<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, 1999          Commission File No. 1-12449

                              SCPIE HOLDINGS INC.
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                                            <C>
                    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)
</TABLE>

      Registrant's telephone number, including area code: (310) 551-5900
<TABLE>
  <S>                                                   <C>
       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)
</TABLE>

          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 13, 2000, was approximately $281,450,490
(based upon the closing sales price of such date, as reported by the Wall Street
Journal).

At March 13, 2000, the Registrant had issued and outstanding an aggregate of
9,901,269 shares of its Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Proxy statement for the Annual Meeting of Stockholders of Registrant to be
held on May 11, 2000 (only portions of which are incorporated by reference).

================================================================================
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

    SCPIE Holdings Inc. is the parent company of a group of insurance and
insurance-related companies conducting business principally in California. It
began operating as an independent publicly held company on January 29, 1997, as
the result of the merger of Southern California Physicians Insurance Exchange
("SCPIE" or the "Exchange") into SCPIE Indemnity Company, a California domiciled
insurance company and subsidiary of the Company ("SCPIE Indemnity"), and the
issuance of 9,994,652 shares of common stock of the Company to approximately
10,400 members of the Exchange in exchange for their membership interests in
SCPIE and 500,000 shares to SCPIE Indemnity (the "Reorganization"). On January
30, 1997, the Company sold an additional 2,300,000 shares in a public offering
of its common stock (the "Offering"). The common stock is listed on the New York
Stock Exchange ("NYSE") under the trading symbol "SKP."

    For purposes of this Form 10-K report, the "Company" refers, at all times
prior to January 29, 1997, the effective date of the Reorganization, to the
Exchange and its subsidiaries, collectively, and at all times on or after such
effective date, to SCPIE Holdings Inc. and its subsidiaries, collectively; the
term "SCPIE Holdings" refers at all times to SCPIE Holdings Inc., excluding its
subsidiaries.

    SCPIE Holdings was organized in February 1996, as a Delaware corporation.
The Company principally engages in conducting the business of its predecessor,
the Exchange, through its subsidiaries. The insurance company subsidiaries of
SCPIE Holdings include SCPIE Indemnity, American Healthcare Indemnity Company
("AHI") and American Healthcare Specialty Insurance Company ("AHSIC"). AHI and
AHSIC were inactive insurance companies acquired by the Company in 1996 to
expand the Company's operations outside California. AHI, domiciled in Delaware,
is licensed to transact insurance in 46 states and the District of Columbia, and
AHSIC, domiciled in Arkansas, is eligible to write policies as an excess and
surplus line insurer in 29 states and the District of Columbia. During 1999,
SCPIE Holdings contributed $2.0 million to the capital and surplus of AHSIC.
During 1997, SCPIE Holdings contributed $25.0 million and $23.0 million to the
capital and surplus of AHI and AHSIC, respectively. The other subsidiaries of
SCPIE Holdings include SCPIE Insurance Services, Inc., a California licensed
insurance agency, and two companies providing management services. The term
"Insurance Subsidiaries" refers to SCPIE Indemnity, AHI and AHSIC.

OVERVIEW

    SCPIE Holdings is one of the nation's leading providers of medical
malpractice insurance based on direct premiums written in 1999. The Company
currently insures more than 14,500 physicians, other healthcare providers and
oral and maxillofacial surgeons 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.

    The Company's total revenues and net income were $191.3 million and $29.9
million, respectively, for the year ended December 31, 1999 and were $210.0
million and $37.0 million, respectively, for the year ended December 31, 1998.
As of December 31, 1999, the Company had $813.2 million of total assets and
$294.7 million of total stockholders' equity.

    Medical malpractice insurance, or medical professional liability insurance,
insures the physician, hospital or other healthcare provider 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"), in 1998, total medical malpractice
premiums in the United States were approximately $6.0 billion. In California,
the second largest market for medical malpractice insurance based on direct
premiums written, approximately $674.0 million of medical malpractice premiums
were written in 1998. The Company's share of the medical malpractice premiums
written in California in 1998 was approximately 17%. The Company's market share
is substantially higher in Southern California where more than 91% of the
Company's California insureds are located.

    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.
<PAGE>

    The Company believes that the growth in managed healthcare and the emergence
of multi-state integrated healthcare providers and delivery systems will lead to
major changes in the medical malpractice insurance industry. Practice management
organizations, hospitals, administrators of large group practices and managed
care organizations have an increasing influence over the purchasing decision for
the medical malpractice insurance coverages of their affiliated physicians. As
the consolidation of healthcare providers continues, the number of physicians
insured through such organizations will increase and the Company believes that
such organizations increasingly will seek well-capitalized medical malpractice
insurers that can provide a full range of products and a high level of service
in each state in which such organizations conduct business.

BUSINESS STRATEGY

    To position the Company to compete and grow its business successfully in the
current environment, the Company has adopted a strategy that includes: (i)
expanding the Company's product offerings, particularly to meet the liability
insurance needs of larger, more diverse healthcare entities; (ii) diversifying
geographically by increasing writings of medical malpractice insurance in states
other than California; (iii) positioning the Company to take advantage of
acquisition and consolidation opportunities relating to medical malpractice
insurance; (iv) maintaining the Company's relationship with its primary
policyholder base of California physician and medical group insureds; and (v)
maintaining sufficient capital to take advantage of future market opportunities
and to retain strong insurance ratings.

    While professional liability insurance for physicians is the principal
product offered by the Company, the Company believes that providing insurance to
hospitals and other healthcare entities continues to represent a significant
area for further growth of its insurance business. As a result, the Company has
undertaken to develop other insurance products necessitated by changes in the
healthcare industry and began writing medical malpractice insurance for
hospitals, directors and officers' liability insurance for healthcare entities,
and errors and omissions coverage for managed care organizations. The Company
presently intends to continue its efforts to develop insurance products designed
to meet the needs of customers in the healthcare market.

    In addition to its direct insurance operations, the Company has written a
modest portfolio of assumed reinsurance business for a number of years.  This
has principally involved small participations in the reinsurance of primary and
excess medical malpractice insurance programs.  In the third quarter of 1999,
the Company formed a Ceded and Assumed Reinsurance Division to materially expand
its reinsurance operations.  The strategic objective of this division is to
create a well-balanced portfolio of carefully underwritten assumed reinsurance
lines in addition to medical malpractice to add diversity to the direct business
of the Company.  The Company expects that a primary source of this business will
be placements from reinsurance brokers and intermediaries.  The Company believes
that this line of business will become an increasingly important aspect of its
operations.

    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 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 Fremont Indemnity
Company (Fremont) and a small midwestern insurance company in 1998 and 1999,
respectively. In 1999, the Company derived approximately 20% of its physician
and medical group premium volume from policies issued outside the state of
California. This expansion is in its initial 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.

    Additionally, the Company actively markets its hospital policies under a
program directly and through regional and local brokers, and must compete with a
number of insurance companies in the underwriting of hospital malpractice
policies.  At December 31, 1999, the Company insured 57 hospitals, of which 37
were located in California.

    Historically, the financial performance of the medical malpractice 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 medical malpractice insurance industry in
California and other states has faced a soft insurance market. The Company
believes that its strategy will position it to expand premium writings

                                       2
<PAGE>

and market share when the market "hardens," that is, when demand coincides more
closely with capacity, and premium rates increase to more appropriate levels.
However, 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.

