" "A
(Excellent)" A.M. Best rating based on their consolidated performance.

Employees
---------

     As of December 31, 2000, the Company employed 238 persons. None of the
employees is covered by a collective bargaining agreement. The Company believes
that its employee relations are good.

Executive Officers
------------------

     The Executive Officers of the Company and their ages as of March 12, 2001
are as follows:

                                       18
<PAGE>

<TABLE>
<CAPTION>
         Name                    Age                          Position
         ----                    ---                          --------
         <S>                     <C>         <C>
         Donald J. Zuk           64          President, Chief Executive Officer and  Director
         Patrick S. Grant        58          Senior Vice President, Marketing
         Joseph P. Henkes        51          Secretary and Senior Vice President, Operations and Actuarial Services
         Patrick T. Lo           48          Senior Vice President and Chief Financial Officer
         Donald P. Newell        63          Senior Vice President and General Counsel
         Timothy C. Rivers       52          Senior Vice President, Assumed Reinsurance
</TABLE>

     Donald J. Zuk has been President and Chief Executive Officer of SCPIE
Management Company since 1989. Prior to joining SCPIE Management Company, he
served 22 years with Johnson & Higgins, insurance brokers. His last position
there was Senior Vice President in charge of its Los Angeles Healthcare
operations, which included the operations of SCPIE under a contract that then
existed with SCPIE Management Company. Mr. Zuk is a director of BCSI Holdings
Inc. and Homeowners Holding Company, both privately held insurance companies.

     Patrick S. Grant has been with SCPIE since 1990 serving initially as Vice
President, Marketing. He was named Senior Vice President, Marketing in 1992.
Prior to that time, he spent almost 20 years with the insurance brokerage firm
of Johnson & Higgins. His last position there was Vice President, Professional
Liability. Mr. Grant has worked on the Company operations since 1976.

     Joseph P. Henkes has been with the Company since 1990 serving initially as
Vice President, Operations and Actuarial Services. He was named Senior Vice
President, Operations and Actuarial Services in 1992. Prior to that time he
spent three years with Johnson & Higgins, where his services were devoted
primarily to the Company. He has been an Associate of the Casualty Actuarial
Society since 1975 and a member of the American Academy of Actuaries since 1980.

     Patrick T. Lo has been Senior Vice President since 1999 and Chief Financial
Officer of the Company since 1993. From 1990 to 1993 he served as Vice President
and Controller of the Company. Prior to that time, he spent nine years as
Assistant Controller, Assistant Vice President and Vice President at The
Doctors' Company, a California medical malpractice insurance company.

  Donald P. Newell joined SCPIE in January 2001.  Prior to that time he was a
partner at the law firm of Latham & Watkins in San Diego, California.  Mr.
Newell has worked on matters for the Company since 1975.

     Timothy C. Rivers has been with SCPIE since August 1999.  Prior to that
time, he spent 17 years with Guy Carpenter & Company, a reinsurance brokerage
subsidiary of Marsh McLennan, and a predecessor business, Willcox & Company.
Mr. Rivers has worked on the Company operations since 1985.

Risk Factors
------------

     Certain statements in this Form 10-K that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results of the Company to be materially different from historical
results or from any results expressed or implied by such forward-looking
statements. Such risks, uncertainties and other factors include, but are not
limited to, the following risks:

     Concentration of Business
     -------------------------

     Substantially all of the Company's direct premiums written are generated
from healthcare liability insurance policies issued to physicians and medical
groups, healthcare facilities and other providers in the healthcare industry. As
a result, negative developments in the economic, competitive or regulatory
conditions affecting the healthcare liability insurance industry, particularly
as such developments might affect medical malpractice insurance for physicians,
and medical groups, could have a material adverse effect on the Company's
results of operations.

                                       19
<PAGE>

     Most of the Company's direct premiums written are generated in Southern
California. The revenues and profitability of the Company are therefore subject
to prevailing regulatory, economic and other conditions in Southern California.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

     The Company's strategy includes expanding and diversifying its insurance
products and geographic operations. There can be no assurance that the Company
will be successful in implementing this strategy. See "-- Entry into New
Markets"

     Industry Factors
     ----------------

     Many factors influence the financial results of the healthcare liability
insurance industry, several of which are beyond the control of the Company.
These factors include, among other things: changes in severity and frequency of
claims; changes in applicable law and regulatory reform; changes in judicial
attitudes toward liability claims; and changes in inflation, interest rates and
general economic conditions.

     The availability of healthcare liability insurance, or the industry's
underwriting capacity, is determined principally by the industry's level of
capitalization, historical underwriting results, returns on investment and
perceived premium rate adequacy. Historically, the financial performance of the
healthcare liability industry has tended to fluctuate between a soft insurance
market and a hard insurance market.  In a soft insurance market, competitive
conditions could result in premium rates and underwriting terms and conditions
that may be below profitable levels. For a number of years, the healthcare
liability insurance industry in California and nationally has faced a soft
insurance market. There can be no assurance as to whether or when industry
conditions will improve or the extent to which any improvement in industry
conditions may improve the Company's financial condition and results of
operations.

     Competition
     -----------

     The Company competes with numerous insurance companies in the California
market. The Company's principal competitors for physicians and medical groups
consist of three physician-owned mutual or reciprocal insurance companies,
several commercial companies and a physicians' mutual protection trust, which
levies assessments primarily on a "claims paid" basis. In addition, commercial
insurance companies such as Farmers Group, Inc., and St. Paul Companies, Inc.
compete for the medical malpractice insurance business of larger medical groups,
hospitals and other healthcare providers. Several of these competitors have
greater financial resources than the Company. Between 1993 and 2000, the Company
instituted overall rate increases in order to improve its underwriting results.
These rate increases were higher than those implemented by most of its
competitors. As a result, the Company has lost some of its policyholders, in
part due to its rate increases.  In 2001, the Company instituted an average
10.6% rate increase for California physicians and medical groups and is
instituting similar increases in other states.  The effect of these rate
increases on the Company's ability to retain and expand its healthcare liability
insurance business is uncertain.

  In addition to pricing, competitive factors may include dividend policy,
financial stability, breadth and flexibility of coverage and the quality and
level of services provided.

     The competitive environment could result in lower premium rates and fees,
reduced profitability and loss of market share. As the Company expands into new
product lines and new geographic markets, it competes with established companies
in such markets, many of which will have existing relationships with the doctors
and medical groups that the Company will be seeking to insure.

     Loss and LAE Reserves
     ---------------------

     The reserves for losses and loss adjustment expenses established by the
Company are estimates of amounts needed to pay reported and unreported claims
and related LAE. The estimates are based on assumptions related to the ultimate
cost of settling such claims based on facts and interpretation of circumstances
then known, predictions of future events, estimates of future trends in claims
frequency and severity and judicial theories of liability, legislative activity
and other factors. However, establishment of appropriate reserves is an
inherently uncertain process involving estimates of future losses, and there can
be no assurance that currently established reserves will prove adequate in light
of subsequent actual experience. The inherent uncertainty is greater for certain
types of insurance, such as medical malpractice, where a longer period may
elapse before a definite determination of ultimate liability is made, and where
the judicial, political and regulatory climates are changing. Healthcare
liability claims and expenses may be paid over a period of 10 or more years,
which is longer than most property and casualty claims. Trends in losses on
long-tail lines of business such as healthcare liability may be slow to appear,
and accordingly, the Company's reaction in terms of modifying underwriting
practices and changing premium rates may lag underlying loss trends. In
addition, emerging changes in the practice of medicine, such as the emergence of

                                       20
<PAGE>

new, larger medical groups that do not have an established claims history and
additional claims resulting from restrictions on treatment by managed care
organizations, may require the Company to adjust its underwriting and reserving
practices. See "-- Changes in Healthcare." While the Company believes that its
reserves for losses and LAE are adequate, there can be no assurance that the
Company's ultimate losses and LAE will not deviate, perhaps substantially, from
the estimates reflected in the Company's financial statements. If the Company's
reserves should prove inadequate, the Company will be required to increase
reserves, which could have a material adverse effect on the Company's financial
condition or results of operations.

     The Company has consistently experienced favorable development (i.e.,
redundancies) in reserves established for prior years. Redundant reserves, which
have been recognized or released in every year since 1985, have contributed
significantly to reported earnings in recent years. The Company reduced reserves
for prior years by $61.2 million, $93.8 million and $53.2 million in the years
ended December 31, 1999, 1998 and 1997, respectively.  (The 1998 redundancies
were offset, in part, by a $28.1 million increase in the loss and LAE reserves
for the medical malpractice insurance business assumed from an unaffiliated
company in January 1998.)  During 2000, the Company experienced adverse loss
development in its prior years' reserves for hospitals and significant ongoing
losses in this program.  The Company also experienced less favorable loss
development in its other insurance lines than in prior years.  The Company
recognized favorable development in prior years' reserves of $42.1 million in
2000, of which only $8.1 million was recognized in the fourth quarter ended
December 31, 2000.

     The Company has continued to experience less favorable loss development
attributable to prior years' loss and LAE reserves.  The Company has established
these reserves at levels it considers adequate, but it does not expect any
material redundancies to develop during 2001.  The Company will continue to
establish its loss and LAE reserves at what it believes are conservative levels
for the 2001 accident year, but at expected lower levels than during 2000 due to
rate actions, stricter underwriting and the change in the mix of business.  If
the Company does not experience any material favorable reduction during 2001 in
prior years' loss reserves, the Company's net income will be adversely affected.

     Changes in Healthcare
     ---------------------

     Significant attention has recently been focused on reforming the healthcare
system at both the Federal and state levels. A broad range of healthcare reform
and patients' rights measures have been suggested, and public discussion of such
measures will likely continue in the future. Proposals have included, among
others, spending limits, price controls, limits on increases in insurance
premiums, limits on the liability of doctors and hospitals for tort claims,
increased tort liabilities for managed care organizations and changes in the
healthcare insurance system. The Company cannot predict which, if any, reform
proposals will be adopted, when they may be adopted or what impact they may have
on the Company. While some of these proposals could be beneficial to the
Company, the adoption of others could have a material adverse effect on the
Company's financial condition or results of operations.

     In addition to regulatory and legislative efforts, there have been
significant market driven changes in the healthcare environment. In recent
years, a number of factors related to the emergence of "managed care" have
negatively impacted or threatened to impact the medical practice and economic
independence of physicians. Physicians have found it more difficult to conduct a
traditional fee for service practice and many have been driven to join or
contractually affiliate with managed care organizations, healthcare delivery
systems or practice management organizations. This consolidation could result in
the elimination or significant decrease in the role of the physician and the
medical group from the medical professional liability purchasing decision. In
addition, the consolidation could reduce primary medical malpractice insurance
premiums paid by healthcare systems, as larger healthcare systems generally
retain more risk by accepting higher deductibles and self-insured retentions or
form their own captive insurance companies.

     Entry Into New Markets
     ----------------------

     The Company's strategy is to expand and diversify its products and
operations to meet the insurance needs of large healthcare organizations, while
maintaining its traditional personalized service for physicians and medical
groups, both large and small. The Company has introduced policies providing
hospital professional liability, managed care organization errors and omissions
and directors and officers' liability insurance for healthcare organizations.
There is no assurance, however, that this diversification will be successful.

     Geographic expansion has been accomplished principally through an
arrangement with Brown & Brown, Inc. ("Brown & Brown"), one of the nation's top
independent insurance agency organizations.  American Healthcare Indemnity
Company ("AHI"), a subsidiary of SCPIE Holdings, entered into an agreement with
Brown & Brown to market professional liability insurance to physicians and small
medical groups in selected states commencing January 1, 1998.  The program now
has been expanded to encompass eight

                                       21
<PAGE>

states, the largest in terms of premium volume being Connecticut, Florida and
Georgia. Continued expansion of this relationship with Brown & Brown is an
important element of the Company's strategy for diversification into states
outside California. AHI has also expanded its operations outside California
through sales of professional liability policies to physicians who do not meet
the normal underwriting criteria of the Company. These policies are sold through
various brokers typically at a higher premium. The broker relationships were
developed from the medical malpractice insurance businesses AHI acquired from
two unrelated insurance companies in 1998 and 1999, respectively. In 2000, the
Company derived approximately 37% of its healthcare liability premium volume
from policies issued outside the state of California. There is no assurance,
however, that the Company will successfully retain or continue to expand this
business or that it will ultimately be profitable.

     Importance of Ratings
     ---------------------

     Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. The Company is rated "A
(Excellent)" by A.M. Best, the third highest rating of 15 ratings assigned to
insurance companies, which currently range from "A++ (Superior)" to "F (In
Liquidation)." A.M. Best's ratings reflect its opinion of an insurance company's
financial strength, operating performance and ability to meet its obligations to
policyholders and are not evaluations directed to purchasers of an insurance
company's securities. In June 1996, A.M. Best reduced the Company's rating from
"A+ (Superior)," citing significant uncertainty in the medical malpractice
marketplace, caused, in part, by evolving managed care issues, the Company's
narrow product line and geographic concentration, and intense competition and
weakening premium rates in the medical malpractice industry. A.M. Best similarly
reduced the ratings of three other medical malpractice insurance companies
domiciled in California and several other medical malpractice companies
domiciled in states other than California. The Company's ability to maintain or
improve its rating by A.M. Best may depend on its ability to implement
successfully its business strategy. See "Business -- A.M. Best Rating." If A.M.
Best materially reduces the Company's rating from its current level, the
Company's results of operations could be adversely affected. A continuation of
an "A" rating from A.M. Best is particularly important to the Company's assumed
reinsurance operations. The Insurance Subsidiaries have entered into a
reinsurance pooling arrangement and each of the Insurance Subsidiaries has been
assigned the same "pooled" "A (Excellent)" A.M. Best rating based on their
consolidated performance.

     Ceded Reinsurance
     ------------------

     The amount and cost of reinsurance available to companies specializing in
medical professional liability insurance are subject, in large part, to
prevailing market conditions beyond the control of the Company. The Company's
ability to provide professional liability insurance at competitive premium rates
and coverage limits on a continuing basis will depend in part upon its ability
to secure adequate reinsurance in amounts and at rates that are commercially
reasonable. Although the Company anticipates that it will continue to be able to
obtain such reinsurance on reasonable terms, there can be no assurance that this
will be the case. In 1999, the Company experienced a number of large paid losses
under its healthcare liability insurance policies that were in excess of the
limits of insurance retained by the Company and thus were borne by the
reinsurers.  In addition, the Company established significant reserves for such
excess losses on certain claims reported under its hospital policies in 1999.

     The Company is subject to a credit risk with respect to its reinsurers
because reinsurance does not relieve the Company of liability to its insureds
for the risks ceded to reinsurers. Although the Company places its reinsurance
with reinsurers it believes to be financially stable, a significant reinsurer's
inability to make payment under the terms of a reinsurance treaty could have a
material adverse effect on the Company. See "Business - Ceded Reinsurance."

     Recent Entry Into Assumed Reinsurance Market
     --------------------------------------------

     The Company has rapidly expanded its assumed reinsurance operations since
the division was formed in late 1999.   Treaties include professional,
commercial and personal liability coverages, commercial and residential property
risks, accident and health coverages and marine coverages on a worldwide basis.
During 2000, assumed reinsurance premiums earned were approximately $27.1
million (not including fronting arrangements), and the Company expects this
premium volume to approximately triple for 2001, based on treaties in existence.
Loss experience for 2000 is based almost entirely on actuarial estimates, as
actual losses are still in the early stages of development.  Actual experience
could materially exceed or be less than these estimates.  If the losses are
excessive, there could be a significant adverse effect on the Company's results
of operations and financial condition at the increased premium volumes expected
in 2001.

     The strategic objective of the reinsurance division is to create a well-
balanced portfolio of carefully underwritten assumed reinsurance lines of
insurance to add diversity to the direct business of the Company.  The Company
has relied heavily on prior

                                       22
<PAGE>

relationships with lead reinsurers and reinsurance intermediaries to gain access
to attractive opportunities. In most instances, the Company is a treaty
participant at a level in which the reinsured also has a significant share of
the losses. In other instances, the Company has also invested in the company
managing the reinsurance arrangement. Two officers experienced in this area, who
joined the Company in 1999 to start the division, have developed these
relationships. If these officers left the employ of the Company for any reason,
the Company would have difficulty maintaining the relationships or the business
of the division. There is no assurance that the Company will be successful in
attracting appropriate reinsurance opportunities or that this business will be
profitable.

     Holding Company Structure; Limitation on Dividends
     ---------------------------------------------------

     SCPIE Holdings is an insurance holding company whose assets consist of all
of the outstanding capital stock of the Insurance Subsidiaries. As an insurance
holding company, SCPIE Holdings' ability to meet its obligations and to pay
dividends, if any, may depend upon the receipt of sufficient funds from its
subsidiaries. The payment of dividends to SCPIE Holdings by the Insurance
Subsidiaries is subject to general limitations imposed by applicable insurance
laws. See "Business -- Regulation -- Regulation of Dividends from Insurance
Subsidiaries."

     Anti-Takeover Provisions
     ------------------------

     SCPIE Holdings' amended and restated certificate of incorporation (the
"Restated Certificate") and amended and restated bylaws (the "Bylaws") include
provisions that may be deemed to have anti-takeover effects and may delay, defer
or prevent a takeover attempt that stockholders may consider to be in their best
interests. These provisions include: a Board of Directors consisting of three
classes; authorization to issue up to 5,000,000 shares of preferred stock, par
value $1.00 per share (the "Preferred Stock"), in one or more series with such
rights, obligations, powers and preferences as the Board of Directors of SCPIE
Holdings (the "SCPIE Holdings Board") may provide; a limitation which permits
only the SCPIE Holdings Board, or the Chairman or the President of SCPIE
Holdings to call a special meeting of stockholders; a prohibition against
stockholders acting by written consent; provisions which provide that directors
may be removed only for cause and only by the affirmative vote of holders of
two-thirds (66 2/3%) of the outstanding shares of voting securities; provisions
which provide that the SCPIE Holdings Board may increase the size of the Board
and may fill vacancies and newly created directorships; and certain advance
notice procedures for nominating candidates for election to the SCPIE Holdings
Board and for proposing business before a meeting of stockholders. In addition,
state insurance holding company laws applicable to the Company in general
provide that no person may acquire control of SCPIE Holdings without the prior
approval of appropriate insurance regulatory authorities. See "Business --
Regulation -- Holding Company Regulation."

     In May 1997, the Board of Directors of the Company adopted a stockholder
rights plan (the "Rights Plan") to deter any attempted takeover of the Company
on terms not approved by the Board of Directors.  Pursuant to the Rights
Agreement, dated May 13, 1997, with ChaseMellon Shareholder Services, LLC (the
"Rights Agreement"), the Company declared a dividend of one preferred share
purchase right (a "Right") for each share of Company common stock, $.0001 par
value (the "Common Shares"), of the Company outstanding at the close of business
on June 3, 1997 (the "Record Date").  One Right attaches to each share of common
stock, and, when exercisable, each Right will entitle the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, $1.00 par value per share (the "Preferred
Shares"), at a price of $80.00 per one one-hundredth of a Preferred Share,
subject to adjustment (the "Purchase Price").  Because of the nature of the
Preferred Share's dividend, liquidation and voting rights, the value of one one-
hundredth of a Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share.

     The Rights Plan operates by diluting the ownership of any person who
acquires a number of Common Shares above the 20% threshold defined in the Rights
Agreement (an "Acquiring Person") or any person or group who commences or
announces an intention to commence a tender or exchange offer that would result
in beneficial ownership of 20% or more of the Common Shares.  In the event that
a person becomes an Acquiring Person or if the Company were the surviving
corporation in a merger with an Acquiring Person or any affiliate or associate
of an Acquiring Person and the Common Shares were not changed or exchanged, each
holder of a Right, other than Rights that are or were acquired or beneficially
owned by the 20% stockholder (which Rights will thereafter be void), thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the then current Purchase Price of the Right.  In the
event that, after a person has become an Acquiring Person, the Company were
acquired in a merger or other business combination transaction or more than 50%
of its assets or earning power were sold, proper provision shall be made so that
each holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the then current Purchase
Price of the Right.

                                       23
<PAGE>

     The Rights will expire on May 12, 2007, subject to the Company's right to
extend such date, unless earlier redeemed or exchanged by the Company or
terminated.  The Rights may be redeemed in whole, but not in part, at a price of
$.01 per Right by the Board of Directors at any time prior to the time a person
becomes an Acquiring Person.  The Rights may also be exchanged at any time after
a person becomes an Acquiring Person and prior to the acquisition of 50% or more
of the then-outstanding Common Shares (except for the Rights of the Acquiring
Person) for that number of Common Shares having an aggregate value equal to the
Spread (the excess of the value of the Common Shares issuable upon exercise of a
Right after a Person becomes an Acquiring Person over the Purchase Price) per
Right (subject to adjustment).

     Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date as defined in the
Rights Agreement.  After the Distribution Date, the Company and Rights Agent may
amend or supplement the Rights Agreement without the approval of any holders of
Right Certificates under certain circumstances provided that the interests of
the holders of Right Certificates (other than an Acquiring Person or an
affiliate or associate of an Acquiring Person) are not adversely affected
thereby.

     As the result of a Delaware court case, the Board of Directors adopted an
amendment to the Rights Agreement which eliminated certain "Continuing Director"
provisions from the Rights Agreement to bring the Rights Agreement squarely
within the type of plan previously held to be valid by the Delaware Supreme
Court.  The Company does not believe this amendment dilutes the effectiveness of
the Company's Rights Plan or reduces the ability of the Company's directors, in
response to any likely set of circumstances, to redeem the Rights if required to
properly exercise their fiduciary duties.

     Regulatory and Related Matters
     ------------------------------

     Insurance companies are subject to supervision and regulation by the state
insurance authority in each state in which they transact business. Such
supervision and regulation relate to numerous aspects of an insurance company's
business and financial condition, including limitations on lines of business,
underwriting limitations, the setting of premium rates, the establishment of
standards of solvency, statutory surplus requirements, the licensing of insurers
and agents, concentration of investments, levels of reserves, the payment of
dividends, transactions with affiliates, changes of control and the approval of
policy forms. Such regulation is concerned primarily with the protection of
policyholders' interests rather than stockholders' interests. See "Business --
Regulation."

     State regulatory oversight and various proposals at the Federal level may
in the future adversely affect the Company's results of operations. In recent
years, the state insurance regulatory framework has come under increased Federal
scrutiny, and certain state legislatures have considered or enacted laws that
alter and, in many cases, increase state authority to regulate insurance
companies and insurance holding company systems. Further, the NAIC and state
insurance regulators are reexamining existing laws and regulations, which in
many states has resulted in the adoption of certain laws that specifically focus
on insurance company investments, issues relating to the solvency of insurance
companies, RBC guidelines, interpretations of existing laws, the development of
new laws and the definition of extraordinary dividends. See "Business -
Regulation."

ITEM 2.  PROPERTIES
--------------------

     In July 1998, the Company entered into a lease covering approximately
95,000 square feet of office space for its Company headquarters.  The lease is
for a term of 10 years ending in 2009 and the Company has options to renew the
lease for an additional 10 years.  The Company moved its headquarters and
principal operations to these offices in March 1999.  The Company expended $5.3
million for leasehold improvements through 2000.

     The Company also leases office space for claims offices in San Diego,
California; Fresno, California and Tampa, Florida, a sales office in Sacramento,
California and Phoenix, Arizona and marketing offices in Addison, Texas and Boca
Raton, Florida.

     The Company is the owner of two office buildings that were previously
occupied by the Company's headquarters, both located in Beverly Hills,
California. One building contains approximately 25,000 square feet of office
space and the other office building contains approximately 24,000 square feet.
Both office buildings are currently unencumbered and are fully leased to
unaffiliated parties.

                                       24
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     The Company is a defendant in a California action brought by the bankruptcy
estate of an uninsured physician. The bankruptcy estate alleged that the Company
had an undisclosed conflict of interest when it provided the physician with a
free courtesy defense by an attorney who had represented the interests of the
Company's insureds in other cases. In 1995, a jury made a damage award against
the Company of $4.2 million in compensatory damages, and punitive damages that
were reduced to $14.0 million by the trial judge. The Company appealed these
awards to the California district court of appeal.  On May 8, 1998, the
appellate court reversed the judgment against the Company in its entirety.  The
case was remanded to the California Superior Court in which the judgment was
originally entered.  The Company filed a motion in the Superior Court for entry
of judgment in its favor, which the bankruptcy estate opposed.  The trial judge
ruled in favor of the Company, and judgment for the Company was entered on
September 29, 1999.  The bankruptcy estate has filed a notice of appeal of this
ruling with the district court of appeal.  The Company does not expect a
decision from the appellate court until approximately August 2001. The Company
believes that the action is entirely without merit and will continue to
aggressively pursue its rights.

     The Company is named as defendant in various legal actions primarily
arising from claims made under insurance policies and contracts. These actions
are considered by the Company in estimating the loss and loss adjustment expense
reserves. The Company's management believes that the resolution of these actions
will not have a material adverse effect on the Company's financial position or
results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of 2000.

                                       25
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------------------
MATTERS
-------

Price Range of Common Stock
---------------------------

          The Company's Common Stock is publicly traded on the New York Stock
Exchange under the symbol "SKP." The following table shows the price ranges per
share in each quarter during the last two years:

<TABLE>
<CAPTION>
                                                High                 Low
<S>                                      <C>                  <C>
1999
----
First quarter                                          30.13               25.75
Second quarter                                         32.63               23.88
Third quarter                                          32.81               28.69
Fourth quarter                                         36.06               31.50

2000
----
First quarter                                          36.66               27.50
Second quarter                                         30.94               19.19
Third quarter                                          21.69               19.75
Fourth quarter                                         23.63               18.63

2001
----
First quarter (January 1 - March 26)                   29.57               20.50
</TABLE>

     On March 26, 2001, the closing price of the Company's common stock was
$21.22.

STOCKHOLDERS OF RECORD

     The approximate number of stockholders of record of the Company's Common
Stock as of March 12, 2001 was 6,107.

     Dividends
     ---------

     The SCPIE Holdings' Board of Directors (the "Board") paid cash dividends on
its common stock of $0.32 per share in 1999 and $0.40 in 2000. On February 28,
2001, the Board declared a $0.10 quarterly dividend payable on March 31, 2001,
to stockholders of record on March 12, 2001. The Company expects to continue the
payment of quarterly dividends to its stockholders.  The continued payment and
amount of cash dividends will depend upon, among other factors, the Company's
operating results, overall financial condition, capital requirements and general
business conditions.

     As a holding company, SCPIE Holdings is largely dependent upon dividends
from its subsidiaries to pay dividends to its stockholders.  These subsidiaries
are subject to state laws that restrict their ability to distribute dividends.
State law permits payment of dividends and advances within any twelve-month
period without any prior regulatory approval in an amount up to the greater of
10% of statutory earned surplus at the preceding December 31 or net income for
the calendar year preceding the date the dividend is paid.  Under these
restrictions, the principal insurance subsidiary of the Company is entitled to
pay dividends to SCPIE Holdings during 2001 up to approximately $24.1 million.
See Note 6 of the Notes to Consolidated Financial Statements and "Business --
Regulation -- Regulation of Dividends from Insurance Subsidiaries."

                                       26
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA    (In thousands, except per share
--------------------------------------------
data)


<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,                               2000        1999        1998        1997        1996
----------------------------------------                             --------    --------    --------    --------    --------
<S>                                                                  <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA(1):
Net premiums written (4)                                              $208,203    $153,896    $156,323    $130,642    $126,318
                                                                      ========    ========    ========    ========    ========
Premiums earned                                                       $176,502    $153,192    $157,976    $133,866    $120,484
Net investment income                                                   34,152      37,697      40,367      42,716      40,769
Realized investment gains
  and other revenue                                                        822         398      11,618       7,153      12,113
                                                                      --------    --------    --------    --------    --------
    Total revenues                                                     211,476     191,287     209,961     183,735     173,366
                                                                      --------    --------    --------    --------    --------
Losses and loss adjustment
  Expenses                                                             152,602     122,780     132,208     123,377     108,797
Other operating expenses                                                36,483      29,310      28,211      17,987      14,276
                                                                      --------    --------    --------    --------    --------
    Total expenses                                                     189,085     152,090     160,419     141,364     123,073
                                                                      --------    --------    --------    --------    --------
Income before policyholder dividends and federal income taxes           22,391      39,197      49,542      42,371      50,293
Policyholder dividends(2)                                                   --          --          --          --       8,436
Federal income taxes                                                     5,120       9,295      12,566      10,195      11,665
                                                                      --------    --------    --------    --------    --------
  Net income                                                          $ 17,271    $ 29,902    $ 36,976    $ 32,176    $ 30,192
                                                                      ========    ========    ========    ========    ========

BALANCE SHEET DATA(1):
Total investments                                                     $675,120    $655,391    $793,616    $785,664    $717,910
Total assets                                                           854,645     834,036     921,469     888,449     805,155
Total liabilities                                                      538,104     518,492     534,951     527,334     516,588
Total stockholders' equity                                             316,541     294,700     386,518     361,115     288,567

ADDITIONAL DATA(1):
Basic earnings per share of common stock(3)                           $   1.84    $   2.63    $   3.06    $   2.66    $   3.02
Diluted earnings per share of common stock(3)                             1.84        2.62        3.06          --          --
Dividends per share of common stock                                       0.40        0.32        0.24        0.20          --
Book value per share                                                     33.92       30.98       32.54       29.41       28.86
GAAP ratios:
  Loss ratio                                                              86.5%       80.2%       83.7%       92.2%       90.3%
  Expense ratio                                                           20.6        19.1        17.9        13.4        11.8
  Combined ratio                                                         107.1        99.3       101.6       105.6       102.1
Statutory capital and surplus                                         $249,261    $265,459    $343,330    $321,289    $251,958
</TABLE>

(1) Financial data as of and for the year ended December 31, 1996 are derived
    from the consolidated financial statements of Southern California Physicians
    Insurance Exchange (the Exchange) and its subsidiaries. Financial data as of
    and for the years ended December 31, 1997 through and 2000 are derived from
    the financial statements of SCPIE Holdings Inc. (SCPIE Holdings) and its
    subsidiaries.

(2) In the second quarter of 1996, the Company estimated an additional $9.0
    million of policyholder dividends (offset by a $0.6 million credit for
    forfeited dividends declared in 1995) would be paid due to favorable loss
    experience related to policy years 1987 through 1992. This policyholder
    dividend was paid to members of the Exchange in the form of premium credits
    during 1997. The Company has ceased paying such dividends to its
    policyholders.

(3) Basic earnings per share of common stock at December 31, 2000, 1999 and 1998
    are computed using the weighted average number of common shares outstanding
    during the year of 9,375,735, 11,383,592 and 12,074,272, respectively. All
    other periods give effect to the merger of the Exchange into a subsidiary of
    SCPIE Holdings completed on January 29, 1997, including the allocation of
    approximately 10,000,000 shares of common stock to members of the Exchange
    in connection therewith.  Diluted earnings per share of common stock at
    December 31, 2000, 1999 and 1998  are computed using the weighted average
    number of common shares outstanding during the year of 9,382,494, 11,403,081
    and 12,089,013, respectively.  For further discussion of basic earnings per
    share and diluted earnings per share, see the notes to consolidated
    financial statements beginning on page 49.

(4) Net premiums written for 2000 reflects the Company's change in accounting
    method to recognize written premiums on the effective date of the policy
    rather than on the date premiums were billed. This change had no impact on
    the income statement. If 1999 premiums had been recognized under this
    method, net premiums written would have approximated $174.5 million.

                                       27
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion should be read in conjunction with the
consolidated financial statements and the related notes thereto appearing
elsewhere in this Form 10-K. The consolidated financial statements include the
accounts and operations of SCPIE Holdings Inc. (SCPIE Holdings or the Company)
and its wholly owned subsidiaries.

     Certain statements in the following discussion that are not historical in
fact constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  Forward-looking statements regarding
the Company, its business prospects and results of operations are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be expressed or implied by such forward-
looking statements.  Such risks, uncertainties and other factors are discussed
below and in periodic filings with the Securities and Exchange Commission.

Cyclical Nature of Property and Casualty Insurance Industry
-----------------------------------------------------------

     Many factors influence the financial results of the property and casualty
insurance industry, several of which are beyond the control of the Company.
These factors include, among other things, changes in severity and frequency of
claims; changes in applicable law and regulatory reform; changes in judicial
attitudes toward  liability claims; and changes in inflation, interest rates and
general economic conditions.

     The availability of healthcare liability insurance, or the industry's
underwriting capacity, is determined principally by the industry's level of
capitalization, historical underwriting results, returns on investment and
perceived premium rate adequacy. Historically, the financial performance of the
healthcare liability industry has tended to fluctuate between a soft insurance
market and a hard insurance market. In a soft insurance market, competitive
conditions could result in premium rates and underwriting terms and conditions
that may be below profitable levels.  Reinsurance of property and casualty lines
is subject to these same market influences.

     For a number of years, the insurance industry generally, and the healthcare
liability insurance industry in particular has faced a soft insurance market.
There are indications that the market is gradually hardening, particularly in
assumed reinsurance.  The Company still faces severe price competition in all of
its direct markets, particularly in California for coverage of physicians and
medical groups.

Recent Entry Into Assumed Reinsurance Market
--------------------------------------------

     The Company has rapidly expanded its assumed reinsurance operations since
the division was formed in late 1999.   Treaties include professional,
commercial and personal liability coverages, commercial and residential property
risks, accident and health coverages and marine coverages on a worldwide basis.
During 2000, assumed reinsurance premiums earned were approximately $27.1
million (not including fronting arrangements), and the Company expects this
premium volume to approximately  triple for 2001, based on treaties in
existence.  Loss experience for 2000 is based almost entirely on actuarial
estimates, as actual losses are still in the early stages of development.
Actual experience could materially exceed or be less than these estimates.  If
the losses are excessive, there could be a significant adverse effect on the
Company's results and financial condition at the increased premium volumes
expected in 2001.

     The strategic objective of the reinsurance division is to create a well-
balanced portfolio of carefully underwritten assumed reinsurance lines of
insurance to add diversity to the direct business of the company.  The Company
has relied heavily on prior relationships with lead reinsurers and reinsurance
intermediaries to gain access to attractive opportunities.  In most instances,
the Company is a treaty participant at a level in which the reinsured also has a
significant share of the losses.  In other instances, the Company has also
invested in the company managing the reinsurance arrangement.  Two officers
experienced in this area, who joined the Company in 1999 to start the division,
have developed these relationships.  If these officers left the employ of the
Company for any reason, the Company would have difficulty maintaining the
relationships or the business of the division.  There is no assurance that the
Company will be successful in attracting appropriate reinsurance opportunities
or that this business will be profitable.