PRODUCTS

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

<TABLE>
<CAPTION>
                                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------------------------------
                                                               1999                       1998                       1997
                                                          --------------             --------------              --------------
            <S>                                            <C>                       <C>                         <C>
            Physician and medical group
             liability:
             Physician and medical group
                standard professional
                liability.............................        $125,572                $   108,679                    $109,393
             Nonstandard physicians...................           5,617                      1,299                       1,700
             Emergency medicine program...............           2,243                      2,012                       1,589
             Urgent care centers......................             234                        325                         277
                                                              --------                -----------                    --------
                Subtotal medical liability............         133,666                    112,315                     112,959

             Excess personal liability................             694                        701                         756
                                                              --------                -----------                    --------
                Subtotal physician and
                  medical group liability.............         134,360                    113,016                     113,715

           Hospital liability.........................          13,448                     10,432                       8,475
           Healthcare provider liability..............           1,142                        761                         800
           Healthcare facility liability..............           2,199                         --                          --
           Managed care organization errors
             and omissions............................             750                        740                         668

           Directors and officers'
             liability................................             809                        264                         252
                                                              --------                -----------                    --------
             Total....................................        $152,708                   $125,213 (1)                $123,910
                                                              ========                ===========                    ========
</TABLE>

(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 written premiums for 1998 would have been
    approximately $152.0 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

                                       3
<PAGE>

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 following table summarizes the Company's physician and medical group
professional liability direct premiums written for the year ended December 31,
1999:

<TABLE>
<CAPTION>
                                                                        DIRECT
                                                                       PREMIUMS             PERCENTAGE
          GROUP SIZE                                                    WRITTEN              OF TOTAL
          ----------                                                  ----------           ------------
                                                                              (IN THOUSANDS)
          <S>                                                          <C>                  <C>
           Sole practitioner physicians..........................       $ 83,128               62.2%
           Group with less than five physicians..................         21,063               15.8%
           Group with five through eight
           physicians............................................         11,702                8.7%
           Group with nine or more physicians....................         17,773               13.3%
                                                                        --------              -----
               Total.............................................       $133,666              100.0%
                                                                        ========              =====
          </TABLE>

    The Company has written professional liability insurance for oral surgeons
in California for a number of years. Oral surgeons are frequently licensed
physicians. Beginning in 2000, the Company will expand this program to offer
coverage to oral surgeons nationally. The Company will also begin an expanded
program to underwrite dentists in California and Texas.

    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 primary limits of $1.0 million for each
claim or occurrence and excess limits up to $50.0 million with no aggregate
limit. The Company reinsures 90% of the excess limits of coverage.

    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.

    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

                                       4
<PAGE>

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 $252,000 in direct premiums written in 1997,
$264,000 in 1998, and $809,000 in 1999. 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 patients.

    Premium volume for all of the foregoing products has been small, but the
Company considers these products important to its expansion plans.

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 33 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. The Company has one principal brokerage
relationship in California that accounts for the majority of hospitals insured
in that state.

    Six county medical associations and several specialty societies have
endorsed the Company's professional liability program. The Company considers
these endorsements to be helpful in its marketing efforts. The county medical
associations also perform certain limited information verification services for
the Company.

    Effective January 1, 1998, Brown & Brown, formerly Poe & Brown, began
marketing the Company's professional liability policies on an exclusive basis to
individual physicians and medical groups of fewer than 20 physicians.  The
Company retains the right to market groups above this size threshold through
other brokers.  This exclusive marketing arrangement is effective only in
designated states, initially Connecticut, Florida, Georgia and Louisiana.  Since
then, Alabama, Kentucky, Oklahoma and Texas have been added to the Brown & Brown
marketing arrangement.   Brown & Brown is one of the nation's top independent
insurance agency organizations, with an established physician medical
malpractice program offered to customers through a large select network of local
and regional brokers.

                                       5
<PAGE>

UNDERWRITING

    The underwriting department consists of a vice president in charge of
underwriting, three divisional underwriting managers, 15 underwriters and 17
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 follows a strict procedure with respect to the issuance of all
physician professional liability policies. Each applicant or member of an
applicant medical group is required to complete a detailed application that
provides a personal and professional history, the type and nature of the
applicant's professional practice, certain information relating to specific
practice procedures, hospital and professional affiliations and a complete
history of any prior claims and incidents. The application may be forwarded to
the county medical association for verification of educational and professional
information. The Company performs its own independent verification of these
matters and may conduct an investigation to determine if there are any lawsuits
that may not have been disclosed in the application.

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

    The underwriting department submits recommendations for premium surcharges
or non-renewal of physicians to the physicians' underwriting committee of the
Company, which is comprised solely of physicians, many of whom are insureds or
retired insureds of the Company and members of the Board of Directors. Members
of the committee are not employees of the Company, but receive compensation for
their services on the committee. Physicians have the right to seek
reconsideration of surcharges from the committee. The Company has found that
physician interchange with the committee is often helpful in improving the
practice characteristics of the insured.

    The Company makes all underwriting and rating decisions on this and all of
its direct business. Except as set forth below, each hospital is required to
submit an application that provides detailed information on operations,
financial position and risk factors. The Company reviews loss experience for at
least the past five years, prior insurance policies and endorsements, financial
reports and reports from the principal accreditation agencies for the hospital
industry. Risk management surveys are performed as needed to supplement this
information.

    For hospitals that were formerly insured by the Company through its
relationship with a large insurance broker that encountered financial
difficulties, the Company has generally issued its policies utilizing schedules
of coverage, limits, rating factors and other pertinent information supplied to
the Company by the broker.  The Company is now developing its own rating
experience with these insureds and is individually underwriting these policies.

    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. 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'

                                       6
<PAGE>

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 has
instituted no rate increase for 2000. It appears that the Company's competitors
are also foregoing rate increases for the current year, and the current
competitive conditions will continue to persist.

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 and 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 60 employees, including 16
clerical personnel. The Company has 5 unit managers and 4 branch managers
responsible for specific geographic areas, and additional units for specialty
areas such as hospitals, birth injuries and policy 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.

    California has adopted a standard of judicial administration that requires
its trial courts to set goals to dispose of 90% of all cases within 12 months
after filing and 100% of cases within 24 months. The courts in the various
counties in which the Company defends claims have sought to comply with these
"fast-track" standards during the past few years. The effect of this change has
been significant. Before this requirement was implemented, cases in certain
counties did not proceed to trial for many years after filing. The claims
department staff now must make earlier evaluations and reserve estimates,
authorize discovery expenses early in the litigation process and be prepared to
settle the case or proceed to trial within one year.

    The Company emphasizes early evaluation and aggressive management of claims.
Claims department professionals complete a full evaluation and reserving of
claims under "fast-track" within six months of the filing of a claim and on all
other cases within 12 months after filing. The Company has established different
levels of authority within the claims department for approval of reserves and
settlement of claims. The Company has a claims committee comprised solely of
physicians which meets periodically with the vice president in charge of claims
and other claims managers to consider and evaluate cases that have complex
medical issues and subject the Company to large exposures. At December 31, 1999,
the Company had 3,240 open claims.

    The Company vigorously defends its insureds against claims, but seeks to
resolve expediently cases with high exposure potential. The defense of a medical
professional liability claim requires significant cooperation between the
litigation supervisor or claims department manager responsible for the claim and
the insured physician. California law requires that a medical professional
liability claim cannot generally be settled without the consent of the physician
insured. California law further 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 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 the physician's 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.

                                       7
<PAGE>

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 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 at the upper end of a
reasonable range of reserve estimates.

    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,
                                                                                           ----------------------------------
                                                                                            1999          1998         1997
                                                                                           -------      --------     --------
       <S>                                                                                 <C>          <C>          <C>
       Reserves for losses and LAE at beginning
       of year......................................................................       $477,631     $454,971     $459,567
       Less reinsurance recoverables................................................         24,899       21,531       19,266
                                                                                           --------     --------     --------
       Reserves for losses and LAE, net of related
       reinsurance recoverable, at
       beginning of year............................................................        452,732      433,440      440,301
                                                                                           --------     --------     --------
       Reserves from purchase of Fremont
       Indemnity Company............................................................             --       36,972           --
       Provision for losses and LAE for claims
       occurring in the current year, net of
       reinsurance..................................................................        183,959      197,870      176,586
       Decrease in estimated losses and LAE for
       claims occurring in prior years, net of
       reinsurance..................................................................        (61,179)     (65,662)     (53,209)
                                                                                           --------     --------     --------
       Incurred losses during the year, net of
       reinsurance..................................................................        122,780      132,208      123,377
                                                                                           --------     --------     --------
       Deduct losses and LAE payments for
       claims, net of reinsurance, occurring
       during:
         Current year...............................................................         13,742       14,408       11,814
         Prior years................................................................        156,913      135,480      118,424
                                                                                           --------     --------     --------
                                                                                            170,655      149,888      130,238
                                                                                           --------     --------     --------
       Reserve for losses and LAE, net of
       related reinsurance recoverable, at
       end of year..................................................................        404,857      452,732      433,440
       Reinsurance recoverable for losses
       and LAE, at end of year......................................................         45,007       24,899       21,531
                                                                                           --------     --------     --------
       Reserves for losses and LAE, gross
       of reinsurance recoverable, at end
       of year......................................................................       $449,864     $477,631     $454,971
                                                                                           ========     ========     ========
</TABLE>

                                       8
<PAGE>

    In 1999, the Company experienced a number of large paid losses under its
physician and medical group policies that were in excess of the limits of
insurance retained by the Company.  In addition, the Company established
significant reserves for such excess losses for certain claims reported under
its hospital policies.  These payments and reserve increases resulted in the
significant increase in reinsurance recoverable at the end of 1999.