                                       28
<PAGE>

Changing Nature of the Direct Business
--------------------------------------

     The Company's historical business is underwriting professional liability
insurance for physicians and medical groups in California.  In recent years, the
Company has followed a strategy for growth, which includes diversifying
geographically into states other than California and expanding the insurance
products offered by the Company.

     Brown & Brown Relationship.  The Company has accomplished geographic
     --------------------------
expansion principally through an arrangement with Brown & Brown, Inc. (Brown &
Brown), one of the nation's top independent insurance agency organizations.
American Healthcare Indemnity Company (AHI), a subsidiary of SCPIE Holdings,
entered into an agreement with Brown & Brown to market professional liability
insurance to physicians and small medical groups in selected states commencing
January 1, 1998.  The program now has been expanded to encompass eight states,
the largest in terms of premium volume being Florida, Georgia and Connecticut.
Continued expansion of this relationship with Brown & Brown is an important
element of the Company's strategy for diversification into states outside
California.

     Other Non-California Physician and Medical Group Business.  AHI has also
     ---------------------------------------------------------
expanded its operations outside California through sales of professional
liability policies to physicians who do not meet the normal underwriting
criteria of the Company.  These policies are sold through various brokers
typically at a higher premium.  The broker relationships were developed from the
medical malpractice insurance businesses AHI acquired from Fremont Indemnity
Company (Fremont) and a small midwestern insurance company in 1998 and 1999,
respectively.

     In 2000, the Company derived more than 30% of its physician and medical
group premium volume from policies issued outside the state of California.  This
expansion is in its early  stages.  There is no assurance, however, that the
Company will successfully retain or continue to expand this business or that it
will ultimately be profitable.

     Hospital Policies.  The Company initially expanded its insurance products
     -----------------
in 1994 by offering professional liability insurance to hospitals in California.
The Company greatly extended its presence in the hospital market in late 1996
through a marketing agreement with a leading healthcare insurance broker.  Under
this arrangement, the broker placed a coverage with the Company for
approximately 75 hospitals, healthcare providers and other organizations in
seven states.  The Company subsequently attempted to expand its hospital
writings through other brokers. The Company encountered severe competitive
conditions in all parts of the hospital market.  During 2000, the Company
incurred unacceptable losses under its hospital policies generally.  The Company
has adopted stringent underwriting procedures and guidelines for continuing its
hospital policies, and at present insures only 15 hospitals.   The Company
expects little or no improvement in the market, as long as the current
conditions exist.

     Other Insurance Products.  The Company offers a variety of other insurance
     ------------------------
products to complement its professional liability insurance policies, including
principally directors and officers liability insurance and managed care errors
and omissions policies to medical groups and hospitals.  In late 1999, the
Company began offering a newly designed product that provides physicians and
medical groups with protection for defense expenses and certain liabilities
related to governmental investigations into billing errors and omissions to
Medicare (and other governmentally subsidized) patients.  Premium volume for all
of these products has been small, but the Company considers these products
important to its expansion plans.

     Dentists and Oral Surgeons.  The Company has written professional liability
     --------------------------
insurance for oral surgeons in California for a number of years.  Beginning in
2000, the Company expanded its relationship with Brown & Brown to include
professional liability coverage for dentists in California and Texas and for
oral surgeons nationally.  These programs had been underwritten by another
insurance company and marketed by Brown & Brown previously.  The Company issues
its own dentist policies and reinsures the oral surgeon policies issued and
renewed by the other insurance company.

Loss and LAE Reserves Redundancies
----------------------------------

     Medical malpractice and other property and casualty loss and loss
adjustment expense (LAE) reserves are established based on known facts and
interpretation of circumstances, including the Company's experience with similar
cases and historical trends involving claim payment patterns, loss payments and
pending levels of unpaid claims, as well as court decisions and economic
conditions. The effects of inflation are considered in the reserving process.
Establishment of appropriate reserves is an inherently uncertain process, and
there can be no assurance that currently established reserves will prove
adequate in light of subsequent actual experience. The Company follows a
practice of conservatively estimating its future liabilities relating to losses
already incurred and for years prior to 2000 attempted to establish its loss and
LAE reserves for the current year at the upper end of a reasonable range of

                                       29
<PAGE>

reserve estimates. During 2000, the Company continued to establish reserve
estimates for the current year at estimates it considered conservative, but at
lower levels than in prior years principally due to the change in the mix of
business.

     The Company has consistently experienced favorable development (i.e.,
redundancies) in reserves established for prior years. Redundant reserves, which
have been recognized or released in every year since 1985, have contributed
significantly to reported earnings in recent years. The Company reduced reserves
for prior years by $61.2 million, $93.8 million and $53.2 million in the years
ended December 31, 1999, 1998 and 1997, respectively.  (The 1998 redundancies
were offset, in part, by a $28.1 million increase in the loss and LAE reserves
for the medical malpractice insurance business assumed from an unaffiliated
company in January 1998.)  During 2000, the Company experienced adverse loss
development in its prior years' reserves for hospitals and significant ongoing
losses in this program.  The Company also experienced less favorable loss
development in its other insurance lines than in prior years.  The Company
recognized favorable development in prior years' reserves of $42.1 million in
2000, of which only $8.1 million was recognized in the fourth quarter ended
December 31, 2000.

     The Company has continued to experience-less favorable loss development
attributable to prior years' loss and LAE reserves.  The Company has established
these reserves at levels it considers adequate, but it does not expect any
material redundancies to develop during 2001.  The Company will continue to
establish its loss and LAE reserves at what it believes are conservative levels
for the 2001 accident year, but at expected lower levels than during 2000 due to
rate actions, stricter underwriting and the change in the mix of business.  If
the Company does not experience any material favorable reduction during 2001 in
prior years' loss reserves, the Company's net income will be adversely affected.

Operating Expenses
------------------

     With its continued expansion into other states and markets, the Company has
experienced an increase in its operating expense levels to achieve and service
this expansion.  Commissions for policies that are sold through agents and
brokers typically range from 7.0% to 20.0% of premiums, whereas the Company does
not incur commissions on products sold directly.  Hospital and other healthcare
provider policies are typically sold through brokers, as are physician and
medical group policies sold through Brown & Brown and in the program acquired
from Fremont.  To the extent that these policies represent an increased
percentage of the Company's business in the future, expense ratios will
increase.

Investments
-----------

     The value of the fixed-maturity portfolio is subject to interest rate risk.
Interest rates have risen substantially since December 31, 1998, resulting in a
decline in the value of five-year treasury bonds and adversely affecting the
carrying value of the Company's fixed-maturity portfolio.  At December 31, 2000,
the Company's fixed maturities were valued at $0.9 million below amortized cost.
If these securities were sold at their current carrying values, the Company
would record a realized loss on the sale.

Results of Operations
---------------------

 Year Ended December 31, 2000, Compared to Year Ended December 31, 1999
 ----------------------------------------------------------------------

     As of December 31, 2000 the Company adopted FASB No. 131, Disclosures About
Segments of an Enterprise and Related Information, and classified its operations
into the direct healthcare liability insurance segment and the assumed
reinsurance segment.  See Note 13 of Notes to Consolidated Financial Statements.

     General Results
     ---------------

     Total revenues were $211.5 million in 2000, an increase of 10.5% over total
revenues of $191.3 million in 1999.  Premiums earned increased $23.3 million, or
15.2%, in 2000. The increase was principally attributable to assumed reinsurance
premiums of $27.1 million earned in 2000 compared to $6.8 million earned in
1999.

     Net investment income decreased approximately $3.5 million, or 9.4%, to
$34.1 million in 2000 from $37.7 million in 1999.  This change reflects a
decrease in average invested assets from $724.5 million in 1999 to $665.3
million in 2000, due principally to the sale of securities to fund the Company's
repurchase of approximately 2.0 million shares of its Common Stock from its
public stockholders in November 1999.  The average annual return before taxes on
the Company's portfolio of fixed-maturity securities was 5.4% in both 1999 and
2000.

                                       30
<PAGE>

     The Company had small realized investment losses in both years.  Equity
earnings from affiliates in 2000 of $0.9 million was attributable to a minority
equity interest in a small personal lines insurance company.

     Total expenses were $189.1 million in 2000, an increase of 24.3 % over
total expenses of $152.1 million in 1999.  The increase in total expenses was
attributable to a decrease in the recognition of prior-year loss reserve
development and an increase in loss costs generally in the direct healthcare
liability insurance segment and higher operating expenses.  The increased
operating expenses reflect a greater proportion of commissioned premiums and
higher employee related expenses in 2000.

     Federal income tax expense as a percentage of income before federal income
taxes varies primarily due to the proportion of tax-exempt investment income
arising in the respective periods.  The effective tax rate was 22.9% in 2000
compared to 23.7% in 1999, reflecting a small increase in the proportion of tax
exempt investment income in 2000.

     Net income for 2000 was $ 17.3 million, or $1.84 diluted earnings per
share, a decrease of 42.2% from net income of  $ 29.9 million, or $2.62 diluted
earnings per share, in 1999.  Operating earnings, which do not include realized
gains or losses, were $1.87 per share in 2000 compared to $2.64 per share in
1999.

     Direct Healthcare Liability Insurance Segment
     ---------------------------------------------

     Premiums Earned.  Premiums earned in the direct healthcare liability
     ---------------
insurance segment increased approximately $3.0 million, or 2.0%, to $149.4
million in 2000 from $146.4 million in 1999. Medical malpractice premiums from
physicians and medical groups decreased to approximately $131.2 million in 2000
from $132.8 million in 1999.  This decrease in premiums was principally due to
the loss of physician and medical group insureds in the highly-price competitive
California market.  Physicians and small medical groups written through Brown &
Brown outside California increased approximately $3.7 million to $22.1 million
from $18.4 million in 1999, and the Company earned an additional $5.1 million in
dentist and oral surgeon premiums in 2000 written through Brown & Brown.  The
Company has instituted an average 2001 premium rate increases for physicians in
California of approximately 10.6% and is instituting similar increases in a
number of other states.  The effect of these rate increases is uncertain.

     Hospital medical malpractice premiums remained largely unchanged with
approximately $10.0 million in 2000 compared to $9.2 million in 1999.  The
Company has selectively underwritten its hospital business for 2001 and
substantially reduced the number of hospitals insured, but at significantly
increased premium rates.   The Company expects a significant decline in earned
premiums from hospitals in 2001 and continued erosion in the number of hospitals
insured.

     Premiums earned from other healthcare facilities and providers increased to
approximately $6.0 million in 2000 from $2.8 million in 1999.   Premiums earned
from managed care errors and omissions, directors and officers liability and
other miscellaneous coverages totaled slightly more than $2.0 million in 2000,
an increase of approximately $1.0 million over 1999.

     Losses and LAE.  Losses and LAE in the direct healthcare liability
     ---------------
insurance segment increased to $129.3 million, or 86.5% of premiums earned in
2000, from $116.6 million, or 79.6% of premiums earned in 1999.  The increase
was due to a reduction in 2000 in the favorable loss reserve development
experienced by the Company with respect to prior policy years,  partially offset
by a reduction in the estimated losses incurred in the 2000 policy year as a
percentage of premiums earned. The Company experienced a net favorable
development in loss and LAE reserves established for prior policy years in 2000
of $42.6 million compared to a favorable development of $61.8 million in 1999.

     The Company has experienced favorable development in loss reserves for many
years, which has accounted for substantial portions of the Company's net income.
During 2000, the Company encountered increases in loss severity relating to its
prior policy years, particularly in its hospital policies, which resulted in the
reduction in favorable loss and LAE reserve development.  The Company does not
expect any material favorable development during 2001 in loss reserves
established for prior years.  However, the Company is anticipating an improved
2001 policy year loss experience based on rate increases instituted by the
Company for 2001.

     Other Operating Expenses.  Other operating expenses for the direct segment
     -------------------------
in 2000 were approximately  $32.3 million, compared to total operating expenses
for the entire business operation in 1999 of $29.3 million, when the Company did
not allocate expenses to the different parts of its operations.  The ratio of
other operating expenses to premiums earned is referred to as the expense ratio,
which increased to 21.6% in 2000 for the direct medical malpractice insurance
segment from 19.1% for the entire operation in 1999.  This increase reflects
higher commission expenses associated with the greater proportion of broker-
produced premiums in 2000 compared to 1999 and an increase in employee-related
expenses.

                                       31
<PAGE>

     Assumed Reinsurance Segment
     ---------------------------

     Premiums Earned.  Premiums earned in the assumed reinsurance segment
     ----------------
increased to $27.1 million in 2000, the segment's first full year of operation,
from $6.8 million in 1999.  The Assumed Reinsurance Division was formed in
August of 1999, although the Company had written small amounts of assumed
reinsurance for a number of years.  Premiums earned during 2000 included
approximately $8.8 million under casualty programs, $6.3 million under property
programs, $9.4 million under accident and health programs and $2.6 million under
its marine program.  The Company also earned $6.2 million in other assumed
premiums in 2000 under fronting arrangements related to its dentist and oral
surgeon programs marketed by Brown & Brown.  In 1999, Company had assumed
premiums earned of $11.1 million relating to fronting insurance arrangements
that are no longer in effect.

     The Company has significantly increased its writings of assumed
reinsurance.  As of December 31, 2000, the Company had treaties in effect that
are estimated to produce more than $75.0 million in premiums earned in 2001.

     Losses and LAE.  Assumed reinsurance losses and LAE (other than under
     --------------
fronting arrangements) were $23.3 million in 2000, or 86.0% of assumed premiums
earned, compared to $6.2 million, or 91.2% of premiums earned, in 1999.

     Other Operating Expenses   Other operating expenses for the assumed
     ------------------------
reinsurance segment were $4.2 million in 2000, or an expense ratio of 15.3%.  No
allocation of operating expenses was made for 1999.  Operating expenses consist
primarily of commissions and employee-related expenses.

 Year Ended December 31, 1999, Compared to Year Ended December 31, 1998
 ----------------------------------------------------------------------

     The Company did not classify its operations in separate segments in 1999
and prior years.

     Premiums Earned.  Premiums earned decreased approximately $4.8 million, or
     ----------------
3%, to $153.2 million in 1999 from $158.0 million in 1998.  Medical malpractice
premiums from physicians and medical groups decreased to approximately $133.0
million in 1999 from $143.2 million in 1998.  Of this decrease, approximately
$4.5 million was attributable to additional ceded premiums under the Company's
reinsurance treaties to reflect premium adjustments and additional premiums
resulting from some significant excess losses borne by the reinsurers in 1999.
The decrease in premiums was also attributable to the loss of physician insureds
during the second and third quarters of 1999 in medical specialties that
experienced 1999 rate increases.  Hospital medical malpractice premiums were
approximately $9.2 million in 1999 compared to $8.8 million in 1998.  Assumed
reinsurance premiums, other than those received in fronting arrangements, were
approximately $6.8 million in 1999 compared to $5.5 million in 1998.  Other
healthcare provider-related liability premiums totaled $4.0 million in 1999
compared to $0.9 million in 1998.

     Net Investment Income.  Net investment income decreased approximately $2.7
     ----------------------
million, or 6.7%, to $37.7 million in 1999 from $40.4 million in 1998.  Invested
assets decreased $138.2 million to $655.4 million at December 31, 1999, from
$793.6 million at December 31, 1998, due principally to the sale of securities
to fund the Company's repurchase of approximately 2.0 million shares of its
common stock from its public stockholders in November 1999.  The investment
portfolio also contained a larger percentage of higher-yielding bonds during
1999 than in 1998.

     Realized Investment Gains (Losses).  Realized investment losses were
     -----------------------------------
approximately $0.3 million in 1999 compared to realized gains of $11.1 million
in 1998.  Through the nine months ended September 30, 1999, the Company had net
realized gains of $5.3 million.  The Company recorded a realized loss in the
1999 fourth quarter related to the sale of securities to fund the repurchase of
its common stock and to reposition the Company's investment portfolio.

     Losses and LAE.  Losses and LAE decreased to $122.8 million in 1999 from
     ---------------
$132.2 million in 1998.  As a percentage of premiums earned, losses and LAE
decreased to 80.2% in 1999 from 83.7% for the same period in 1998.  For 1999,
the Company reduced loss and LAE reserves incurred in prior policy years
approximately $61.2 million as compared to a reserve reduction of $93.8 million
in 1998 for claims incurred in prior policy years.

     Other Operating Expenses.  Other operating expenses increased $1.1 million,
     -------------------------
or 3.9%, to $29.3 million in 1999 from $28.2 million in 1998.  The expense ratio
increased to 19.1% in 1999 from 17.9% in 1998.  This increase reflected a
decrease in premiums earned and higher commission expenses associated with the
greater proportion of broker-produced premiums in 1999 compared to 1998.

                                       32
<PAGE>

     Federal Income Taxes.  Federal income taxes decreased $3.3 million, or
     ---------------------
26.2%, to $9.3 million in 1999 from $12.6 million in 1998 due primarily to lower
realized gains in 1999.  The effective tax rate decreased to 23.7% in 1999 from
25.4% in 1998.

Liquidity and Capital Resources
-------------------------------

     The primary sources of the Company's liquidity are insurance premiums, net
investment income, recoveries from reinsurers and proceeds from the maturity or
sale of invested assets. Funds are used to pay losses, LAE, operating expenses,
reinsurance premiums and taxes.

     Because of uncertainty related to the timing of the payment of claims, cash
from operations for a property and casualty insurance company can vary
substantially from period to period.  During 2000, the Company had positive cash
flow from operations of $4.8 million compared to a negative cash flow of $8.8
million in 1999.  The positive cash flow in 2000 was principally attributable to
increased assumed reinsurance premiums received by the Company and a decrease in
loss and LAE payments.  The negative cash flow during 1999 was due to unusually
high payments of losses.

     The Company invests its cash flow from operations in both fixed-maturity
securities and equity securities. The Company's current policy is to limit its
investment in equity securities and real estate to no more than 8.0% of the
total market value of its investments. Accordingly, the Company's portfolio of
unaffiliated equity securities had a fair value of $24.4 million at December 31,
2000. The Company plans to continue this focus on fixed-maturity securities for
the indefinite future.

     The Company has made limited investments in real estate, which have been
used almost entirely in the Company's operating activities, with the remainder
leased to third parties. The Company leases approximately 95,000 square feet of
office space for its headquarters.  The lease is for a term of 10 years ending
in 2009, and the Company has options to renew the lease for an additional 10
years.  The Company has leased to unaffiliated third parties its two former
headquarters buildings.

     The Company maintains a portion of its investment portfolio in high-
quality, short-term securities to meet short-term operating liquidity
requirements, including the payment of losses and LAE. Short-term investments
totaled $84.5 million, or 12.5% of invested assets, at December 31, 2000. The
Company believes that all of its short-term and fixed-maturity securities are
readily marketable.

      SCPIE Holdings is an insurance holding company whose assets primarily
consist of all of the capital stock of its insurance company subsidiaries.  Its
principal sources of funds are dividends from its subsidiaries and proceeds from
the issuance of debt and equity securities.  The insurance company subsidiaries
are restricted by state regulation in the amount of dividends they can pay in
relation to earnings or surplus, without the consent of the applicable state
regulatory authority, principally the California Department of Insurance. SCPIE
Holdings' principal insurance company subsidiary may pay dividends to SCPIE
Holdings in any 12-month period, without regulatory approval, to the extent such
dividends do not exceed the greater of (i) 10% of its statutory surplus at the
end of the preceding year or (ii) its statutory net income for the preceding
year. Applicable regulations further require that an insurer's statutory surplus
following a dividend or other distribution be reasonable in relation to its
outstanding liabilities and adequate to meet its financial needs, and permit the
payment of dividends only out of statutory earned (unassigned) surplus unless
the payment out of other funds receives regulatory approval. The amount of
dividends that the insurance company subsidiaries are able to pay to SCPIE
Holdings during 2001 without prior regulatory approval is approximately $24.1
million. Of this amount, approximately $2.9 million may be paid after November
26, 2001, and the remainder on or after December 29, 2001. The Company believes
that SCPIE Holdings has sufficient liquid assets and other resources of cash
that no dividends will be required until after November 26, 2001.

     Common stock dividends paid to stockholders were $0.40 per share in 2000.
These dividends were funded through dividends from the Company's insurance
subsidiaries.  The Company expects to pay dividends in the future.  However,
payment of dividends is subject to Board approval, earnings and the financial
condition of the Company.

     The Company has entered into a Credit Agreement with Union Bank of
California, N. A., First Union Bank and Dresdner Bank AG, as lenders.  Under the
Credit Agreement, the Company may borrow up to $40.0 million from time to time,
subject to certain conditions.  The proceeds from the Credit Agreement may be
used by the company for general corporate purposes and certain other permitted
uses.  As of December 31, 2000, borrowings under the Credit Agreement totaled
$27.0 million.  All amounts outstanding under the Credit Agreement on May 27,
2002 will automatically become payable in twelve equal quarterly installments
beginning August 30, 2002.

                                       33
<PAGE>

     Based on historical trends, market conditions and its business plans, the
Company believes that its sources of funds will be sufficient to meet its
liquidity needs over the next 18 months and beyond. However, because economic,
market and regulatory conditions may change, there can be no assurance that the
Company's sources of funds will be sufficient to meet these liquidity needs. The
short- and long-term liquidity requirements of the Company may vary because of
the uncertainties regarding the settlement dates for unpaid claims.

     During May 2000, the Board of Directors authorized the repurchase of up to
1,000,000 shares of its common stock on the open market.  This authorization
extended the company's 1999 program that expired in May 2000.  Under this
extended 1999 program, 360,820 shares have been repurchased.

Market Risk Disclosures For Financial Instruments
-------------------------------------------------

     The investment portfolio of the Company is subject to various market risk
exposures, including interest rate risk and equity price risk.

     The Company invests its assets primarily in fixed-maturity securities,
which at December 31, 2000, comprised 84% of total investments at market value.
U.S. government and tax-exempt bonds represent 65% of the fixed-maturity
investments, with the remainder consisting almost entirely of mortgage-backed
securities and corporate bonds.  Equity securities, consisting primarily of
common stocks, account for 4% of total investments at market value.  The
remaining 12% of the investment portfolio consists of highly liquid short-term
money market funds.

     The value of the fixed-maturity portfolio is subject to interest rate risk.
As market interest rates decrease, the value of the portfolio goes up with the
opposite holding true in rising interest rate environments.  A common measure of
the interest sensitivity of fixed-maturity assets is modified duration, a
calculation that takes maturity, coupon rate, yield and call terms to calculate
an average age of the expected cash flows.  The longer the duration, the more
sensitive the asset is to market interest rate fluctuations.

     The value of the common stock equity investments is dependent upon general
conditions in the securities markets and the business and financial performance
of the individual companies in the portfolio.  Values are typically based on
future economic prospects as perceived by investors in the equity markets.

     The first two columns of the following table show the financial statement
carrying values and related estimated fair values of the fixed-maturity
securities and equity investments held by the Company at December 31, 2000 and
1999, respectively.  The third column shows the effect on current estimated fair
values assuming a 100-basis-point increase in market interest rates and a 10%
decline in equity prices (sensitivity analysis).  This sensitivity analysis is
required by the Securities and Exchange Commission rules issued in 1997.

<TABLE>
<CAPTION>
                                                                                               Estimated Fair Value
                                                                         Estimated Fair Value      At Adjusted
                                                                          at Current Market    Market Rates/Prices
                       (In Thousands)                    Carrying Value      Rates/Prices       as Indicated Below
      -------------------------------------------------------------------------------------------------------------
      <S>                                                <C>             <C>                   <C>
      December 31, 2000
      -----------------
      Interest rate risk*
        Fixed-maturity securities
            available for sale                                 $566,266              $566,266              $539,586

      Equity price risk**
        Common stocks                                          $ 24,403              $ 24,403              $ 21,963

      December 31, 1999
      -----------------
      Interest rate risk*
        Fixed-maturity securities
            available for sale                                 $549,024              $549,024              $520,859

      Equity price risk**
        Common stocks                                          $ 33,464              $ 33,464              $ 30,118
</TABLE>

     * Adjusted interest rates assume a 100-basis-point increase in market rates
     **Adjusted equity prices assume a 10% decline in market values

                                       34
<PAGE>

     For all its financial assets and liabilities, the Company seeks to maintain
reasonable average durations, consistent with the maximization of income without
sacrificing investment quality and providing for liquidity and diversification.

     The estimated fair values at current market rates for financial instruments
subject to interest rate risk in the table above are the same as those disclosed
in Note 2 (Investments) to the consolidated financial statements.  The estimated
fair values at the adjusted market rates (assuming a 100-basis-point increase in
market interest rates) are calculated using discounted cash flow analysis and
duration modeling where appropriate.  The estimated values do not consider the
effect that changing interest rates could have on prepayment activity (e.g.,
mortgages underlying mortgage-backed securities).

     This sensitivity analysis provides only a limited, point-in-time view of
the market risk sensitivity of certain of the Company's financial instruments.
The actual impact of market interest rate and price changes on the financial
instruments may differ significantly from those shown in the sensitivity
analysis.  The sensitivity analysis is further limited as it does not consider
any actions the Company could take in response to actual and/or anticipated
changes in interest rates and equity prices.

Effect of Inflation
-------------------

     The primary effect of inflation on the Company is considered in pricing and
estimating reserves for unpaid losses and LAE for claims in which there is a
long period between reporting and settlement, such as medical malpractice
claims. The actual effect of inflation on the Company's results cannot be
accurately known until claims are ultimately settled. Based on actual results to
date, the Company believes that loss and LAE reserve levels and the Company's
rate-making process adequately incorporate the effects of inflation.

ITEM 8. FINANCIAL STATEMENTS  AND SUPPLEMENTARY DATA
----------------------------------------------------

     The Company's Consolidated Financial Statements and related notes,
including supplementary data, are set forth in the "Index" on page 43 hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---- ------------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------

     None.

                                       35
<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

     Information regarding Directors of the Company is incorporated by reference
to the section entitled "Election of Directors" in the Company's definitive
proxy statement filed with the SEC in connection with the Annual Meeting of
Stockholders to be held on May 10, 2001 (the "Proxy Statement"). Information
regarding Executive Officers is set forth in Item 1 of Part I of this Form 10-K
report under the caption "Executive Officers."

ITEM 11. EXECUTIVE COMPENSATION
--------------------------------

     The information required by this item is incorporated by reference to the
Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

     The information required by this item is incorporated by reference to the
Proxy Statement under the heading "Stock Ownership."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information required by this item is incorporated by reference to the
Proxy Statement under the heading "Certain Relationships and Related
Transactions."

                                       36
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
------------------------------------------------------------------------

  (a)(1) and (a)(2) and (d) FINANCIAL STATEMENTS AND SCHEDULE. Reference is made
                            to the "Index--Financial Statements and Financial
                            Statement Schedule--Annual Report on Form 10-K"
                            filed on page 43 of this Form 10-K report.

  (a)  (3)      Exhibits:

<TABLE>
<CAPTION>
    NUMBER                                                           DOCUMENT
    ------                                                           --------
    <S>          <C>
        2.       Amended and Restated Plan and Agreement of Merger by and among SCPIE Holdings Inc., SCPIE Indemnity Company and
                 Southern California Physicians Insurance Exchange dated August 8, 1996, as amended December 19, 1996.  (filed
                 with the Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

       3.1       Amended and Restated Certificate of Incorporation.  (filed with the Company's Registration Statement on Form S-1
                 (No. 33-4450) and incorporated herein by reference).

       3.2       Amended and Restated Bylaws.  (filed with the Company's Quarterly Report on Form 10-Q on August 16, 1999 and
                 incorporated herein by reference).

      10.1       Amended and Restated Employment Agreement dated January 2, 2001, between SCPIE Management Company and Donald J.
                 Zuk.

      10.2       Letter of Credit Agreement dated February 11, 1998 between Union Bank of California, N.A. and American
                 Healthcare Indemnity Company in the amount of $7,674,561.  (filed with the Company's Annual Report on Form 10-K
                 on March 31, 1998 and incorporated herein by reference).

      10.3       Letter of Credit Agreement dated February 11, 1998 between Union Bank of California, N.A. and American
                 Healthcare Indemnity Company in the amount of $1,000,000.  (filed with the Company's Annual Report on Form 10-K
                 on March 31, 1998 and incorporated herein by reference).

      10.6       First Excess of Loss Treaty No. 01-95-0020 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

      10.7       Second Excess of Loss Treaty No. 01-95-0021 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

      10.8       Third Excess of Loss Treaty No. 01-95-0022 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

      10.9       Fourth Excess of Loss Treaty No. 01-95-0599 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.10       Per Policy Excess of Loss Treaty No. 01-94-0365 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.11       Reinstatement/Retroactive/Aggregate Extension Excess of Loss Treaty No. 01-95-0879 with various subscribing
                 reinsurers.  (filed with the Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated herein
                 by reference).

     10.12       Medical Malpractice Surplus Reinsurance Treaty between SCPIE and Lloyd's Syndicate No. 1010 and Syndicates
                 Comprising 1007 Group underwritten for by CW Spreckley, Esq. and others, effective date January 1, 1996, Treaty
                 No. 01-95-0374.  (filed with the Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated
                 herein by reference).

     10.13       Physician Medical Malpractice/Hospital Professional Liability Quota Share Reinsurance Agreement between Hannover
                 Ruckversicherungs, Aktiengesellschaft/Eisen Und Stahl Ruckversicherungs-Aktiengesellschaft, Hannover, Germany,
                 and various subscribing reinsurers, effective date January 1, 1995, Treaty No. 01-95-0694.  (filed with the
                 Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.14       First Excess of Loss Treaty No. 01-96-0020 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.15       Second Excess of Loss Treaty No. 01-96-0021 with various subscribing reinsurers.  (filed with the Company's

</TABLE>

                                       37
<PAGE>

<TABLE>
<CAPTION>
    NUMBER                                                           DOCUMENT
    ------                                                           --------
    <S>          <C>
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.16       Third Excess of Loss Treaty No. 01-96-0022 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.17       Fourth Excess of Loss Treaty No. 01-96-0599 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.18       Per Policy Excess of Loss Treaty No. 01-96-0365 with various subscribing reinsurers.  (filed with the Company's
                 Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.19       Addendum No. 1 to the Reinstatement/Retroactive/Aggregate Extension Excess of Loss Treaty No. 01-96-0879 with
                 various subscribing reinsurers.  (filed with the Company's Registration Statement on Form S-1 (No. 33-4450) and
                 incorporated herein by reference).

     10.20       Quota Share Reinsurance Agreement Treaty No. 01-96-0922.  (filed with the Company's Registration Statement on
                 Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.21       First Excess of Loss Treaty No. 01-97-0020 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1998 and incorporated herein by reference).

     10.22       Second Excess of Loss Treaty No. 01-97-0021 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1998 and incorporated herein by reference).

     10.23       Third Excess of Loss Treaty No. 01-97-0022 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1998 and incorporated herein by reference).

     10.24       Fourth Excess of Loss Treaty No. 01-97-0599 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1998 and incorporated herein by reference).

     10.25       Per Policy Excess of Loss Treaty No. 01-97-0365 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1998 and incorporated herein by reference).

     10.26       Addendum No. 2 to the Reinstatement/Retroactive/Aggregate Extension Excess of Loss Treaty No. 01-97-0879 with
                 various subscribing reinsurers.  (filed with the Company's Annual Report on Form 10-K on March 31, 1998 and
                 incorporated herein by reference).

     10.27       Quota Share Reinsurance Treaty No. 1-97-0922.  (filed with the Company's Annual Report on Form 10-K on March 31,
                 1998 and incorporated herein by reference).

     10.29       First Excess of Loss Reinsurance Treaty No. 01-97-1134 with various subscribing reinsurers.  (filed with the
                 Company's Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.30       Second Excess of Loss Reinsurance Treaty No. 01-97-1135 with various subscribing reinsurers.  (filed with the
                 Company's Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.31       First Excess of Loss Treaty No. 01-98-0020 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.32       Second Excess of Loss Treaty No. 01-98-0021 with various subscribing reinsurers  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.33       Third Excess of Loss Treaty No. 01-98-0022 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.34       Fourth Excess of Loss Treaty No. 01-98-0599 with various subscribing reinsurers.  (filed with the Company's
                 Annual Report on Form 10-K on March 31, 1999 and incorporated herein by reference).

     10.35       Quota Share Reinsurance Treaty No. 1-98-0922.  (filed with the Company's Annual Report on Form 10-K on March 31,
                 1999 and incorporated herein by reference).

     10.44       SCPIE Management Company Retirement Income Plan, as amended and restated, effective January 1, 1989.  (filed
                 with the Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.45       Supplemental Employee Retirement Plan for Selected Employees of SCPIE Management Company dated January 1, 1995.
                 (filed with the Company's Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).

     10.47       The SMC Cash Accumulation Plan, dated July 1, 1991, as amended.  (filed with the Company's Registration
                 Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).
</TABLE>

                                       38
<PAGE>

<TABLE>
<CAPTION>
    NUMBER                                                           DOCUMENT
    ------                                                           --------
    <S>          <C>
     10.48       Inter-Company Pooling Agreement effective January 1, 1997.    (filed with the Company's Annual Report on Form
                 10-K on March 31, 1998 and incorporated herein by reference).

     10.49       SCPIE Holdings Inc. and Subsidiaries Consolidated Federal Income Tax Liability Allocation Agreement effective
                 January 1, 1996.   (filed with the Company's Annual Report on Form 10-K on March 31, 1998 and incorporated
                 herein by reference).

     10.50       The 1997 Equity Participation Plan of SCPIE Holdings Inc.  (filed with the Company's Annual Report on Form 10-K
                 on March 31, 1998 and incorporated herein by reference).

     10.51       Form of Indemnification Agreement.  (filed with the Company's Registration Statement on Form S-1 (No. 33-4450)
                 and incorporated herein by reference).

     10.52       Lease between Wh/WSA Realty, L.L.C., a Delaware limited liability company and SCPIE Holdings Inc., a Delaware
                 corporation dated July 31, 1998.  (filed with the Company's Annual Report on Form 10-K on March 31, 1998 and
                 incorporated herein by reference).