    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 1999 to be $100,000 was first reserved in 1989
at $150,000, the $50,000 redundancy (original estimate minus actual loss) would
be included in the cumulative redundancy in each of the years 1989 through 1998
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.

<TABLE>
<CAPTION>

                                                                       YEAR ENDED DECEMBER 31,
                               ----------------------------------------------------------------------------------------------
                                 1989         1990        1991        1992        1993        1994        1995        1996
                               --------     --------    --------    --------    --------    --------    --------   ----------
<S>                            <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
                                                                            (IN THOUSANDS)
Loss and LAE
  reserves.............        $412,679     $427,049    $439,908    $465,423    $472,129    $449,566    $446,627   $  440,301
Liability reestimated
  as of:
  One year later.......         375,764      401,878     409,966     421,994     411,915     391,733     386,879      387,094
  Two years later......         348,781      368,124     364,105     368,521     363,562     337,441     337,760      301,794
  Three years later...          320,319      324,370     316,220     325,073     315,712     304,063     264,813      259,022
  Four years later.....         294,992      284,628     282,291     292,801     293,711     254,004     236,609
  Five years later.....         266,649      264,582     261,344     274,304     262,879     239,372
  Six years later......         256,900      251,335     252,077     257,864     254,502
  Seven years later...          247,678      245,745     243,216     252,353
  Eight years later ...         244,863      241,533     240,306
  Nine years later.....         242,973      239,883
  Ten years later......         241,836
Cumulative
  redundancy...........         170,843      187,166     199,602     213,070     217,627     210,194     210,018      181,280
Cumulative
  amount of
  liability paid
  through:
  One year later.......          85,771      103,983     101,001     105,678     121,106     109,481     101,844      118,307
  Two years later......         162,264      171,327     171,429     184,883     192,519     170,603     170,932      181,116
  Three years later....         204,129      206,499     205,829     219,649     217,484     202,660     195,265      207,141
  Four years later.....         221,479      221,654     221,884     232,379     231,794     213,431     207,454
  Five years later.....         228,922      230,606     227,692     237,879     237,272     221,409
  Six years later......         234,202      232,410     231,277     240,363     241,904
  Seven years later....         235,274      232,912     232,416     242,698
  Eight years later....         235,362      233,263     233,784
  Nine years later.....         235,621      243,010
  Ten years later......         236,363
Net reserves--
  December 31..........                                                         $472,129    $449,566    $446,627   $  440,301
Reinsurance
  recoverables.........                                                           18,644      19,177      19,560       19,266
                                                                                --------    -------     --------   ----------
Gross reserves.........                                                         $490,773    $468,743    $466,187   $  459,567
                                                                                ========    ========    ========   ==========
</TABLE>
<TABLE>
<CAPTION>
                                 YEAR ENDED DECEMBER 31,
                            --------------------------------
                              1997        1998        1999
                            --------    --------    --------
                                    (IN THOUSANDS)
<S>                         <C>         <C>         <C>
Loss and LAE
  reserves.............     $433,440    $452,732    $404,857
Liability reestimated
  as of:
  One year later.......      339,672     391,553
  Two years later......      283,276
  Three years later...
  Four years later.....
  Five years later.....
  Six years later......
  Seven years later...
  Eight years later ...
  Nine years later.....
  Ten years later......
Cumulative
  redundancy...........      150,165      61,179
Cumulative
  amount of
  liability paid
  through:
  One year later.......      107,748     156,912
  Two years later......      179,016
  Three years later....
  Four years later.....
  Five years later.....
  Six years later......
  Seven years later....
  Eight years later....
  Nine years later.....
  Ten years later......
Net reserves--
  December 31..........     $433,440    $452,732    $404,857
Reinsurance
  recoverables.........       21,531      24,899      45,007
                            --------    --------   ---------
Gross reserves.........     $454,971    $477,631    $449,864
                            ========    ========   =========
</TABLE>

                                       9
<PAGE>

    The Company has historically experienced favorable loss and LAE reserve
development. The Company believes that the favorable loss and LAE reserve
development since 1989 has resulted from four factors: (i) the Company's
conservative approach to establishing reserves for medical malpractice insurance
losses and LAE; (ii) the continuing benefits from the Medical Injury
Compensation Reform Act ("MICRA"), the California tort reform legislation that
was declared constitutional in a series of decisions by the California Supreme
Court in the mid-1980s; (iii) benefits from California legislation requiring
matters in litigation to proceed more expeditiously to trial; and (iv) improved
results from a restructuring of the Company's internal claims process. See "--
Regulation -- Medical Malpractice Tort Reform" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General." The
Company believes, based on its analysis of annual statements filed with state
regulatory authorities, that its principal California competitors have
experienced similar favorable loss and LAE reserve development in past years.

    General liability losses have been less than 1.9% of medical malpractice
losses in the last five years. The Company does not have material reserves for
pollution claims and the Company's claims experience for pollution coverage has
been negligible.

    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.

REINSURANCE

    Reinsurance Ceded. 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 1999, the
Company ceded $13.9 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 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
has 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 $50.0 million.

    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. Through 1999, the Company also reinsured a portion of the
reinstatement premiums under a separate treaty, together with certain other
miscellaneous liability exposures, including retroactive liability for two
insurance layers from several past years and aggregate extension coverage which
provides additional aggregate loss limits for the layer $1.0 million excess of
$1.0 million, each occurrence, for specified years.

    The Company has a separate quota share reinsurance treaty with respect to
its managed care organization errors and omissions policies and any directors
and officers' liability policies it may write. Under the most recent treaty, the
reinsurers bear 50% of all losses and ALAE incurred under these policies. All
losses and LAE incurred greater than $1.0 million but not ceded under the quota
share agreement are subject to ceding under the excess of loss treaties above.

    Reinsurance is placed under reinsurance treaties and agreements with a
number of individual companies and syndicates at Lloyd's of London ("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, 1999. No other single reinsurer's percentage
participation in 1999 exceeded 5% of total reinsurance premiums.

                                       10
<PAGE>

<TABLE>
<CAPTION>

                                                   PREMIUMS CEDED                 PERCENTAGE OF TOTAL
                                                   FOR YEAR ENDED                    REINSURANCE
                                                 DECEMBER 31, 1999    RATING(1)        PREMIUMS
                                                 -----------------    ---------   -------------------
                                                   (IN THOUSANDS)
      <S>                                        <C>                  <C>         <C>
      Hannover Ruckversicherungs..............         $3,960             A+               22%
      Lloyd's of London Syndicates............          6,589             A                36%
      American Re.............................          2,073             A                11%
      CNA International Reinsurance Co........          1,101             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.

    Reinsurance and Excess Liability Insurance Assumed.  The Company assumes a
small amount of reinsurance covering medical professional liability risks
primarily in the United States, and has small participations in other property
and casualty reinsurance syndicates.  The Company has engaged in this assumed
reinsurance business for a number of years.

    In August 1999, the Company formed a Ceded and Assumed Reinsurance Division
to materially expand its reinsurance operations. The strategic objective of this
division is to create a well-balanced portfolio of carefully underwritten
assumed reinsurance lines of insurance other than medical malpractice to add
diversity to the direct business of the Company. A primary source of business
will be placements from reinsurance brokers and intermediaries. The Company
expects that another source will be generated from strategic investments. In
November 1999, the Company purchased approximately 9.5% of the outstanding
common stock of GoshawK Insurance Holdings plc ("GoshawK"). GoshawK is a
publicly traded underwriter at Lloyd's of London. 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.

    The general expansion of the Company into assumed reinsurance is in its
initial state.  The Company cannot predict whether it will develop sufficient
opportunities in this line of business or whether this business will be
profitable.

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 SCPIE Indemnity is Brown Brothers Harriman & Co., and the
investment manager for AHI and AHSIC is Conning & 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.

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                                                    DECEMBER 31, 1999               DECEMBER 31, 1998
                                                                ---------------------------    ---------------------------
                                                                  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............................................          $141,274         $134,090       $237,290        $252,800
   State, municipalities and
    political subdivisions..............................           253,741          247,384        348,161         355,402
   Mortgage-backed securities,
    U.S. Government.....................................            49,800           48,481         68,542          68,938
   Corporate............................................           126,886          118,618         44,881          44,959
   Other................................................                91               91             97              97
                                                                  --------         --------       --------        --------
    Total fixed maturity securities.....................           571,792          549,024        698,971         722,196

 Common stocks............................................          33,428           33,464         31,493          37,015
                                                                   -------          -------       --------        --------

Total.....................................................        $605,220         $582,488       $730,464        $759,211
                                                                  ========         ========       ========        ========
</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  $33.5 million at
December 31, 1999.

    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, 1999:

<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).....................................................         $275,805      $265,603         48.4%
       AA..............................................................          208,676       199,349         36.3
       A...............................................................           70,270        67,925         12.4
       BBB.............................................................            9,763         9,020          1.6
       Non rated(2)....................................................            7,278         7,127          1.3
                                                                                --------      --------        -----
                                                                                $571,792      $549,024        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."

                                       12
<PAGE>

  The following table sets forth certain information concerning the maturities
of fixed maturity securities in the Company's investment portfolio as of
December 31, 1999:

<TABLE>
<CAPTION>
                                                                             AMORTIZED       FAIR       PERCENTAGE OF
                                                                                COST        VALUE         FAIR VALUE
                                                                             ---------     --------     -------------
                                                                                          (IN THOUSANDS)
      Years to maturity:
      <S>                                                                    <C>           <C>          <C>
        One or less...................................................        $  2,731     $  2,735            .4%
        After one through five........................................          90,491       89,289          16.3
        After five through ten........................................         192,626      182,712          33.1
        After ten.....................................................         236,144      225,447          41.1
      Mortgage-backed securities......................................          49,800       48,841           9.1
                                                                              --------     --------         -----
                Totals................................................        $571,792     $549,024         100.0%
                                                                              ========     ========         =====
</TABLE>

    The average weighted maturity of the securities in the Company's fixed
maturity portfolio as of December 31, 1999 was 5.98 years. The average duration
of the Company's fixed maturity portfolio as of December 31, 1999 was 5.1 years.

    The Company also maintains cash and highly liquid short-term investments,
which at December 31, 1999 totaled $72.9 million.

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

<TABLE>
<CAPTION>
                                                                            AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                                            ----------------------------------------
                                                                              1999             1998            1997
                                                                            --------         --------        -------
                                                                                          (IN THOUSANDS)
<S>                                                                         <C>             <C>              <C>
FIXED MATURITY SECURITIES:
Average invested assets (includes short-
  term cash investments)(1).........................                        $689,036         $739,734        $718,239
Net investment income:
  Before income taxes...............................                          36,771           39,654          39,926
  After income taxes................................                          28,557           30,733          30,731
Average annual return on investments:
  Before income taxes...............................                            5.34%            5.36%           5.56%
  After income taxes................................                            4.14%            4.15%           4.28%
Net realized investment gains (losses) after
  income tax........................................                        $   (255)        $  5,804        $  1,909
EQUITY SECURITIES:
Average invested assets(2)..........................                        $ 35,239         $ 30,269        $ 21,750
Net investment income:
  Before income taxes...............................                             927              713             840
  After income taxes................................                             742              564             777
Average annual return on investments:
  Before income taxes...............................                            2.63%            2.36%           3.86%
  After income taxes................................                            2.11%            1.86%           3.57%
Net realized investment gains after
  income tax........................................                        $     63         $  1,430        $  2,382
</TABLE>
____________

(1) Fixed maturity securities at cost.

(2) Equities at market.

                                       13
<PAGE>

COMPETITION

    The physician professional liability insurance market in California is
highly competitive. The Company competes principally with three physician-owned
mutual or reciprocal insurance companies, Norcal Mutual Insurance Company, The
Doctors' Company and Medical Insurance Exchange of California, with several
commercial insurers, including CNA Insurance Companies, and also with a
physicians' mutual protection trust. The physician-owned insurance companies
were organized at approximately the same time as the Company and all of these
companies have expanded their operations in California. Each of these companies
is actively engaged in soliciting insureds in Southern California, the Company's
primary area of operations, and each has offered assessments or premiums at very
competitive rates during the past few years. The Company believes that the
principal competitive factors, in addition to pricing, include dividend policy,
financial stability, breadth and flexibility of coverage and the quality and
level of services provided. In addition, commercial insurance companies such as
Farmers Group, Inc. and MMI Companies, Inc. (MMI) now actively compete for
larger medical groups in the California market, and companies endorsed by
specialty medical societies are also entering the market. St. Paul Companies,
Inc., the largest national medical professional liability insurance company, has
agreed to acquire MMI and may become a more active competitor in the California
market for physicians and medical groups.

    The hospital professional liability insurance market is also extremely
competitive. Most of the Company's principal insurance company competitors for
physicians and medical groups, as well as a hospital industry sponsored captive
insurance company, actively compete in the hospital professional liability
insurance market. The largest writer of malpractice insurance for hospitals in
California is an affiliate of Farmers Group, Inc.  The Company actively markets
its hospital policies through brokers and directly under a new program and
competes not only with Farmers Group, Inc. affiliates but also with MMI,
Executive Risk Inc. and a number of other insurance companies in the
underwriting of hospital malpractice policies.

    The Company expects to encounter similar competition from local doctor-owned
insurance companies and commercial companies in other states as it carries out
its expansion plans. The Company plans to compete in other states principally
through independent agents and brokers, such as its relationship with Brown &
Brown, and by offering superior policyholder services. The Company also intends
to expand its business through business combinations with medical professional
liability insurers.  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.

REGULATION

    General. Insurance companies are regulated by government agencies in states
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.

    Most of the Company's 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.

                                       14
<PAGE>

    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 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.

    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 other states.

    On August 31, 1999, the California Insurance Commissioner approved a special
dividend of $80.0 million from SCPIE Indemnity Company to SCPIE Holdings, which
was distributed on November 9, 1999.  The proceeds from this dividend were used
by the Company to purchase 2,023,973 shares of its common stock at $35 per share
through a procedure referred to as a "Dutch Auction."  Including the special
dividend, total dividends of  $106.0 million were paid to SCPIE Holdings in
1999.  Because of the large amount of these dividends paid to SCPIE Holdings on
November 9, 1999, additional dividends in 2000 in any material amount
effectively may not be paid to SCPIE Holdings, without regulatory approval,
until 12 months after that date.  The Company believes that SCPIE Holdings has
sufficient liquid assets and other resources of cash that no dividends will be
required until after November 9, 2000.

    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, 1999,
each of the Insurance Subsidiaries' RBC 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

                                       15
<PAGE>

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 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. 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.

    The constitutionality of the various provisions of MICRA was judicially
challenged soon after its enactment, and California trial courts and
intermediate appellate courts reached conflicting decisions. The California
Supreme Court, in a series of decisions rendered during 1984 and 1985, upheld
the constitutionality of MICRA. 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. In
1987, the principal proponents and opponents of MICRA signed an agreement under
which the parties agreed to a five-year moratorium on amendments to MICRA,
except for an increase in the limits on plaintiffs' attorneys' fees, which was
enacted at the time of this agreement. This moratorium expired by its terms on
December 31, 1992.  Many legislative changes to MICRA have been introduced since
that time, but 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 after
January 1, 1993. 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 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 county 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.

                                       16
<PAGE>

EMPLOYEES

  As of December 31, 1999, the Company employed 239 persons. None of the
employees is covered by a collective bargaining agreement. The Company believes
that its employee relations are good.

                                       17
<PAGE>

EXECUTIVE OFFICERS

  The Executive Officers of the Company and their ages as of March 13, 2000 are
as follows:

<TABLE>
<CAPTION>
      Name            Age                         Position
----------------      ------     -----------------------------------------
<S>                   <C>        <C>
Donald J. Zuk         63         President, Chief Executive Officer and
                                 Director
Patrick S. Grant      57         Senior Vice President, Marketing
Joseph P. Henkes      50         Secretary and Senior Vice President,
                                 Operations and Actuarial Services
Patrick T. Lo         47         Senior Vice President and Chief Financial
                                 Officer
Timothy C. Rivers     51         Senior Vice President, Ceded and 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 almost five 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.

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

                                       18
<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 medical malpractice
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 medical malpractice 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
medical malpractice 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 medical
malpractice 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., Executive Risk Inc. and MMI
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 1999, 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, but has realized a modest increase in its
premium volume through 1998 and improved its underwriting results. See "Business
- Rates."

    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. See "Business --
Competition."