     10.53       Quota Share Reinsurance Agreement between Fremont Indemnity Company and SCPIE Indemnity Company, effective
                 January 1, 1998.  (filed with the Company's Annual Report on Form 10-K on March 31, 1998 and incorporated herein
                 by reference).

     10.54       Assumption Reinsurance Agreement between Fremont Indemnity Company and American Healthcare Indemnity Company,
                 effective January 1, 1998.  (filed with the Company's Annual Report on Form 10-K on March 31, 1998 and
                 incorporated herein by reference).

     10.55       First Casualty Excess of Loss Reinsurance Agreement No. S06000-251 99-01-01 SR with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.56       Second Casualty Excess of Loss Reinsurance Agreement No. S06000-252 99-01-01 SR with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.57       Casualty Clash Excess of Loss Reinsurance Agreement No. S06000-253 99-01-01 SR with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.58       Casualty Quota Share Reinsurance Agreement No. SCPIE Cas QS 99-01-01 RE Rel with various subscribing reinsurers.
                 (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.59       First Excess of Loss Reinsurance Treaty No. 8493-00-0007-98-01 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.60       Second Excess of Loss Reinsurance Treaty No. 8493-00-0007-98-02 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.61       First Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-01 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.62       Second Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-02 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.63       Third Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-03 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.64       Fourth Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-04 with various subscribing reinsurers. (filed with
                 the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.65       Quota Share Reinsurance Treaty No. 8493-00-0005-99-00 with various subscribing reinsurers. (filed with the
                 Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.66       Cover Note for First Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-01 with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.67       Cover Note for Second Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-02 with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
</TABLE>

                                       39
<PAGE>

<TABLE>
<CAPTION>
    NUMBER                                                           DOCUMENT
    ------                                                           --------
    <S>          <C>
                 reference).
     10.68       Cover Note for Third Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-03 with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.69       Cover Note for Fourth Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-04 with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.70       Cover Note for Fifth Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-05 with various subscribing
                 reinsurers. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and incorporated herein by
                 reference).

     10.71       Credit Agreement by and among SCPIE Holdings Inc., the Financial Institutions Named Therein, Union Bank of
                 California, N.A., as Administrative Agent and Arranger, and First Union National Bank, as Documentation Agent,
                 dated as of May 25, 1999 (filed with the Company's Current Report on Form 8-K on June 22, 1999 and incorporated
                 by reference).

     10.72       First Amendment to Credit Agreement and Waiver Thereunder by and among SCPIE Holdings Inc., the Financial
                 Institutions Named Therein, Union Bank of California, N.A., as Administrative Agent and Arranger, and First
                 Union National Bank, as Documentation Agent, dated as of October 1, 1999. (filed with the Company's Annual
                 Report on Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.73       The SCPIE Holdings Inc. Employee Stock Purchase Plan (filed as an exhibit to the Company's Proxy Statement for
                 the 2000 Annual Meeting of Stockholders and incorporated herein by reference).

     10.74       Program Administrator Agreement by and between the Professional Programs Division of  Poe & Brown, Inc. and
                 American Healthcare Indemnity Company, dated as of January 1, 1998. (filed with the Company's Annual Report on
                 Form 10-K on March 31, 2000 and incorporated herein by reference).

     10.75       Letter of Credit Agreement dated January 27, 1999 between Union Bank of California, N.A. and SCPIE Indemnity
                 Company in the amount of $5,730,000. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and
                 incorporated herein by reference).

     10.76       Letter of Credit Agreement dated January 27, 1999 between Union Bank of California, N.A. and SCPIE Indemnity
                 Company in the amount of $4,176,915. (filed with the Company's Annual Report on Form 10-K on March 31, 2000 and
                 incorporated herein by reference).

     10.77       Form of Change of Control Severance Agreement entered into by Chief Executive Officer on December 14, 2000.

     10.78       Form of Change of Control Severance Agreement entered into by Senior Vice Presidents on December 14, 2000.

     10.79       Form of Change of Control Severance Agreement entered into by Vice Presidents on December 14, 2000.

     10.80       Cover Note for Per Policy Excess of Loss Reinsurance Treaty No. 8493-3 with Hannover
                 Rueckversicherungs-Aktiengessellschaft.

     10.81       Placement Slip for First - Fifth Excess of Loss Reinsurance Treaty No. 8493-00-0009-01/2/3/4/5 with various
                 subscribing reinsurers.

      11.1       Statement re: computation of per share earnings (filed with the Company's Registration Statement on Form S-1
                 (No. 33-4450) and incorporated herein by reference).

      21.1       Subsidiaries of the registrant (filed with the Company's Registration Statement on Form S-1 (No. 33-4450) and
                 incorporated hereby by reference).

      23.0       Consent of independent auditors
</TABLE>

____________


    (b)  Reports on Form 8-K:

None.

                                       40
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         SCPIE HOLDINGS INC.

                                         By /s/ DONALD J. ZUK
                                            ----------------------------------
                                                Donald J. Zuk
March 30, 2001                                  President and Chief Executive
Officer

                                       41
<PAGE>

          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                   TITLE                              DATE
                    -----------                                  -----                              ----
<S>                                          <C>                                                <C>
/s/   DONALD J. ZUK                          President, Chief Executive Officer and Director    March 30, 2001
-------------------------------------
Donald J. Zuk                                         (Principal Executive Officer)


/s/   PATRICK T. LO                         Senior Vice President, Chief Financial Officer and  March 30, 2001
-------------------------------------
Patrick T. Lo                                            Chief Accounting Officer
                                                     (Principal Financial Officer and
                                                      Principal Accounting Officer)


 /s/   MITCHELL S. KARLAN, M.D.                     Chairman of the Board and Director          March 30, 2001
-------------------------------------
Mitchell S. Karlan, M.D.


 /s/   JACK E. MCCLEARY, M.D.                             Director and Treasurer                March 30, 2001
-------------------------------------
Jack E. McCleary, M.D.


 /s/   J. HYATT BROWN                                            Director                       March 30, 2001
-------------------------------------
J. Hyatt Brown


 /s/   WILLIS T. KING, JR.                                       Director                       March 30, 2001
-------------------------------------
Willis T. King, Jr.


 /s/   CHARLES B. MCELWEE, M.D.                                  Director                       March 30, 2001
-------------------------------------
Charles B. McElwee, M.D.


 /s/   WENDELL L. MOSELEY, M.D.                                  Director                       March 30, 2001
-------------------------------------
Wendell L. Moseley, M.D.


 /s/   DONALD P. NEWELL                                          Director                       March 30, 2001
-------------------------------------
Donald P. Newell


 /s/   HARRIET M. OPFELL, M.D.                                   Director                       March 30, 2001
-------------------------------------
Harriet M. Opfell, M.D.


 /s/   WILLIAM A. RENERT, M.D.                                   Director                       March 30, 2001
-------------------------------------
William A. Renert, M.D.


 /s/   HENRY L. STOUTZ, M.D.                                     Director                       March 30, 2001
-------------------------------------
Henry L. Stoutz, M.D.


 /s/   REINHOLD A. ULLRICH, M.D.                                 Director                       March 30, 2001
-------------------------------------
Reinhold A. Ullrich, M.D.
</TABLE>

                                       42
<PAGE>

                              SCPIE HOLDINGS INC.
             FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                           ANNUAL REPORT ON FORM 10-K

                                _______________

                                     INDEX
<TABLE>
<CAPTION>
                                                                         PAGES
                                                                      -----------
<S>                                                                   <C>
Report of Independent Auditors......................................           44
Financial Statements:
  Consolidated Balance Sheets as of December 31, 2000 and 1999......           45
  Consolidated Statements of Income for the years ended
    December 31, 2000, 1999 and 1998................................           46
  Consolidated Statements of Changes in Stockholders' Equity for
   the years ended December 31, 2000, 1999 and 1998.................           47

  Consolidated Statements of Cash Flows for the years ended
    December 31, 2000, 1999 and 1998................................           48
  Notes to Consolidated Financial Statements........................           49
  Schedule II - Condensed Financial Information of Registrant.......           62
  Schedule III - Supplementary Insurance Information................           66
</TABLE>

     All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.

                                       43
<PAGE>

                         Report of Independent Auditors



Board of Directors and Stockholders
SCPIE Holdings Inc.


We have audited the accompanying consolidated balance sheets of SCPIE Holdings
Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2000.  Our
audits also included the financial statement schedules listed in the index at
item 14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SCPIE Holdings
Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.  Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.



/s/ Ernst & Young LLP
Los Angeles, California
February 16, 2001

                                       44
<PAGE>

                      SCPIE Holdings Inc. and Subsidiaries

                          Consolidated Balance Sheets
                       (In thousands, except share data)

<TABLE>
<S>                                                                  <C>                <C>
DECEMBER 31,                                                                  2000                1999
-------------                                                                --------            --------

ASSETS

Securities available for sale (Note 2):
  Fixed-maturity investments, at fair value
    (amortized cost: 2000 - $567,166; 1999 - $571,792)                       $566,266            $549,024
  Equity investments, at fair value
    (cost: 2000 - $25,874; 1999 - $33,428)                                     24,403              33,464
                                                                             --------            --------
Total securities available for sale                                           590,669             582,488
Short-term investments                                                         84,451              72,903
                                                                             --------            --------
Total investments                                                             675,120             655,391
Cash                                                                           10,418               6,858
Accrued investment income                                                       9,307               9,080
Premiums receivable                                                            46,371              40,498
Reinsurance recoverable on unpaid loss and loss adjustment
 expense reserves (Note 4)                                                     40,152              45,007

Deferred federal income taxes (Note 5)                                         16,869              25,434
Costs in excess of net assets acquired                                          6,153               6,983
Property and equipment, net                                                     7,930               8,091
Real estate                                                                    16,126              16,485
Other assets                                                                   26,199              20,209
                                                                             --------            --------
Total assets                                                                 $854,645            $834,036
                                                                             ========            ========

LIABILITIES

Reserves:
  Losses and loss adjustment expenses (Note 3)                               $433,541            $449,864
  Unearned premiums                                                            56,996              46,140
                                                                             --------            --------
Total reserves                                                                490,537             496,004
Bank loan payable (Note 8)                                                     27,000              13,000
Other liabilities                                                              20,567              30,332
                                                                             --------            --------
Total liabilities                                                             538,104             539,336

Commitments and contingencies (Note 9)

STOCKHOLDERS' EQUITY

Preferred stock - par value $1.00, 5,000,000 shares
  authorized, no shares issued or outstanding                                      --                  --
Common stock - par value $0.0001, 30,000,000 shares
  authorized, 12,792,091 shares issued,
  2000 - 9,331,017 shares outstanding
  1999 - 9,513,189 shares outstanding                                               1                   1
Additional paid-in capital                                                     36,386              36,386
Accumulated other comprehensive loss                                           (1,528)            (14,764)
Retained earnings                                                             384,437             370,923
                                                                             --------            --------
                                                                              419,296             392,546
Treasury stock, at cost
  (2000 - 2,961,074 shares and 1999 - 2,778,902 shares)                       (98,705)            (93,796)
Stock subscription notes receivable                                            (4,050)             (4,050)
                                                                             --------            --------
Total stockholders' equity                                                    316,541             294,700
                                                                             --------            --------

Total liabilities and stockholders' equity                                   $854,645            $834,036
                                                                             ========            ========

</TABLE>

                            See accompanying notes.

                                       45
<PAGE>

                      SCPIE Holdings Inc. and Subsidiaries

                       Consolidated Statements of Income
                     (In thousands, except per-share data)

<TABLE>
<S>                                                            <C>                 <C>                <C>
FOR THE YEAR ENDED DECEMBER 31,                                           2000               1999               1998
--------------------------------                                        --------           --------           --------

REVENUES

Premiums earned (Note 4)                                                $176,502           $153,192           $157,976
Net investment income (Note 2)                                            34,152             37,697             40,367
Realized investment gains (losses) (Note 2)                                 (400)              (295)            11,129
Equity in earnings from affiliate                                            880                 64                 --
Other revenue                                                                342                629                489
                                                                        --------           --------           --------
Total revenues                                                           211,476            191,287            209,961

EXPENSES

Losses and loss adjustment expenses (Note 3)                             152,602            122,780            132,208
Other operating expenses                                                  36,483             29,310             28,211
                                                                        --------           --------           --------
Total expenses                                                           189,085            152,090            160,419
                                                                        --------           --------           --------
Income before federal income taxes                                        22,391             39,197             49,542
Federal income taxes (Note 5)                                              5,120              9,295             12,566
                                                                        --------           --------           --------
Net income                                                              $ 17,271           $ 29,902           $ 36,976
                                                                        ========           ========           ========

Basic earnings per share of common stock (Note 11)                      $   1.84           $   2.63           $   3.06

Diluted earnings per share of common stock (Note 11)                    $   1.84           $   2.62           $   3.06
</TABLE>

                            See accompanying notes.

                                       46
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

          Consolidated Statements of Changes in Stockholders' Equity
                                (In thousands)

<TABLE>
<CAPTION>
                                                             ACCUMULATED                                 STOCK
                                              ADDITIONAL        OTHER                                 SUBSCRIPTION       TOTAL
                                     COMMON    PAID-IN      COMPREHENSIVE      RETAINED    TREASURY      NOTES       STOCKHOLDERS'
                                     STOCK     CAPITAL      INCOME (LOSS)      EARNINGS     STOCK      RECEIVABLE        EQUITY
                                   -----------------------------------------------------------------------------------------------
<S>                                <C>        <C>           <C>                <C>         <C>         <C>            <C>
Balance at January 1, 1998          $     1    $ 36,386       $   14,638       $ 310,506   $    (416)   $     --      $  361,115
  Net income                             --          --               --          36,976          --          --          36,976
  Comprehensive income for
    unrealized gains on
     securities,
    net of reclassification
    adjustments of $1,863 for
    gains included in net income         --          --            4,047              --          --          --           4,047
                                                                                                                      ----------
     Comprehensive income                                                                                                 41,023
                                                                                                                      ----------

  Issuance of common stock               --          --               --              --     (12,725)         --         (12,725)
  Purchase of treasury stock
  Cash dividends                         --          --               --          (2,895)         --          --          (2,895)
                                    -------    --------       ----------       ---------   ---------    --------      ----------

Balance at December 31, 1998              1      36,386           18,685         344,587     (13,141)         --         386,518
  Net income                             --          --               --          29,902          --          --          29,902
  Comprehensive income for
    unrealized gains on
     securities,
    net of reclassification
    adjustments of $1,985 for
    gains included in net income         --          --          (33,449)             --          --          --         (33,449)
                                                                                                                      ----------
     Comprehensive loss                                                                                                   (3,547)
                                                                                                                      ----------

  Purchase of treasury stock             --          --               --              --     (84,705)         --         (84,705)
  Treasury stock reissued                                                                      4,050      (4,050)             --
  Cash dividends                         --          --               --          (3,566)         --          --          (3,566)
                                    -------    --------       ----------       ---------   ---------    --------      ----------

Balance at December 31, 1999              1      36,386          (14,764)        370,923     (93,796)     (4,050)        294,700
  Net income                             --          --               --          17,271          --          --          17,271
  Comprehensive income for
   unrealized gains on
    securities,
   net of reclassification
   adjustments of $1,027 for
   losses included in net income
                                         --          --           13,236              --          --          --          13,236
                                                                                                                      ----------
       Comprehensive income                                                                                               30,507
                                                                                                                      ----------

Purchase of treasury stock               --          --               --              --      (5,095)         --          (5,095)
Treasury stock reissued                  --          --               --              --         186                         186
Cash dividends                           --          --               --          (3,757)         --          --          (3,757)
                                    -------    --------       ----------       ---------   ---------    --------      ----------
Balance at December 31, 2000        $     1    $ 36,386       $   (1,528)      $ 384,437   $ (98,705)   $ (4,050)     $  316,541
                                    =======    ========       ==========       =========   =========    ========      ==========
</TABLE>

                            See accompanying notes.

                                       47
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows
                                (In thousands)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                               2000               1999               1998
-------------------------------                             ---------          ---------          ---------
<S>                                                         <C>                <C>                <C>
OPERATING ACTIVITIES

Net income                                                  $  17,271          $  29,902          $  36,976

Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
    Provisions for amortization and depreciation                3,761              4,562              5,061
    Provision for deferred federal income taxes                 1,501              4,739              1,815
    Realized investment (gains) losses                            400                295            (11,129)
    Equity in earnings of affiliate                              (880)               (64)                --
Changes in operating assets and liabilities:
    Accrued investment income                                    (227)             2,360                762
    Unearned premiums                                          10,856                705              2,519
    Unpaid losses and loss adjustment expenses,
      and reinsurance recoverables                            (11,468)           (47,875)            19,292
    Other liabilities                                          (6,853)              (279)           (18,905)
    Premiums receivable and other assets                       (9,597)            (3,183)           (25,713)
                                                            ---------          ---------          ---------
Net cash provided by (used in) operating activities             4,764             (8,838)            10,678

INVESTING ACTIVITIES

Purchases - fixed maturities                                 (313,082)          (290,369)          (300,916)
Sales - fixed maturities                                      300,703            380,415            263,293
Maturities - fixed maturities                                  11,575             29,967             36,501
Purchases - equities                                               --            (26,597)           (19,219)
Sales - equities                                                8,266             24,776              6,979
Change in short-term investments, net                         (11,548)           (38,498)            18,876
Change in funds held by reinsured                              (2,266)            (1,032)            (1,519)
                                                            ---------          ---------          ---------
Net cash provided by (used in) investing activities            (6,352)            78,662              3,995

FINANCING ACTIVITIES

Proceeds from bank loan                                        18,000             13,000                 --
Repayment of bank loan                                         (4,000)                --                 --
Purchase of treasury stock, net                                (5,095)           (84,705)           (12,725)
Cash dividends                                                 (3,757)            (3,566)            (2,895)
                                                            ---------          ---------          ---------
Net cash provided by (used in) financing activities             5,148            (75,271)           (15,620)
                                                            ---------          ---------          ---------

Increase (decrease) in cash                                     3,560             (5,447)              (947)

Cash at beginning of year                                       6,858             12,305             13,252
                                                            ---------          ---------          ---------
Cash at end of year                                         $  10,418          $   6,858          $  12,305
                                                            =========          =========          =========
</TABLE>

                            See accompanying notes.