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. Medical
malpractice 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 medical malpractice 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

                                       19
<PAGE>

emergence of 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 believes it has been conservative in establishing loss and LAE
reserves. In recent years, the Company has revised estimates of loss severity
and determined that certain of its reserves were redundant. Redundant reserves,
which have been released in every year since 1985, contributed significantly to
reported earnings in 1999, 1998 and 1997. The Company reduced reserves for prior
years by $61.2 million, $93.8 million and $53.2 million in the years ending
December 31, 1999, 1998 and 1997, respectively. The redundancies recognized in
1998 were offset, in part, by a $28.1 million increase in the loss and LAE
reserves for the medical malpractice insurance business assumed from Fremont in
January 1998.  The Company cannot predict whether similar redundancies will be
experienced in future years. The Company continues to establish its loss and LAE
reserves at what it believes is the upper end of a reasonable range of reserve
estimates, but there is no assurance that such reserves will ultimately prove to
be redundant. If reserves ultimately prove redundant, then the redundant amount
will become income in the period such amount is released from reserves and will
be included in stockholders' equity. During 1999, the Company experienced some
reduction in the amount of the redundancy and believes additional reductions are
reasonably likely. If such redundancies do not occur or loss and LAE experience
does not improve, the Company's net income could be significantly reduced or a
net loss could occur. To the extent that reserves prove to be inadequate in the
future, the Company would have to increase such reserves and incur a charge to
earnings in the period that such reserves are increased, which could have a
material adverse effect on the Company's results of operations and financial
condition. See "Business - Loss and LAE Reserves."

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
measures has 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.
The Company has also participated in recent years as a reinsurer in the excess
medical professional liability market. 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 states, the largest in terms of premium
volume being Connecticut, Florida and Georgia. Continued expansion of this
relationship with Brown &

                                       20
<PAGE>

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 Fremont and a small midwestern insurance company in 1998 and
1999, respectively. In 1999, the Company derived approximately 20% of its
physician and medical group premium volume from policies issued outside the
state of California. This expansion is in its initial 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.

PHYSICIAN AND MEDICAL ASSOCIATION RELATIONSHIPS

    The Exchange was organized in 1976 by physicians, received the exclusive
endorsement and active support of a number of local county medical associations
in building its physician and medical group policyholder base and, as a
reciprocal insurance company, has been wholly owned and governed by its members.
The Exchange relied on its relationship with physicians and medical associations
in marketing its policies in competition with commercial insurance companies and
other physician-owned companies. The Company will endeavor to maintain its
medical association endorsements and to continue its close relationship with
physicians and medical groups through personalized service. There can be no
assurance that the Company will be able to maintain these relationships. In the
last two years, four county medical associations terminated these endorsements.

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. 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.

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 physician and medical group 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 -- Reinsurance."

    The Company for some years has assumed a small amount of reinsurance
covering medical and professional liability risks and other property and
casualty risks. In August 1999, the Company formed a separate division to
materially expand its assumed reinsurance operations. This general expansion of
the Company into assumed reinsurance is in its initial stage. The Company cannot
predict whether it will develop sufficient opportunities in this line of
business or whether this business will be profitable.

                                       21
<PAGE>

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.

  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

                                       22
<PAGE>

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 -- Regulation of Dividends from Insurance Subsidiaries," "-- Risk-
Based Capital" and "-- Regulation of Investments."

ITEM 2. PROPERTIES

  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.

  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
in March 1999. The Company intends to lease its former headquarters entirely to
third parties. The Company expended $5.2 million for leasehold improvements
through 1999.

  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.

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

                                       23
<PAGE>

originally entered. The Company has 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 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 1999.

                                       24
<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 NYSE 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
          1998
          ----
          <S>                                        <C>              <C>
          First quarter                              31.63            27.31
          Second quarter                             38.38            30.25
          Third quarter                              35.38            28.50
          Fourth quarter                             32.25            27.94

          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 (January 1 - March 13)       36.67            27.50
</TABLE>

  On March 13, 2000, the closing price of the Company's common stock was $29.94.

STOCKHOLDERS OF RECORD

  The approximate number of stockholders of record of the Company's Common Stock
as of March 13, 2000 was 6,368.

DIVIDENDS

  The SCPIE Holdings' Board of Directors (the "Board") paid cash dividends on
its common stock of $.24 per share in 1998 and $0.32 per share in 1999. On
February 15, 2000, the Board declared a $0.10 quarterly dividend payable on
March 31, 1999, to stockholders of record on March 15, 2000. 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 2000 up to approximately $30.6 million. See Note 6 of
the Notes to Consolidated Financial Statements and "Business - Regulation --
Regulation of Dividends from Insurance Subsidiaries."

                                       25
<PAGE>

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

<TABLE>
<CAPTION>
AS OF OR FOR THE YEAR ENDED DECEMBER 31,                       1999         1998         1997         1996         1995
----------------------------------------                    ----------   ----------   ----------   ----------   ----------
<S>                                                         <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA(1):
Net premiums written                                         $153,896     $156,323     $130,642     $126,318     $114,513
                                                             ========     ========     ========     ========     ========
Premiums earned                                              $153,192     $157,976     $133,866     $120,484     $116,354
Net investment income                                          37,697       40,367       42,716       40,769       40,424
Realized investment gains
  and other revenue                                               398       11,618        7,153       12,113        8,231
                                                             --------     --------     --------     --------     --------
    Total revenues                                            191,287      209,961      183,735      173,366      165,009
                                                             --------     --------     --------     --------     --------
Losses and loss adjustment
  expenses                                                    122,780      132,208      123,377      108,797      118,023
Other operating expenses                                       29,310       28,211       17,987       14,276       12,561
                                                             --------     --------     --------     --------     --------
    Total expenses                                            152,090      160,419      141,364      123,073      130,584
                                                             --------     --------     --------     --------     --------
Income before policyholder
  dividends and
  federal income taxes                                         39,197       49,542       42,371       50,293       34,425
Policyholder dividends(2)                                          --           --           --        8,436           --
Federal income taxes                                            9,295       12,566       10,195       11,665       10,056
                                                             --------     --------     --------     --------     --------
  Net income                                                 $ 29,902     $ 36,976     $ 32,176     $ 30,192     $ 24,369
                                                             ========     ========     ========     ========     ========

BALANCE SHEET DATA(1):
Total investments                                            $655,391     $793,616     $785,664     $717,910     $695,021
Total assets                                                  813,192      921,469      888,449      805,155      781,358
Total liabilities                                             518,492      534,951      527,334      516,588      507,539
Total stockholders' equity                                    294,700      386,518      361,115      288,567      273,819

ADDITIONAL DATA(1):
Basic earnings per share of common stock(3)                  $   2.63     $   3.06     $   2.66     $   3.02     $   2.44
Diluted earnings per share of common stock(3)                    2.62         3.06           --           --           --
Dividends per share of common stock                              0.32         0.24         0.20           --           --
Book value per share                                            30.98        32.54        29.41        28.86        27.38
GAAP ratios:
  Loss ratio                                                     80.2%        83.7%        92.2%        90.3%       101.4%
  Expense ratio                                                  19.1%        17.9         13.4         11.8         10.8
  Combined ratio                                                 99.3%       101.6        105.6        102.1        112.2
Statutory capital and surplus                                $265,459     $343,330     $321,289     $251,958     $235,352
</TABLE>

(1) Financial data as of and for the year ended December 31, 1995 are derived
    from the combined financial statements of the company's predecessor,
    Southern California Physicians Insurance Exchange (the Exchange), and an
    affiliated non-profit corporation that was liquidated into the Exchange on
    July 12, 1996. Financial data as of and for the year ended December 31, 1996
    are derived from the consolidated financial statements of the Exchange and
    its subsidiaries. Financial data as of and for the years ended December 31,
    1997, 1998 and 1999 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, 1999 and 1998 are
    computed using the weighted average number of common shares outstanding
    during the year of 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, 1999 and 1998  are computed using the weighted average number
    of common shares outstanding during the year of 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 47.

                                       26
<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 MEDICAL MALPRACTICE INSURANCE INDUSTRY

  Many factors influence the financial results of the medical malpractice
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 medical malpractice 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
medical malpractice 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 medical
malpractice insurance industry in California 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.

CHANGING NATURE OF THE BUSINESS

  The vast majority of the Company's business is 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 by expanding the insurance
products offered by the Company.

  Brown & Brown Relationship.  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 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 Fremont Indemnity
Company (Fremont) and a small midwestern insurance company in 1998 and 1999,
respectively. In 1999, the Company derived approximately 20% of its physician
and medical group premium volume from policies issued outside the state of
California. This expansion is in its initial 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 broker encountered financial difficulties, and the Company now
underwrites its business through a regional broker headquartered in California
and through various brokers in other states. The Company has been unable to
expand its hospital business because of the severe competitive conditions in
this market, and

                                       27
<PAGE>

the loss experience is unfavorable. The Company has recently adopted more
stringent underwriting procedures and guidelines for its hospital policies. The
Company expects little or no improvement in this 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 will expand 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 will
initially reinsure the policies issued and renewed by the other insurance
company, and will issue its own dentist policies as soon as regulatory approvals
are obtained.

  Assumed Reinsurance.  The Company has written a modest portfolio of assumed
  -------------------
reinsurance business for a number of years, which has been profitable. The
Company formed a Ceded and Assumed Reinsurance Division in the third quarter of
1999 to materially expand its reinsurance operations. The strategic objective of
this division is to create a well-balanced portfolio of carefully underwritten
assumed reinsurance lines of insurance other than medical malpractice to add
diversity to the direct business of the company. A primary source of business
will be placements from reinsurance brokers and intermediaries. Another source
will be generated from strategic investments, such as the Company's purchase of
approximately 9.5% of the outstanding common stock of GoshawK Insurance Holdings
plc ("GoshawK") during the fourth quarter of 1999. GoshawK is a publicly held
underwriter at Lloyd's of London. As part of this transaction, the Company
entered into a quota share reinsurance treaty effective January 1, 2000, under
which the Company will assume 7.5% of GoshawK's annual premium. This general
expansion into assumed reinsurance is in its initial stages. There is no
assurance that the Company will be successful in attracting appropriate
reinsurance opportunities or that this business will be profitable.

COMPETITIVE ENVIRONMENT

  The California medical malpractice insurance market for medical groups and
physicians, in which the Company principally operates, has been extremely
competitive for a number of years. The Company's principal competitors are three
physician-owned companies and a physicians' mutual protection trust. In
addition, commercial insurance companies have recently returned to the
California market to insure medical groups and physicians.

  In the late 1980s, many medical malpractice insurance companies began to
experience significantly improved claims cost trends and attempted to attract
medical groups and physicians insured by other companies by reducing premium
rates. Beginning in 1990, the Company implemented annual rate decreases
aggregating more than 25% during the next three years, which resulted in a
significant reduction in premium volume and a deterioration of underwriting
results. Between 1993 and 1999, however, 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 actually experienced a
small decrease in premium volume as a result of its 3.7% rate increase. The
Company has instituted no rate increase for 2000. It appears that the Company's
competitors are also foregoing rate increases for the current year, and the
current competitive conditions will continue to persist.

LOSS AND LAE RESERVES

  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 has
attempted to establish its loss and LAE reserves at the upper end of a
reasonable range of reserve estimates. The Company believes that it has been

                                       28
<PAGE>

particularly difficult to make such estimates for medical malpractice claims in
California because of the uncertain benefits of tort reform measures and more
recently a change in the judicial process.

  The Company believes that a combination of these and other factors have
contributed to the recent redundancies in reserves established for prior years.
The original reserves were established without full knowledge of the effect of
these factors. Redundant reserves, which have been 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 Fremont in January 1998. The Company cannot predict whether similar
redundancies will be experienced in future years. The Company continues to
establish its loss and LAE reserves at what it believes is at the upper end of a
reasonable range of reserve estimates, but there is no assurance that such
reserves will ultimately prove to be redundant. During 1999 the Company
experienced some reduction in the amount of the redundancy and believes
additional reductions are reasonably likely. If such redundancies do not occur
or loss and LAE experience does not improve, the Company's net income could be
significantly reduced or a net loss could occur.

  During 1999, the Company experienced a number of paid losses under its
physician and medical group policies that were in excess of the limits of
insurance retained by the Company and thus borne by its reinsurers. In addition,
the Company established significant reserves for such excess losses for certain
claims reported under its hospital policies. The Company has experienced a
similar period in the past in which a number of excess losses were incurred in a
relatively short period of time. However, if such excess losses continue, the
Company may encounter difficulty in obtaining reinsurance on reasonable terms.

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 17.5% 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, 1998
the Company's fixed maturities were valued at $23.2 million in excess of
amortized cost. At December 31, 1999, the value of the portfolio had declined to
$22.8 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, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998

PREMIUMS EARNED Premiums earned decreased approximately $4.8 million, or 3.0%,
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 the Fremont and Brown & Brown
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

                                       29
<PAGE>

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 for 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 ratio of other
operating expenses to premiums earned is referred to as the expense ratio, which
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.

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. The effective tax rate
decreased to 23.7% in 1999 from 25.4% in 1998, due primarily to lower realized
gains in 1999.

YEAR ENDED DECEMBER 31, 1998, COMPARED TO YEAR ENDED DECEMBER 31, 1997

PREMIUMS EARNED Premiums earned increased approximately $24.1 million, or 18%,
to $158.0 million in 1998 from $133.9 million in 1997. The increase was
principally due to a $30.0 million increase in physician and medical group
medical malpractice insurance premiums to approximately $143.2 million in 1998
compared to $113.2 million in 1997. This increase was a result of the Company's
acquisition of the medical malpractice book of business of Fremont on January 1,
1998, and premiums attributable to an agency relationship with Brown & Brown,
Inc., which commenced on January 1, 1998. Hospital medical malpractice premiums
were approximately $8.8 million in 1998 compared to $14.6 million in 1997. This
decrease in 1998 hospital premiums is due principally to the loss of one large
integrated hospital account in Florida in late 1997. Assumed reinsurance
premiums, other than interim premiums relating to the Fremont and Brown & Brown
arrangements, increased slightly in 1998.

NET INVESTMENT INCOME Net investment income decreased approximately $2.3
million, or 5.5%, to $40.4 million in 1998 from $42.7 million in 1997. Invested
assets increased $7.9 million to $793.6 million in 1998 from $785.7 million at
December 31, 1997. The average pretax yield on the investment portfolio
decreased to 5.2% in 1998 compared to 5.6% in 1997 due to a general decline in
interest rates and a greater proportion of lower-yielding, tax-exempt securities
in the portfolio.

REALIZED INVESTMENT GAINS Realized investment gains were approximately $11.1
million in 1998 compared to $6.6 million in 1997. In December 1998, sales were
made in the fixed-maturity portion of the investment portfolio to reposition the
portfolio by increasing the percentage of corporate securities.

LOSSES AND LAE Losses and LAE increased $8.8 million, or 7.2%, to $132.2 million
in 1998 from $123.4 million in 1997. As a percentage of premiums earned, losses
and LAE decreased to 83.7% in 1998 from 92.2% for the same period in 1997. For
1998, the Company reduced loss and LAE reserves incurred in prior policy years
approximately $93.8 million as compared to a reserve reduction of $53.2 million
for 1997 for claims incurred in prior policy years. The redundancies recognized
in 1998 were offset, in part, by a $28.1 million increase in the loss and LAE
reserves for the medical malpractice insurance business assumed from Fremont in
January 1998.

OTHER OPERATING EXPENSES Other operating expenses increased $10.2 million, or
56.8%, to $28.2 million in 1998 from $18.0 million in 1997. The ratio of other
operating expenses to premiums earned is referred to as the expense ratio, which
increased to 17.9% in 1998 from 13.4% in 1997. This increase is due primarily to
certain one-time charges and the amortization of nonrecurring costs related to
the acquisition of the Fremont business. Additionally, other operating expenses
include higher commission expenses associated with the greater percentage of
business written through brokers in 1998 and general personnel increases
necessary to produce and service the higher 1998 premium volume.

                                       30
<PAGE>

FEDERAL INCOME TAXES Federal income taxes increased $2.4 million, or 23.3%, to
$12.6 million in 1998 from $10.2 million in 1997. The effective tax rate
increased to 25.4% in 1998 from 24.1% in 1997, due primarily to higher realized
gains 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 1999, the Company had negative cash
flow from operations of $9.9 million compared to a positive cash flow of $9.2
million in 1998. The negative cash flow during 1999 was due to unusually high
payments of losses during the second and third quarters of 1999. During that
period, the Company experienced a number of settlements and judgments in
physician medical malpractice insurance claims (and in one hospital malpractice
claim) that were at or near the policy limits involved.