                                       48
<PAGE>

                      SCPIE Holdings Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

NOTE 1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts and
operations, after intercompany eliminations, of SCPIE Holdings Inc. (SCPIE
Holdings) and its wholly-owned subsidiaries, principally SCPIE Indemnity Company
(SCPIE Indemnity), American Healthcare Indemnity Company (AHI), American
Healthcare Specialty Insurance Company (AHSIC) and SCPIE Management Company
(SMC), collectively, the Company.  Significant intercompany accounts and
transactions have been eliminated in consolidation.

     The Company principally writes professional liability insurance for
physicians, oral and maxillofacial surgeons, hospitals and other healthcare
providers. Most of the Company's coverage is written on a "claims-made and
reported" basis. This coverage is provided only for claims that are first
reported to the Company during the insured's coverage period and that arise from
occurrences during the insured's coverage period. The Company also makes "tail"
coverage available for purchase by policyholders in order to cover claims that
arise from occurrences during the insured's coverage period, but that are first
reported to the Company after the insured's coverage period and during the term
of the applicable tail coverage.

     In 1999, the Company formed an assumed reinsurance division and has rapidly
expanded its operation.  The strategic objective of the reinsurance division is
to create a well-balanced portfolio of carefully underwritten assumed
reinsurance lines of insurance to add diversity to the direct business of the
Company.  Treaties include professional, commercial and personal liability
coverages, commercial and residential property risks, accident and health
coverages and marine coverages on a worldwide basis.  (See Note 13.)

     The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes.  Actual results could differ from
those estimates.

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States (GAAP) which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities. The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below:

INVESTMENTS

     The Company has designated its entire investment portfolio as available-
for-sale. The Company has no securities classified as "trading" or "held to
maturity."  Available-for-sale securities are stated at fair value with the
unrealized gains and losses, net of tax, reported in other comprehensive income.
Realized investment gains and losses and declines in value judged to be other
than temporary are included as a component of revenues based on specific
identification of the investment sold.  Interest and dividends on securities
classified as available for sale are included in investment income.

     For the mortgage-backed bond portion of the fixed-maturity securities
portfolio, the Company recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of securities. When
actual prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the security is adjusted to
the amount that would have existed had the new effective yield been applied
since the acquisition of the security. That adjustment is included in net
investment income.

     Premiums and discounts on investments are amortized to investment income
using the interest method over the contractual lives of the investments. Short-
term investments are carried at cost, which approximates fair value.

     Investments in 20% to 50% owned affiliates are accounted for on the equity
method, and investments in less than 20%-owned affiliates are accounted for on
the cost method.

                                       49
<PAGE>

DEFERRED ACQUISITION COSTS

     Deferred acquisition costs, which are included in other assets, are
capitalized and amortized as premiums are earned over the terms of the related
policies.

<TABLE>
<CAPTION>
          (IN THOUSANDS)                                2000            1999            1998
          --------------                              --------        --------         -------
          <S>                                    <C>             <C>             <C>
          Balance at beginning of year                $ 10,067        $  8,051         $   520
          Costs deferred                                27,581          15,237          12,871
          Costs amortized                              (19,524)        (13,221)         (5,340)
                                                      --------        --------         -------
          Balance at end of year                      $ 18,124        $ 10,067         $ 8,051
                                                      ========        ========         =======
</TABLE>

     As the Company has expanded its assumed reinsurance operations and
operations in other states during 1999 and 2000 through brokerage relationships,
the corresponding commissions and fronting fee arrangements have resulted in an
overall increase in acquisition costs.

PREMIUMS

     Premiums are recognized as earned on a pro rata basis over the terms of the
respective policies.

UNEARNED PREMIUMS

     Unearned premiums are calculated using the monthly pro rata basis over the
terms of the respective policies.

RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

     Reserves for losses and loss adjustment expenses (LAE) represent the
estimated liability for reported claims plus those incurred but not yet reported
and the related estimated costs to adjust those claims. The reserve for losses
and LAE is determined using case-basis evaluations and statistical analysis and
represents estimates of the ultimate cost of all unpaid losses incurred through
December 31 of each year. Although considerable variability is inherent in such
estimates, management believes that the reserve for unpaid losses and related
LAE is adequate. The estimates are continually reviewed and adjusted as
necessary; such adjustments are included in current operations and are accounted
for as changes in estimates.

REINSURANCE

     Prospective reinsurance premiums, losses and loss adjustment expenses are
accounted for on bases consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.

PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost and depreciated principally
under the straight-line method over the useful life of the assets that range
from five to seven years.  Property and equipment consist of the following:



<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                      ----------------------
          (IN THOUSANDS)                                2000          1999
                                                      -------        -------
          <S>                                         <C>            <C>
          Leasehold improvements                      $ 5,256        $ 5,168
          Furniture and equipment                      10,077          8,679
                                                      -------        -------
                                                       15,333         13,847
          Accumulated depreciation                     (7,403)        (5,756)
                                                      -------        -------
          Property and equipment, net                 $ 7,930        $ 8,091
                                                      =======        =======
</TABLE>

REAL ESTATE

     Real estate, the Company's former home office headquarters, is recorded at
cost and depreciated principally under the straight-line method over the useful
life of the buildings.  Accumulated depreciation at December 31, 2000 and 1999,
was $3.4 million and $3.0 million respectively.  In July 1998, the Company
entered into a lease covering approximately 95,000 square feet of office space
for new Company headquarters.  The lease is for a term of 10 years and the
Company moved its headquarters and principal operations to this space in March
1999.  During 2000, both former headquarters buildings were leased entirely to
third parties.

                                       50
<PAGE>

INCOME TAXES

     Income taxes have been provided using the liability method in accordance
with Financial Accounting Standards Board Statement (FASB) No. 109, Accounting
for Income Taxes.

BUSINESS SEGMENTS

     As a result of the expansion of the Company's Assumed Reinsurance
operations, effective December 31, 2000, the Company adopted FASB No. 131,
Disclosures about Segments of an Enterprise and Related Information (Statement
131).  Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports.  Statement 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers.  The adoption of Statement 131 did not affect the Company's
results of operations or financial position.  (See Note 13.)

CREDIT RISK

     Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and fixed maturities. The Company places its temporary cash investments with
high-credit quality financial institutions and limits the amounts of credit
exposure to any one financial institution. Concentrations of credit risk with
respect to fixed maturities are limited due to the large number of such
investments and their distributions across many different industries and
geographics.

     Ceded reinsurance is placed with a number of individual companies and
syndicates at Lloyd's of London to avoid concentration of credit risk. For the
year ended December 31, 2000, approximately 96% of total ceded reinsurance
premiums paid were placed with reinsurance companies with an A.M. Best or
Insurance Solvency International rating of A- or better, including 30% with
Lloyd's of London syndicates, 42% with Hannover Ruckversicherungs, 8% with
Zurich Re, and 6% with CNA.  The remaining 14% of reinsurance premiums paid was
placed among seven other reinsurers.

STOCK-BASED COMPENSATION

     The Company grants stock options for a fixed number of shares to employees
and nonemployee directors with an exercise price equal to the fair value of the
shares at the date of grant.  The Company accounts for stock option grants in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25), and related Interpretations because the Company
believes the alternative fair value accounting provided for under FASB Statement
No. 123, Accounting for Stock-Based Compensation, requires the use of option
valuation models that were not developed for use in valuing employee stock
options.  Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the dates of
grant, no compensation expense is recognized.

EARNINGS PER SHARE

     Basic and diluted earnings per share are calculated in accordance with FASB
Statement No. 128, Earnings Per Share.

DERIVATIVE FINANCIAL INSTRUMENTS

     In June 1998, the Financial Accounting Standards Board issued FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
which established accounting and reporting standards for derivative instruments
and for hedging activities.  These rules require that all derivative instruments
be reported in the consolidated financial statements at fair value.  Changes in
fair value of derivatives are to be recorded each period in earnings or other
comprehensive income, depending on whether the derivative is designated and
effective as part of a hedged transaction, and on the type of hedge transaction.
Gains or losses on derivative instruments reported in other comprehensive income
must be reclassified as earnings in the period in which earnings are affected by
the underlying hedged item, and the ineffective portion of all hedges must be
recognized in earnings in the current period.  The Company will adopt this
statement effective January 1, 2001.  Management anticipates that the adoption
of this new statement will not have a material impact on the financial position
or results of operations of the Company as derivative instruments are not used.

                                       51
<PAGE>

RECLASSIFICATIONS

     Certain prior-year amounts have been reclassified to conform to the current
year presentation.

NOTE 2.  INVESTMENTS

     The Company's investments in available-for-sale securities are summarized
as follows:

<TABLE>
<CAPTION>
                                                        COST OR                GROSS                  GROSS
                                                       AMORTIZED             UNREALIZED             UNREALIZED               FAIR
          (IN THOUSANDS)                                  COST                 GAINS                  LOSSES                VALUE
          --------------                           ------------------  ----------------------  --------------------  ---------------
          <S>                                      <C>                 <C>                     <C>                   <C>
          December 31, 2000
          Fixed-maturity securities:
           Bonds:
              U.S. Government and Agencies                   $185,476                  $2,953               $   639         $187,790
              State, municipalities and
                political subdivisions                        180,528                   2,126                   774          181,880
              Mortgage-backed securities,
                U.S. Government                                42,734                     229                   132           42,831
              Corporate                                       158,345                   1,449                 6,112          153,682
              Other                                                83                      --                    --               83
                                                             --------                  ------               -------         --------
          Total fixed-maturity securities                     567,166                   6,757                 7,657          566,266
          Common stocks                                        25,874                     491                 1,962           24,403
                                                             --------                  ------               -------         --------
          Total                                              $593,040                  $7,248               $ 9,619         $590,669
                                                             ========                  ======               =======         ========

          December 31, 1999
          Fixed-maturity securities:
           Bonds:
              U.S. Government and Agencies                   $141,274                  $  457               $ 7,641         $134,090
              State, municipalities and
                political subdivisions                        253,741                     596                 6,953          247,384
              Mortgage-backed securities,
                U.S. Government                                49,800                      75                 1,034           48,841
              Corporate                                       126,886                       2                 8,270          118,618
              Other                                                91                      --                    --               91
                                                             --------                  ------               -------         --------
          Total fixed-maturity securities                     571,792                   1,130                23,898          549,024
          Common stocks                                        33,428                      43                     7           33,464
                                                             --------                  ------               -------         --------
          Total                                              $605,220                  $1,173               $23,905         $582,488
                                                             ========                  ======               =======         ========
</TABLE>

     The fair values for fixed-maturity securities are based on quoted market
prices, where available. For fixed-maturity securities not actively traded, fair
values are estimated using values obtained from independent pricing services.
The fair values for equity securities are based on quoted market prices.

     The amortized cost and fair value of the Company's investments in fixed-
maturity securities at December 31, 2000, are summarized by stated maturities as
follows:

<TABLE>
<CAPTION>
                                       AMORTIZED         FAIR
          (IN THOUSANDS)                 COST           VALUE
          ---------------------    ---------------  ---------------
          <S>                      <C>              <C>
          Years to maturity:

               One or less                 $  7,380         $  7,388
               After one through             97,767           97,110
                five
               After five through           248,517          250,167
                ten
               After ten                    170,768          168,770
               Mortgage-backed               42,734           42,831
                securities                 --------         --------
          Totals                           $567,166         $566,266
                                           ========         ========
</TABLE>

       The foregoing data is based on the stated maturities of the securities.
Actual maturities will differ for some securities because borrowers may have the
right to call or prepay obligations.

                                       52
<PAGE>

     Major categories of the Company's investment income are summarized as
follows:

<TABLE>
<CAPTION>
          (IN THOUSANDS)           YEAR ENDED DECEMBER 31,                          2000         1999          1998
          --------------------------------------------------                        -------      -------       -------
          <S>                                                                       <C>          <C>           <C>
          Fixed-maturity investments                                                $32,355      $36,715       $39,670
          Equity investments                                                            534          590           812
          Other                                                                       3,684        2,758         2,396
                                                                                    -------      -------       -------
          Total investment income                                                    36,573       40,063        42,878
          Investment expenses                                                         2,421        2,366         2,511
                                                                                    -------      -------       -------
          Net investment income                                                     $34,152      $37,697       $40,367
                                                                                    =======      =======       =======
</TABLE>

     Realized gains and losses from sales of investments are summarized as
follows:

<TABLE>
<CAPTION>
          (IN THOUSANDS)  YEAR ENDED DECEMBER 31,                                  2000           1999           1998
          ----------------------------------------                               -------        -------        -------
          <S>                                                                    <C>            <C>            <C>
          Fixed-maturity investments:
               Gross realized gains                                              $ 3,147        $ 6,952        $ 9,060
               Gross realized losses                                              (3,376)        (7,340)          (131)
                                                                                 -------        -------        -------
          Net realized gains (losses) on fixed-maturity investments                 (229)          (388)         8,929

          Equity investments:
               Gross realized gains                                                   --          6,716          2,506
               Gross realized losses                                                (171)        (6,623)          (306)
                                                                                 -------        -------        -------
          Net realized gains (losses) on equity investments                         (171)            93          2,200
                                                                                 -------        -------        -------

          Total net realized gains (losses)                                      $  (400)       $  (295)       $11,129
                                                                                 =======        =======        =======
</TABLE>

     The change in the Company's unrealized appreciation (depreciation) on
fixed-maturity securities was $21.9 million, $(46.0) million and $7.2 million
for the years ended December 31, 2000, 1999 and 1998, respectively; the
corresponding amounts for equity securities were $1.5 million, $(5.5 million)
and $(1.0 million).

    At December 31, 2000, the Company's investments in fixed-maturity securities
with a fair value of $39.6 million were on deposit with state insurance
departments to satisfy regulatory requirements.

    No investment in any person or its affiliates exceeded 10% of the Company's
stockholders' equity at December 31, 2000.

                                       53
<PAGE>

NOTE 3.  LOSSES AND LOSS ADJUSTMENT EXPENSES

     The following table provides a reconciliation of the beginning and ending
reserve balances, net of reinsurance recoverable, for 2000, 1999 and 1998.

<TABLE>
<CAPTION>
          (IN THOUSANDS)                                                   2000             1999             1998
          ---------------                                                --------         --------         --------
          <S>                                                            <C>              <C>              <C>
          Reserve for losses and LAE, net of related
            reinsurance recoverable, at beginning of year                $404,857         $452,732         $433,440

          Reserves assumed under the retroactive reinsurance
            agreement  (Note 4)                                                --               --           36,972


          Provision for losses and LAE for claims occurring
            in the current year, net of reinsurance                       194,717          183,959          197,870
          Decrease in estimated losses and LAE for claims
            occurring in prior years, net of reinsurance                  (42,115)         (61,179)         (65,662)
                                                                         --------         --------         --------
          Incurred losses during the year, net of reinsurance             152,602          122,780          132,208

          Deduct losses and LAE payments for claims,
            net of reinsurance, occurring during:
            Current year                                                   15,181           13,742           14,408
            Prior years                                                   148,889          156,913          135,480
                                                                         --------         --------         --------
                                                                          164,070          170,655          149,888
          Reserve for losses and LAE, net of related
            reinsurance recoverable, at end of year                       393,389          404,857          452,732

          Reinsurance recoverable for losses and LAE,
            at end of year                                                 40,152           45,007           24,899
                                                                         --------         --------         --------
          Reserves for losses and LAE, gross of
            reinsurance recoverable, at end of year                      $433,541         $449,864         $477,631
                                                                         ========         ========         ========
</TABLE>

     The Company's reserves for unpaid losses and LAE, net of related
reinsurance recoverable, at December 31, 1999, 1998, and 1997 were decreased in
the following year by $42.1 million, $61.2 million, and $93.8 million,
respectively, for claims that had occurred on or prior to those balance sheet
dates. Those redundancies resulted primarily from settlement of claims and
reevaluation of incurred but not reported reserves established in prior years
for amounts that were less than expected.  The 1998 redundancies were offset, in
part, by a $28.1 million increase in the loss and LAE reserves for the medical
malpractice insurance business acquired from Fremont Indemnity Company (Fremont)
in January 1998.  (See Note 4.)

     The anticipated effect of inflation is implicitly considered when
estimating liabilities for losses and LAE. While anticipated price increases due
to inflation are considered in estimating the ultimate claim costs, the increase
in average severities of claims is caused by a number of factors that vary with
the individual type of insurance written. Future average severities are
projected based on historical trends adjusted for implemented changes in
underwriting standards, policy provisions, and general economic trends. Those
anticipated trends are monitored based on actual development and are modified if
necessary.