  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 $33.5 million at December 31,
1999. 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. 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 early March 1999. The Company intends to
lease its former headquarters entirely to third parties. The Company expended
$5.2 million for leasehold improvements through December 31,1999.

  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 $72.9
million, or 11.1% of invested assets, at December 31, 1999. 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 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 2000 without prior regulatory approval is approximately $30.6
million.

  On August 31, 1999, the California Insurance Commissioner approved a special
dividend of $80.0 million from SCPIE Indemnity Company to SCPIE Holdings, which
was distributed on November 9, 1999. The proceeds from this dividend were used
by the Company to purchase 2,023,973 shares of its common stock at $35 per share
through a procedure referred to as a "Dutch Auction." Including the special
dividend, total dividends of $106.0 million were paid to SCPIE Holdings in 1999.
Because of the large amount of these dividends paid to SCPIE Holdings on
November 9, 1999, additional dividends in 2000 in any material amount
effectively may not be paid to SCPIE Holdings, without regulatory approval,
until 12 months after that date. The Company believes that SCPIE Holdings has
sufficient liquid assets and other resources of cash that no dividends will be
required until after November 9, 2000.

  Common stock dividends paid to stockholders were $0.32 per share in 1999.
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.

                                       31
<PAGE>

  On May 25, 1999, the company entered into a credit agreement with the 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 $75.0 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, 1999, borrowings under the Credit Agreement
totaled $13.0 million.

  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 1999, the Board of Directors authorized the repurchase of up to
1,000,000 shares of its common stock on the open market. This authorization
replaced the company's prior program that expired in May 1999. Since 1997,
900,100 shares were repurchased under these programs.

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, 1999, comprised 84% of total investments at market value. U.S.
government and tax-exempt bonds represent 70% 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 5% of total investment at market value. The remaining 11% 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, 1999 and
1998, 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 Vale
                                                                        Estimated Fair Vale       At Adjusted
                                                                         at Current Market    Market Rates/Prices
                   (In Thousands)                      Carrying Value      Rates/Prices       as Indicated Below
-----------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>                   <C>
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

December 31, 1998
-----------------
</TABLE>

                                       32
<PAGE>

<TABLE>
<S>                                                    <C>              <C>                   <C>
Interest rate risk*
  Fixed-maturity securities
      available for sale                                     $722,196              $722,196              $662,312

Equity price risk**
  Common stocks                                              $ 37,015              $ 37,015              $ 33,314
</TABLE>

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

  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.

YEAR 2000

  The Year 2000 issue is the result of many computer programs being written
using two digits rather than four digits to define the applicable year. To date,
all of the Company's systems have continued to operate without any disruption
related to the Year 2000. Year 2000 costs incurred were $101,000, $1,018,000 and
$734,000 in 1999, 1998 and 1997, respectively, for a total of $1,853,000. The
Company does not expect to incur any further Year 2000 related costs.

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 41 hereof.


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

  None.

                                       33
<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 to be filed with the SEC in connection with the Annual Meeting of
Stockholders to be held on May 11, 2000 (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."

                                       34
<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 41 of this
                Form 10-K  report.

 (a) (3)  Exhibits:
<TABLE>
<CAPTION>
  NUMBER                                                DOCUMENT
  ------                                                --------
  <C>     <S>
   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 3, 2000, 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
          Registration Statement on Form S-1 (No. 33-4450) and incorporated herein by reference).
</TABLE>

                                       35
<PAGE>
<TABLE>

  NUMBER                                                   DOCUMENT
  ------                                                   --------
   <C>     <S>
   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>
                                       36
<PAGE>
<TABLE>

   NUMBER                                                    DOCUMENT
   ------                                                    --------
   <C>      <S>
   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.
   10.56   Second Casualty Excess of Loss Reinsurance Agreement No. S06000-252 99-01-01 SR with various subscribing
           reinsurers.
   10.57   Casualty Clash Excess of Loss Reinsurance Agreement No. S06000-253 99-01-01 SR with various subscribing
           reinsurers.
   10.58   Casualty Quota Share Reinsurance Agreement No. SCPIE Cas QS 99-01-01 RE Rel with various subscribing reinsurers.
   10.59   First Excess of Loss Reinsurance Treaty No. 8493-00-0007-98-01 with various subscribing reinsurers.
   10.60   Second Excess of Loss Reinsurance Treaty No. 8493-00-0007-98-02 with various subscribing reinsurers.
   10.61   First Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-01 with various subscribing reinsurers.
   10.62   Second Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-02 with various subscribing reinsurers.
   10.63   Third Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-03 with various subscribing reinsurers.
   10.64   Fourth Excess of Loss Reinsurance Treaty No. 8493-00-0001-99-04 with various subscribing reinsurers.
   10.65   Quota Share Reinsurance Treaty No. 8493-00-0005-99-00 with various subscribing reinsurers.
   10.66   Cover Note for First Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-01 with various subscribing
           reinsurers.
   10.67   Cover Note for Second Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-02 with various subscribing
           reinsurers.
   10.68   Cover Note for Third Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-03 with various subscribing
           reinsurers.
   10.69   Cover Note for Fourth Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-04 with various subscribing
           reinsurers.
   10.70   Cover Note for Fifth Excess of Loss Reinsurance Treaty No. 8493-00-0001-00-05 with various subscribing reinsurers.
   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).
</TABLE>

                                       37
<PAGE>
<TABLE>

   NUMBER                                                  DOCUMENT
   ------                                                  --------
   <C>      <S>
   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.
   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.
   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.
   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.
   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.
   27.1    Financial Data Schedule.
</TABLE>
____________

   (b)   Reports on Form 8-K:

None.




                                      38
<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
                                           President and Chief Executive Officer
March 29, 2000

                                      39
<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 dated included.

<TABLE>
<CAPTION>
          SIGNATURE                                           TITLE                               DATE
    <C>                                        <S>                                                <C>
    /s/ DONALD J. ZUK                          President Chief Executive Officer and Director     March 29, 2000
    ---------------------------                         (Principal Executive Officer)
    Donald J. Zuk

    /s/ PATRICK T. LO                            Vice President Chief Financial Officer and       March 29, 2000
    ---------------------------                          Chief Accounting Officer
    Patrick T. Lo                                     (Principal Financial Officer and
                                                       Principal Accounting Officer)

    /s/ MITCHELL S. KARLAN, M.D.                    Chairman of the Board and Director            March 29, 2000
    ---------------------------
    Mitchell S. Karlan, M.D.

    /s/ JACK E. MCCLEARY, M.D.                           Director and Treasurer                   March 29, 2000
    ---------------------------
    Jack E. McCleary, M.D.

    /s/ ALLAN K. BRINEY, M.D.                                  Director                           March 29, 2000
    ---------------------------
    Allan K. Briney, M.D.

    /s/ HENRY GLUCK                                            Director                           March 29, 2000
    ----------------------------
    Henry Gluck

    /s/ WILLIS T. KING, JR.                                    Director                           March 29, 2000
    ----------------------------
    Willis T. King, Jr.

    /s/ CHARLES B. MCELWEE, M.D.                               Director                           March 29, 2000
    ----------------------------
    Charles B. McElwee, M.D.

    /s/ WENDELL L. MOSELY, M.D.                                Director                           March 29, 2000
    ----------------------------
    Wendell L. Mosely, M.D.

    /s/ DONALD P. NEWELL                                       Director                           March 29, 2000
    ----------------------------
    Donald P. Newell

    /s/ HARRIET M. OPFELL, M.D.                                Director                           March 29, 2000
    ----------------------------
    Harriet M. Opfell, M.D.

    /s/ WILLIAM A. RENERT, M.D.                                Director                           March 29, 2000
    ----------------------------
    William A. Renert, M.D.

    /s/ HENRY L. STOUTZ, M.D.                                  Director                           March 29, 2000
    ----------------------------
    Henry L. Stoutz, M.D.

    /s/ REINHOLD A. ULRICH, M.D.                               Director                           March 29, 2000
    ----------------------------
    Reinhold A. Ulrich, M.D.

</TABLE>

                                       40
<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......................................       42
Financial Statements:
  Consolidated Balance Sheets as of December 31, 1999 and 1998......       43
  Consolidated Statements of Income for the years ended
    December 31, 1999, 1998 and 1997................................       44
  Statements of Changes in Stockholders' Equity for the years ended
    December 31, 1999, 1998 and 1997................................       45
  Consolidated Statements of Cash Flows for the years ended
    December 31, 1999, 1998 and 1997................................       46
  Notes to Consolidated Financial Statements........................       47
Schedule II - Condensed Financial Information of Registrant.........       58
</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.