NOTE 4.  REINSURANCE

     Certain premiums and benefits are ceded to other insurance companies under
various reinsurance agreements. These reinsurance agreements provide the Company
with increased capacity to write additional risks and maintain its exposure to
loss within its capital resources. Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policy. Some of these agreements include terms whereby the Company
earns a profit-sharing commission if the reinsurer's experience is favorable.

     Reinsurance contracts do not relieve the Company from its obligations to
policyholders. The failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition and economic
characteristics of its reinsurers to minimize its exposure to significant losses
from reinsurer insolvencies.  The Company generally does not require collateral
from its reinsurers that are licensed to assume such business.

                                       54
<PAGE>

     The effect of reinsurance on premiums written and earned are as follows:

<TABLE>
<CAPTION>
       (IN THOUSANDS)                             2000                  1999                  1998
                                          --------------------  --------------------  --------------------
       YEAR ENDED DECEMBER 31,             WRITTEN    EARNED     WRITTEN    EARNED     WRITTEN    EARNED
       -----------------------            ---------  ---------  ---------  ---------  ---------  ---------
       <S>                                <C>        <C>        <C>        <C>        <C>        <C>
       Direct                             $ 180,634  $ 155,838  $ 152,708  $ 149,191  $ 125,213  $ 124,077
       Assumed                               39,848     33,314     15,564     17,932     39,297     42,080
       Ceded                                 12,279     12,650     14,376     13,931      8,187      8,181
                                          ---------  ---------  ---------  ---------  ---------  ---------
       Net premiums                       $ 208,203  $ 176,502  $ 153,896  $ 153,192  $ 156,323  $ 157,976
                                          =========  =========  =========  =========  =========  =========
</TABLE>

     Net premiums written for 2000 reflects the Company's change in accounting
method to recognize written premiums on the effective date of the policy rather
than on the date premiums were billed.  This change had no impact on the income
statement.  If 1999 premiums had been recognized under this method, net premiums
written would have approximated $174.5 million.

     Reinsurance ceded reduced losses and loss adjustment expenses paid by $6.0
million, $12.4 million and $2.6 million in 2000, 1999 and 1998, respectively.
Reinsurance ceded reduced loss and loss adjustment expenses reserves by $40.2
million, $45.0 million and $24.9 million in 2000, 1999 and 1998, respectively.

     For 1999 and prior years, the Company retained the first $1.0 million of
losses incurred per incident and had various reinsurance up to $20.0 million per
incident for physician coverage.  The reinsurers also were obligated to bear
their proportionate share of LAE.  For hospital coverage, the Company reinsured
90% of all losses incurred above a $1.0 million retention, and the Company
retained all LAE.  For 2000, the Company consolidated these treaties into a
program in which the Company retains the first $2.0 million of losses and LAE
per incident and reinsures the excess losses and LAE per incident up to $50.0
million.

     The Company acquired the medical malpractice insurance business of Fremont,
effective January 1, 1998.  The Company and Fremont concurrently entered into a
100% quota share prospective fronting arrangement, making the Company the
reinsurer for the Fremont policies issued or renewed until the Company obtained
the necessary regulatory approvals to underwrite the business directly. The
Company entered into a similar arrangement with another insurer when it replaced
the insurer under a multiple state agency program in 1998 and 2000.  Premiums of
$5.8 million, $6.3 million and $30.9 million are included in assumed premiums
written for 2000, 1999 and 1998, respectively.

     The Company also assumes reinsurance covering medical professional
liability risks, primarily in the United States, as well as participating in
high-layer excess of loss property catastrophe reinsurance for U.S. and
international risks.  In 1999, the Company formed an assumed reinsurance
division and has rapidly expanded its operation.  The strategic objective of the
reinsurance division is to create a well-balanced portfolio of carefully
underwritten assumed reinsurance lines of insurance to add diversity to the
direct business of the Company.  (See Note 13.)

     In November 1996, the Company entered into a six-year agreement with a
third party whereby the Company provided a $5.5 million letter of credit in
exchange for future gains or losses based on the underwriting index of a
reinsurance portfolio. The portfolio is composed of worldwide geographically
dispersed catastrophe excess of loss treaty reinsurance business. The Company
will also receive semiannual payments based on its notional amount ($5.0
million) at a rate determined annually. On an annual basis, if the combined
ratio of the portfolio is below a stipulated underwriting index amount, the
Company will recognize a gain; if the combined ratio is between two stipulated
underwriting index amounts, the Company will not recognize a gain or loss; and,
if the combined ratio is greater than a stipulated underwriting index amount,
the Company will recognize a loss limited to its notional value plus any
interest earned during the agreement. At December 31, 2000, the amounts recorded
in the financial statements related to this agreement were not material.

NOTE 5.  FEDERAL INCOME TAXES

     The components of the federal income tax provision in the accompanying
consolidated statements of income are summarized as follows:

<TABLE>
<CAPTION>
        (IN THOUSANDS)        YEAR ENDED DECEMBER 31,                 2000     1999      1998
        ------------------------------------------------             ------   ------   -------
        <S>                                                          <C>      <C>      <C>
        Current                                                      $3,619   $4,556   $10,751
        Deferred                                                      1,501    4,739     1,815
                                                                     ------   ------   -------
        Total                                                        $5,120   $9,295   $12,566
                                                                     ======   ======   =======
</TABLE>

                                       55
<PAGE>

     A reconciliation of income tax computed at the federal statutory tax rate
to total income tax expense is as follows:

<TABLE>
<CAPTION>
          (IN THOUSANDS)                 YEAR ENDED DECEMBER 31,                   2000       1999       1998
        ----------------------------------------------------------              -------    -------    -------
        <S>                                                                     <C>        <C>        <C>
        Federal income tax at 35%                                               $ 7,837    $13,719    $17,339
        Increase (decrease) in taxes resulting from:
         Tax-exempt interest                                                     (3,194)    (4,657)    (4,964)
         Dividends received deduction                                               (56)       (84)      (158)
         Goodwill                                                                   210        210        210
         Other                                                                      323        107        139
                                                                                -------    -------    -------
        Total federal income tax expense                                        $ 5,120    $ 9,295    $12,566
                                                                                =======    =======    =======
</TABLE>

     Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are summarized as follows:


<TABLE>
<CAPTION>
                             (IN THOUSANDS)            DECEMBER 31,                     2000          1999
                        ----------------------------------------------               -------       -------
                        <S>                                                          <C>           <C>
                        Deferred tax assets:
                          Discounting of loss reserves                               $19,019       $20,039
                          Unearned premium                                             2,531         1,771
                          Unrealized investment losses                                   847         7,948
                          Other                                                        2,523         2,484
                                                                                     -------       -------
                        Total deferred tax assets                                     24,920        32,242

                        Deferred tax liabilities:
                          Deferred acquisition costs                                   6,343         3,523
                          Other                                                        1,708         3,285
                                                                                     -------       -------
                        Total deferred tax liabilities                                 8,051         6,808
                                                                                     -------       -------
                        Net deferred tax assets                                      $16,869       $25,434
                                                                                     =======       =======
</TABLE>

    The Company is required to establish a "valuation allowance" for any portion
of the deferred tax asset that management believes will not be realized.  In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the net deferred tax asset and, therefore, no such valuation
allowance has been established.

     Federal income taxes paid during 2000, 1999 and 1998 were $1.3 million,
$8.1 million and $8.7 million, respectively.

NOTE 6.  STATUTORY ACCOUNTING PRACTICES

    State insurance laws and regulations prescribe accounting practices for
determining statutory net income and equity for insurance companies.  In
addition, state regulators may permit statutory accounting practices that differ
from prescribed practices.

    Statutory accounting practices prescribed or permitted by regulatory
authorities for the Company's insurance subsidiaries differ from GAAP.
Policyholders' surplus and net income, as determined in accordance with
statutory accounting practices, for the Company's insurance subsidiaries are
summarized as follows:

<TABLE>
<CAPTION>
                        (IN THOUSANDS)                                         2000           1999           1998
                       --------------                                        --------       --------       --------
                       <S>                                                   <C>            <C>            <C>
                       Statutory net income for the year                      $ 14,050       $ 34,021       $ 35,936
                       Statutory capital and surplus at  year end              249,261        265,459        343,330
</TABLE>

     SCPIE Indemnity offers its insureds free tail coverage in the event of
death, total and permanent disability, and complete and permanent retirement.
In 1993, the National Association of Insurance Commissioners (NAIC) published
guidelines for establishing a reserve for future free tail policies when the
claims-made policy includes a provision for waiving a premium charge in the
event of death, disability or retirement of the insured.  Based on the NAIC
guidelines, this reserve ($3.5 million and $20.3 million at December 31, 2000
and 1999 respectively) should be recorded as an unearned premium reserve.
Alternatively, it can be considered an unpaid loss with the permission of the
insurance entity's state insurance department.  In 1999, SCPIE Indemnity
received written approval from the California Department of Insurance to record
this amount with the reserve for losses and loss adjustment expenses.  In 2000,
this amount is recorded as an unearned premium reserve.

     Generally, the capital and surplus of the Company's insurance subsidiaries
available for transfer to the parent company are limited to the amounts that the
insurance subsidiaries' capital and surplus, as determined in accordance with
statutory accounting practices, exceed minimum statutory capital requirements;
however, payments of the amounts as dividends may be subject to approval

                                       56
<PAGE>

by regulatory authorities. At December 31, 2000, the amount of dividends
available to SCPIE Holdings from its insurance subsidiaries during 2001 not
limited by such restrictions is approximately $24.1 million.

     The NAIC revised the Accounting Practices and Procedures Manual in a
process referred to as Codification.  The revised manual will be effective
January 1, 2001.  California, Delaware and Arkansas (the states of domicile for
the insurance subsidiaries) have adopted the provisions of the revised manual.
The revised manual has changed, to some extent, prescribed statutory accounting
practices and will result in changes to the accounting practices that the
insurance subsidiaries use to prepare their statutory-basis financial
statements.  Management believes the impact of these changes to the insurance
subsidiaries statutory-basis capital and surplus as of January 1, 2001 will not
be significant.

NOTE 7.  BENEFIT PLANS

     The Company has a 401(k) defined contribution plan and a noncontributory
defined benefit plan, which provide retirement benefits to all its employees. In
2000, the 401(k) plan, the Company matched the employee's contribution up to 6%.
The contribution expense for the 401(k) plan was $760,000, $634,000 and $661,000
for the years ended December 31, 2000, 1999 and 1998, respectively. An
additional defined contribution plan that no longer accepts contributions will
remain with the trustee as funded at December 31, 1989, until retirement or
termination of all employees vested in the plan.

     The Company also maintains a defined benefit pension plan and a
nonqualified supplemental plan of which the net pension expense (income)
consists of the following components:

<TABLE>
<CAPTION>
                                                                                  Qualified Plan         Supplemental Plan
                                                                            ------------------------------------------------
       (IN THOUSANDS)    YEAR ENDED DECEMBER 31,                              2000     1999    1998      2000   1999   1998
       --------------------------------------------                         --------   -----   -----    ------  -----  -----
       <S>                                                                    <C>      <C>     <C>     <C>      <C>    <C>
       Service cost                                                            $ 483   $ 503   $ 344    $  141  $ 220  $ 184
       Interest cost                                                             298     255     195       308    250    212
       Actual return on plan assets                                             (293)   (254)   (220)               -      -
       Amortization of:
         Transition obligation (asset)                                            (4)     (4)     (4)        -      -      7
         Prior service cost                                                       (1)     (1)     (1)       84     84     84
         Actuarial loss (gain)                                                   (44)      -       -        10     38     26
       Curtailment loss (gain)                                                  (710)      -       -       482      -      -
                                                                               -----   -----   -----    ------  -----  -----
       Net pension expense (income)                                            $(271)  $ 499   $ 314    $1,025  $ 592  $ 513
                                                                               =====   =====   =====    ======  =====  =====
</TABLE>

    Both of these plans were terminated effective December 31, 2000.  The
nonqualified supplemental plan will be liquidated and replaced with a new plan
effective January 1, 2001, that provides certain officers defined pension
benefits in excess of limits imposed by federal tax law.  The qualified plan may
be liquidated at the Company's discretion.

                                       57
<PAGE>

     The following table sets forth the funding status of the plan:

<TABLE>
<CAPTION>
                                                                        Qualified Plan     Supplemental Plan
                                                                    -----------------------------------------
 (IN THOUSANDS)                   DECEMBER 31,                          2000      1999       2000       1999
--------------------------------------------------------------------   ------   -------    -------    -------
<S>                                                                   <C>       <C>       <C>        <C>
Change in Benefit Obligation
----------------------------
Net benefit obligation at beginning of year                            $3,159   $ 3,214    $ 3,656      3,308
Service cost                                                              483       503        141        220
Plan amendments                                                             -         -        185          -
Interest cost                                                             298       255        308        250
Effect of curtailment                                                    (702)        -       (659)         -
Actuarial (gain) loss                                                     404      (774)       109       (122)
Gross benefits paid                                                       (40)      (39)         -          -
                                                                       ------   -------    -------    -------
Net benefit obligation at end of year                                   3,602     3,159      3,740      3,656
                                                                       ------   -------    -------    -------

Change in Plan Assets
---------------------
Fair value of plan assets at beginning of year                          3,619     3,203          -          -
Actual return (loss) on plan assets                                      (395)      455          -          -
Employer contributions                                                    215         -          -          -
Gross benefits paid                                                       (40)      (39)         -          -
                                                                       ------   -------    -------    -------
Fair value of plan assets at end of year                                3,399     3,619          -          -
                                                                       ------   -------    -------    -------

Funded status (underfunded)                                              (203)      461     (3,740)    (3,656)
Unrecognized actuarial (gain) loss                                        (48)   (1,185)        19        365
Unrecognized prior service cost (benefit)                                   -       (10)       261        856
Unrecognized net transition obligation (asset)                            (16)      (20)         -          -
                                                                       ------   -------    -------    -------
Accrued pension expense                                                $ (267)  $  (754)   $(3,460)   $(2,435)
                                                                       ======   =======    =======    =======

Amounts recognized in the statement of
 financial position consists of
  Accrued benefit liability                                              (267)     (754)    (3,546)    (2,519)
  Intangible asset                                                          -         -         86         84
                                                                       ------   -------    -------    -------
Accrued pension expense                                                $ (267)  $  (754)   $(3,460)   $(2,435)
                                                                       ======   =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                                         Qualified Plan      Supplemental Plan
                                                                      -----------------------------------------
DECEMBER 31,                                                           2000   1999   1998    2000   1999   1998
--------------                                                         ----   ----   ----    ----   ----   ----
<S>                                                                    <C>    <C>    <C>    <C>     <C>    <C>
Weighted-average assumptions
  Discount rate                                                        7.50%  7.75%  6.75%   7.50%  7.75%  6.75%
  Expected return on plan assets                                       8.00%  8.00%  8.00%     --     --     --
  Rate of compensation increase                                        5.00%  5.00%  5.00%   5.00%  5.00%  5.00%
</TABLE>

    During 1999, the Company implemented the Director and Senior Management
Stock Purchase Plan. The directors and senior managers purchased a total of
145,000 shares of common stock under this plan.  The eligible participants
executed promissory notes in the aggregate amount of $4.1 million to fund this
purchase.

    The Company's Employee Stock Purchase Plan, effective January 1, 2000,
offers eligible employees the opportunity to purchase shares of SCPIE common
stock through payroll deductions.

NOTE 8.  BANK LOAN PAYABLE

     On May 25, 1999, the Company entered into a credit agreement with Union
Bank of California, N. A., First Union Bank and Dresdner Bank AG, as lenders.
The Credit Agreement currently allows the Company borrowings up to $40 million
from time to time, subject to certain conditions. The proceeds may be used by
the Company for general corporate purposes and certain other permitted uses.
Under the Credit Agreement, the interest rate (7.378% and 6.785% at December 31,
2000 and 1999 respectively) is based upon fluctuations in the London InterBank
Offered Rate (LIBOR). Borrowings outstanding at December 31, 2000 and 1999, were
$27.0 million and $13.0 million respectively. All amounts outstanding under the
Credit Agreement on May 27, 2002 will automatically become payable in twelve
equal quarterly installments beginning August 30, 2002. Interest paid was
$724,000 in 2000. No interest was paid in 1999.

NOTE 9.  COMMITMENTS AND CONTINGENCIES

     The Company is named as defendant in various legal actions primarily
arising from claims made under insurance policies and contracts. These actions
are considered by the Company in estimating the loss and loss adjustment expense
reserves. The Company's

                                       58
<PAGE>

management believes that the resolution of these actions will not have a
material adverse effect on the Company's financial position or results of
operations.

     The Company is a defendant in a California action brought by the bankruptcy
estate of an uninsured physician. The bankruptcy estate alleged that the Company
had an undisclosed conflict of interest when it provided the physician with a
free courtesy defense by an attorney who had represented the interests of the
Company's insureds in other cases.   In 1995, a jury made a damage award against
the Company of $4.2 million in compensatory damages, and punitive damages that
were reduced to $14.0 million by the trial judge. The Company appealed these
awards to the California district court of appeal.  On May 8, 1998, the
appellate court reversed the judgment against the Company in its entirety.  The
case was remanded to the California Superior Court in which the judgment was
originally entered.  The Company filed a motion in the Superior Court for entry
of judgment in its favor, which the bankruptcy estate opposed.  The trial judge
ruled in favor of the Company, and judgment for the Company was entered on
September 29, 1999.  The bankruptcy estate filed a notice of appeal of this
ruling with the district court of appeal.  The Company does not expect a
decision from the appellate court until approximately August 2001. The Company
believes that the action is entirely without merit and will continue to
aggressively pursue its rights.

     In July 1998, the Company entered a lease covering approximately 95,000
square feet of office space for new Company headquarters.  The lease has
escalating payments over a term of 10 years and the Company moved its
headquarters and principal operations to this space.  The company expended $5.3
million for leasehold improvements and equipment through December 31, 2000.
Rent expense for the years ended December 31, 2000 and 1999, was $3.6 million
and $2.5 million respectively.

     Future minimum payments under noncancelable operating leases with initial
terms of one year or more consist of the following at December 31, 2000 (in
thousands):

                         2001                     $ 2,980
                         2002                       2,957
                         2003                       2,976
                         2004                       2,968
                         2005                       2,960
                         Thereafter                 8,506
                                                  -------
                                                  $23,347
                                                  =======

 NOTE 10.   STOCK-BASED COMPENSATION

     The Company has a stock compensation plan, the 1997 Equity Participation
Plan of SCPIE Holdings Inc. (the Plan) which provides for grants of stock
options to key employees and nonemployee directors of the Company.

     FASB Statement No. 123 requires disclosure of the pro forma net income and
earnings per share as if the Company had accounted for its employee stock
compensation under the fair value method of that Statement.

     The aggregate number of options for common shares issued and issuable under
the Plan currently is limited to 1,250,000.  All options granted have 10-year
terms and vest over various future periods.

     Exercise prices for options outstanding at December 31, 2000, ranged from
$24.25 to $36.50.  The weighted average remaining contractual life of those
options is nine years.

                                       59
<PAGE>

     A summary of the Company's stock-option activity and related information
     follows:

<TABLE>
<CAPTION>
                                                     2000                      1999                           1998
----------------------------------------------------------------------------------------------------------------------------------
                                           Number of  Weighted-Average  Number of  Weighted -Average  Number of  Weighted-Average
                                            Options    Exercise Price    Options    Exercise Price     Options    Exercise Price
                                           ---------  ----------------  ---------  -----------------  ---------  ----------------
<S>                                        <C>         <C>              <C>         <C>               <C>        <C>
Options outstanding at beginning of year     466,390       $29.97         256,790         $30.76              -       $      -
Granted during year                          180,400        32.40         216,200          29.02        262,590          30.76
Exercised during year                              -            -               -              -              -              -
Forfeited during year                         38,100        29.74           6,600          29.19          5,800          30.76
                                             -------                      -------                       -------

Options outstanding at end of year           608,690       $30.71         466,390         $29.97        256,790       $  30.76
                                             =======                      =======                       =======
</TABLE>


The Company's pro forma information using the Black-Scholes valuation model
follows:


<TABLE>
<CAPTION>
                                                                       2000      1999      1998
                                                                      -------   -------   -------
<S>                                                                  <C>       <C>       <C>
Estimated weighted average of the fair value of options granted       $  9.79   $  7.40   $ 10.72
Pro forma net income (in 000s)                                        $15,846   $28,373   $35,869
Pro forma earnings per share - Basic                                  $  1.70   $  2.50   $  2.97
                             - Diluted                                $  1.70   $  2.49   $  2.97
</TABLE>

     For pro forma disclosure purposes, the fair value of stock options was
estimated at each date of grant using a Black-Scholes option pricing model using
the following assumptions:  Risk-free interest rates ranging from 5.5% to 6.1%;
dividend yields ranging from 0.66% to 1.14%; volatility factors of the expected
market price of the Company's common stock ranging from .273 to .358; and a
weighted average expected life of the options ranging from three to five years.

     In management's opinion, existing stock option valuation models do not
provide an entirely reliable measure of the fair value of nontransferable
employee stock options with vesting restrictions.

NOTE 11.  EARNINGS PER SHARE OF COMMON STOCK

     The following table sets forth the computation of basic and diluted
earnings per share as of and for the year ended:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                               -----------------------------------------------
               (IN THOUSANDS, EXCEPT PER-SHARE DATA)              2000               1999               1998
                                                                -------             -------            -------
          <S>                                                   <C>                 <C>                 <C>
          Numerator:
             Net income                                          $17,271             $29,902            $36,976

          Numerator for:
             Basic earnings per share of common                  $17,271             $29,902            $36,976
              stock
             Diluted earnings per share of                       $17,271             $29,902            $36,976
              common stock

          Denominator:
             Denominator for basic earnings per
              share of common stock - weighted-average
              shares outstanding                                   9,376              11,384             12,074

             Effect of dilutive securities:
               Stock options                                           5                  19                 15
                                                                 -------             -------            -------
               Denominator for diluted earnings
                per share of common stock adjusted -
                weighted-average shares outstanding                9,381              11,403             12,089
                                                                 =======             =======            =======
          Basic earnings per share of common stock               $  1.84             $  2.63            $  3.06
                                                                 =======             =======            =======
          Diluted earnings per share of common stock             $  1.84             $  2.62            $  3.06
                                                                 =======             =======            =======
</TABLE>

                                       60
<PAGE>

NOTE 12.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The unaudited quarterly results of operations for 2000 and 1999 are
summarized as follows:

<TABLE>
<CAPTION>
                                                                     2000                                  1999
                                                    -----------------------------------   ---------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)                 1ST       2ND      3RD      4TH       1ST       2ND       3RD        4TH
-------------------------------------               -------   -------  -------  -------   --------  --------  --------   --------
<S>                                                 <C>       <C>      <C>      <C>       <C>       <C>       <C>        <C>
Premiums earned and other revenues                  $40,173   $43,694  $45,531  $48,326    $41,155   $39,468   $38,992    $34,270
Net investment income                                 8,339     8,417    8,801    8,595      9,476     9,961     9,514      8,746
Realized investment gains (losses)                     (915)       18      753     (256)     6,102       506    (1,325)    (5,578)
Net income                                            3,791     4,382    4,895    4,203     11,592     8,006     6,779      3,525

Basic earnings per share of common stock            $  0.40   $  0.47  $  0.52  $  0.45    $  0.98   $  0.69   $  0.59    $  0.33
Diluted earnings per share of common stock          $  0.40   $  0.47  $  0.52  $  0.45    $  0.98   $  0.69   $  0.58    $  0.33
</TABLE>

NOTE 13.  BUSINESS SEGMENTS

     The Company classifies its business into two segments:  Direct Healthcare
Liability Insurance and Assumed Reinsurance. Segments are designated based on
the types of products provided and based on the risks associated with the
products.  Direct Healthcare Liability Insurance represents professional
liability insurance for physicians, oral and maxillofacial surgeons, hospitals
and other healthcare providers.  Assumed Reinsurance represents the book of
assumed worldwide reinsurance of professional, commercial and personal liability
coverages, commercial and residential property risks, accident and health
coverages and marine coverages.  Other includes items not directly related to
the operating segments such as net investment income, realized investment gains
and losses, and other revenue.

     The accounting policies of the segments are the same as those described in
Note 1.  The Company evaluates insurance segment performance based on the
combined ratios of the segments.  Intersegment transactions are not significant.

     The following table presents information about reportable segment income
(loss) and segment assets as of and for the period indicated:

<TABLE>
<CAPTION>
      (In Thousands)                                                 Direct Healthcare      Assumed
                                                                    Liability Insurance   Reinsurance     Other      Total
                                                                    --------------------  ------------  ---------  ----------
      <S>                                                           <C>                   <C>           <C>        <C>
      Year Ended December 31, 2000
      Premiums earned                                                          $149,404       $27,098   $     --    $176,502
      Net investment income                                                          --            --     34,152      34,152
      Realized investment gains (losses)                                             --            --       (400)       (400)
      Equity earnings from affiliate                                                 --            --        880         880
      Other revenue                                                                  --            --        342         342
                                                                               --------       -------   --------    --------
      Total revenues                                                            149,404        27,098     34,974     211,476

      Losses and loss adjustment expenses                                       129,307        23,295         --     152,602
      Other operating expenses                                                   32,333         4,150         --      36,483
                                                                               --------       -------   --------    --------
      Total expenses                                                            161,640        27,445         --     189,085
                                                                               --------       -------   --------    --------
      Segment (loss) income before income taxes                                 (12,236)         (347)    34,974      22,391
                                                                               ========       =======   ========    ========

      Combined ratio                                                             108.19%       101.28%        --      107.13%
      Segment assets                                                           $155,176       $13,931   $685,538    $854,645
</TABLE>

                                       61
<PAGE>

          Schedule II - Condensed Financial Information of Registrant

                              SCPIE Holdings Inc.
                           Condensed Balance Sheets
                       (In Thousands, Except Share Data)


<TABLE>
<CAPTION>
     DECEMBER 31                                                       2000                    1999
                                                                     --------                --------
     <S>                                                            <C>                      <C>
         ASSETS
         Securities available for sale:
         Fixed-maturity investments, at fair value
           (amortized cost: 2000 - $5,016)                          $  5,016                 $      --
         Equity investments, at fair value                            13,892                    23,401
         Short-term investments                                       13,034                     2,724
         Investment in subsidiaries                                  291,727                   281,220
                                                                    --------                  --------
         Total investments                                           323,669                   307,345
         Cash                                                            286                       282
         Deposits                                                     17,550                        --
         Due from affiliates                                             365                        --
         Other                                                         1,671                       893
                                                                    --------                  --------
         Total assets                                               $343,541                  $308,520
                                                                    ========                  ========

         LIABILITIES
         Due to affiliates                                          $     --                  $    640
         Other                                                            --                       180
         Bank loan payable                                            27,000                    13,000
                                                                    --------                  --------
         Total liabilities                                            27,000                    13,820


         Stockholders' equity:
          Preferred stock - par value $1.00,
           5,000,000 shares authorized,
           no shares issued or outstanding                                --                        --
         Common stock - par value $0.0001,
           30,000,000 shares authorized, 12,792,091
           shares issued,
           2000 - 9,331,017 shares outstanding
           1999 - 9,513,189 shares outstanding                             1                         1
         Additional paid-in capital                                   36,386                    36,386
         Accumulated other comprehensive loss                         (1,528)                  (14,764)
         Retained earnings                                           384,437                   370,923
                                                                    --------                  --------
                                                                     419,296                   392,546
         Treasury stock, at cost (2000 - 2,961,074
           shares and 1999 - 2,778,902 shares)                       (98,705)                  (93,796)
         Stock subscription notes receivable                          (4,050)                   (4,050)
                                                                    --------                  --------
         Total stockholders' equity                                  316,541                   294,700
                                                                    --------                  --------
         Total liabilities and stockholders' equity                 $343,541                  $308,520
                                                                    ========                  ========
</TABLE>

                            See accompanying notes.

                                       62
<PAGE>

    Schedule II - Condensed Financial Information of Registrant (continued)

                              SCPIE Holdings Inc.

                      Condensed Statements of Operations
                                (In Thousands)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,            DECEMBER 31,            DECEMBER 31,
FOR THE YEAR ENDED                                                    2000                    1999                    1998
------------------                                                 ------------            -----------             -----------
<S>                                                                <C>                     <C>                     <C>
         Dividend from subsidiary                                    $26,000                $106,000                 $25,000
         Net investment income                                           806                     638                     142
         Realized investment gains (losses)                             (170)                 (4,278)                      2
         Other income                                                    338                      --                      --
         Other expenses                                               (2,110)                 (2,229)                 (1,956)
                                                                     -------                --------                 -------
         Earnings before federal income taxes and
           equity in income of subsidiaries                           24,864                 100,131                  23,188
         Federal income tax benefit (expense)                          1,035                     (22)                    (28)
                                                                     -------                --------                 -------

         Earnings before equity in income (loss) of
           subsidiaries                                               25,899                 100,109                  23,160
         Equity in income (loss) of subsidiaries                      (8,628)                (70,207)                 13,816
                                                                     -------                --------                 -------
         Net income                                                  $17,271                $ 29,902                 $36,976
                                                                     =======                ========                 =======
</TABLE>

                            See accompanying notes.

                                       63
<PAGE>

    Schedule II - Condensed Financial Information of Registrant (continued)

                              SCPIE Holdings Inc.
                       Condensed Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,      DECEMBER 31,      DECEMBER 31,
      FOR THE YEAR ENDED                                                         2000              1999              1998
      ------------------                                                     -------------     -------------     -------------
         <S>                                                                 <C>               <C>               <C>
         OPERATING ACTIVITIES
         Net income                                                               $ 17,271          $ 29,902          $ 36,976
         Adjustments to reconcile net loss to net cash
          provided by operating activities:
            Realized investment (gains) losses                                         170             4,278                (2)
            Due to affiliates                                                       (1,005)             (374)            1,088
            Provision for amortization                                                 563               839               601
            Changes in other assets and liabilities                                   (928)              (61)              591
            Equity in undistributed (income) loss of subsidiaries                    8,628            70,207           (13,816)
                                                                                  --------          --------          --------
         Net cash provided by operating activities                                  24,699           104,791            25,438

         INVESTING ACTIVITIES
         Sales - equities                                                            8,033                --                --
         Sales - fixed maturities                                                       --                43             2,965
         Purchase - securities                                                      (5,016)          (25,839)           (2,000)
         Change in short- term investments                                         (27,860)           (1,514)             (938)
         Capital contribution to subsidiaries                                       (5,000)           (2,000)          (10,000)
                                                                                  --------          --------          --------
         Cash used in investing activities                                         (29,843)          (29,310)           (9,973)

         FINANCING ACTIVITIES
         Repayment of bank loan                                                     (4,000)               --                --
         Proceeds from bank loan                                                    18,000            13,000                --
         Purchase of treasury stock                                                 (5,095)          (84,705)          (12,725)
         Cash dividends                                                             (3,757)           (3,566)           (2,895)
                                                                                  --------          --------          --------
         Cash provided by (used in) financing activities                             5,148           (75,271)          (15,620)

         Increase (decrease) in cash                                                     4               210              (155)
         Cash at beginning of period                                                   282                72               227
                                                                                  --------          --------          --------
         Cash at end of period                                                    $    286          $    282          $     72
                                                                                  ========          ========          ========
</TABLE>

                            See accompanying notes.

                                       64
<PAGE>

    Schedule II - Condensed Financial Information of Registrant (continued)

                              SCPIE Holdings Inc.
                    Notes to Condensed Financial Statements
                               December 31, 2000


1.  BASIS OF PRESENTATION

        In the SCPIE Holdings' financial statements, investment in subsidiaries
is stated at cost plus equity in undistributed earnings of subsidiaries since
date of acquisition.  The SCPIE Holdings' financial statements should be read in
conjunction with the consolidated financial statements.

2.  BANK LOAN PAYABLE

        On May 25, 1999, the Company entered into a credit agreement with Union
Bank of California, N. A., First Union Bank and Dresdner Bank AG, as lenders.
The Credit Agreement allows company borrowings up to $40 million from time to
time, subject to certain conditions.  The proceeds may be used by the Company
for general corporate purposes and certain other permitted uses.  Under the
Credit Agreement, the interest rate (7.378% at December 31, 2000 and 1999
respectively) is based upon fluctuations in the London InterBank Offered Rate
(LIBOR).  Borrowings outstanding at December 31, 2000 and 1999 were $27.0
million and $13.0 million respectively.  The entire amount is payable during
2001, and may be renewed at the option of the Company.  Interest paid was
$724,000 in 2000.  No interest was paid during 1999.

                                       65
<PAGE>

                                 Schedule III
                      Supplementary Insurance Information
                              SCPIE Holdings Inc.


<TABLE>
<CAPTION>
                                                                                                                Benefits,
                            Deferred       Future Policy               Other Policy                              Claims,
                             Policy      Benefits, Losses,              Claims and                 Net         Losses and
                          Acquisition     Claims and Loss   Unearned     Benefits     Premium    Investment     Settlement
Segments                      Cost           Expenses       Premiums     Payable      Revenue      Income        Expenses
--------                --------------   ----------------  ----------  -----------  ----------  ------------ --------------
<S>                     <C>              <C>               <C>         <C>          <C>         <C>          <C>
Direct Healthcare
  Liability Insurance       $16,293             $402,048      $52,380         --     $ 27,098     $    --        $129,307
Assumed Reinsurance (1)       1,831               31,493        4,616         --      149,404          --          23,295
Other                            --                   --           --         --           --      34,152              --
                            -------             --------      -------                --------     -------        --------
Total                       $18,124             $433,541      $56,996         --     $176,502     $34,152        $152,602
                            =======             ========      =======                ========     =======        ========

<CAPTION>
                                        Amortization of       Other
                                        Deferred Policy     Operating    Premiums
Segments                               Acquisition Costs     Expenses     Written
--------                               ------------------   ----------    --------
<S>                                    <C>                   <C>          <C>
Direct Healthcare
  Liability Insurance                    $17,891              $ 2,517      $ 30,584
Assumed Reinsurance (1)                    1,633               14,442       177,619
Other                                         --                   --            --
                                         -------              -------      --------
Total                                    $19,524              $16,959      $208,203
                                         =======              =======      ========
</TABLE>

(1) Assumed reinsurance excludes amounts received under fronting arrangements.

                                       66