                                      41
<PAGE>

                        Report of Independent Auditors



Shareholders and Board of Directors
SCPIE Holdings Inc.


We have audited the accompanying consolidated balance sheets of SCPIE Holdings
Inc. and subsidiaries as of December 31, 1999 and 1998 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, 1999. Our
audits also included the financial statement schedule listed in the index at
item 14(a).These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule 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, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, 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 21, 2000

                                       42
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

                          Consolidated Balance Sheets
                       (In thousands, except share data)

<TABLE>
<CAPTION>
DECEMBER 31,                                                                     1999                 1998
------------                                                                   --------             --------
<S>                                                                            <C>                  <C>
ASSETS

Securities available for sale (Note 2):
Fixed-maturity investments, at fair value
    (amortized cost: 1999 - $571,792; 1998 - $698,971)                         $549,024             $722,196
  Equity investments, at fair value
    (cost: 1999 - $33,428; 1998 - $31,493)                                       33,464               37,015
                                                                               --------             --------
Total securities available-for-sale                                             582,488              759,211
Short-term investments                                                           72,903               34,405
                                                                               --------             --------
Total investments                                                               655,391              793,616
Cash                                                                              6,858               12,305
Accrued investment income                                                         9,080               11,440
Reinsurance recoverable on unpaid loss and loss adjustment
 expense reserves (Note 4)                                                       45,007               24,899

Deferred federal income taxes (Note 5)                                           25,434               12,163
Costs in excess of net assets acquired                                            6,983                7,811
Property and equipment, net                                                       3,381                2,925
Real estate                                                                      16,485               16,781
Other assets                                                                     44,573               39,529
                                                                               --------             --------
Total assets                                                                   $813,192             $921,469
                                                                               ========             ========
LIABILITIES

Reserves:
  Losses and loss adjustment expenses (Note 3)                                 $449,864             $477,631
  Unearned premiums                                                              25,296               24,591
                                                                               --------             --------
Total reserves                                                                  475,160              502,222
Bank loan payable (Note 8)                                                       13,000                   --
Other liabilities                                                                30,332               32,729
                                                                               --------             --------
Total liabilities                                                               518,492              534,951

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,
  1999 -   9,513,189 shares outstanding
  1998 - 11,878,791 shares outstanding                                                1                    1
Additional paid-in capital                                                       36,386               36,386
Accumulated other comprehensive income (loss)                                   (14,764)              18,685
Retained earnings                                                               370,923              344,587
                                                                               --------             --------
                                                                                392,546              399,659
Treasury stock, at cost
  (1999 - 2,778,902 shares and 1998- 413,300 shares)                            (93,796)             (13,141)
Stock subscription notes receivable                                              (4,050)                  --
                                                                               --------             --------
Total stockholders' equity                                                      294,700              386,518
                                                                               --------             --------

Total liabilities and stockholders' equity                                     $813,192             $921,469
                                                                               ========             ========
</TABLE>

                            See accompanying notes.

                                       43
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                            1999                1998               1997
-------------------------------                                          --------            --------           --------
<S>                                                                      <C>                 <C>                <C>
REVENUES

Premiums earned (Note 4)                                                 $153,192            $157,976           $133,866
Net investment income (Note 2)                                             37,697              40,367             42,716
Realized investment gains (losses) (Note 2)                                  (295)             11,129              6,602
Other revenue                                                                 693                 489                551
                                                                         --------            --------           --------
Total revenues                                                            191,287             209,961            183,735

EXPENSES

Losses and loss adjustment expenses (Note 3)                              122,780             132,208            123,377
Other operating expenses                                                   29,310              28,211             17,987
                                                                         --------            --------           --------
Total expenses                                                            152,090             160,419            141,364
                                                                         --------            --------           --------
Income before federal income taxes                                         39,197              49,542             42,371
Federal income taxes (Note 5)                                               9,295              12,566             10,195
                                                                         --------            --------           --------
Net income                                                               $ 29,902            $ 36,976           $ 32,176
                                                                         ========            ========           ========

Basic earnings per share of common stock (Note 11)                       $   2.63            $   3.06           $   2.66

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

                            See accompanying notes.

                                       44
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

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

<TABLE>
<CAPTION>
                                                                                      STOCK
                                           ADDITIONAL                             SUBSCRIPTION    ACCUMULATED OTHER       TOTAL
                                   COMMON   PAID-IN      RETAINED     TREASURY        NOTES         COMPREHENSIVE     STOCKHOLDERS'
                                   STOCK    CAPITAL      EARNINGS      STOCK       RECEIVABLE          INCOME            EQUITY
                                   ------------------------------------------------------------------------------------------------
<S>                                <C>     <C>           <C>          <C>         <C>             <C>                 <C>
Balance at January 1, 1997         $ --     $    --      $280,788     $     --       $    --          $  7,779          $288,567
  Net income                         --          --        32,176           --            --                --            32,176
  Comprehensive income for
  unrealized gains on securities
  sold, net of reclassification
  adjustments of $4,534 for
  gains included in net income                                                                           6,859             6,859
                                                                                                                        --------
     Comprehensive income                                                                                                 39,035
                                                                                                                        --------

  Issuance of common stock            1      36,386            --           --            --                --            36,387
  Purchase of treasury stock                                              (416)                                             (416)
  Cash dividends                     --          --        (2,458)          --            --                --            (2,458)
                                   ----     -------      --------     --------       -------          --------          --------
Balance at December 31, 1997          1      36,386       310,506         (416)           --            14,638           361,115
  Net income                         --          --        36,976           --            --                --            36,976
  Comprehensive income for
  unrealized gains on securities
  sold, net of reclassification
  adjustments of $1,863 for
  gains included in net income                                                                           4,047             4,047
                                                                                                                        --------
     Comprehensive income                                                                                                 41,023
                                                                                                                        --------

  Purchase of treasury stock         --          --            --      (12,725)           --                --           (12,725)
  Cash dividends                     --          --        (2,895)          --            --                --            (2,895)
                                   ----     -------      --------     --------       -------          --------          --------
Balance at December 31, 1998          1      36,386       344,587      (13,141)           --            18,685           386,518
Net income                           --          --        29,902           --            --                --            29,902
  Comprehensive income for
  unrealized gains (losses) on
  securities sold, net of
  reclassification adjustments of
  $1,985 for losses included in
  net income                         --          --            --           --            --           (33,449)          (33,449)
                                                                                                                        --------
     Comprehensive loss                                                                                                   (3,547)
                                                                                                                        --------

Purchase of treasury stock           --          --            --      (84,705)           --                --           (84,705)
Treasury stock re-issued             --          --            --        4,050        (4,050)               --                --
Cash dividend                        --          --        (3,566)          --            --                --            (3,566)
                                   ----     -------      --------     --------       -------          --------          --------
Balance at December 31, 1999       $  1     $36,386      $370,923     $(93,796)      $(4,050)         $(14,764)         $294,700
                                   ====     =======      ========     ========       =======          ========          ========
</TABLE>

                            See accompanying notes

                                       45
<PAGE>

                     SCPIE Holdings Inc. and Subsidiaries

                     Consolidated Statements of Cash Flows
                                (In thousands)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,                                 1999                1998                1997
-------------------------------                               ---------           ---------           ---------
<S>                                                           <C>                 <C>                 <C>
OPERATING ACTIVITIES

Net income                                                    $  29,902           $  36,976           $  32,176

Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
    Provisions for amortization and depreciation                  4,562               5,061               4,938
    Provision for deferred federal income taxes                   4,739               1,815                 370
    Realized investment (gains) losses                              295             (11,129)             (6,602)
Changes in operating assets and liabilities:
    Accrued investment income                                     2,360                 762              (1,004)
    Unearned premiums                                               705               2,519              (3,225)
    Policyholders' dividends payable                                 --                  --              (7,723)
    Unpaid losses and loss adjustment expenses,
      and reinsurance recoverables                              (47,875)             19,292             (12,950)
    Other assets                                                 (4,215)            (27,232)               (755)
                                                              ---------           ---------           ---------
Net cash provided by (used in) operating activities              (9,870)              9,159               5,804

INVESTING ACTIVITIES

Purchases - fixed maturities                                   (290,369)           (300,916)           (410,381)
Sales - fixed maturities                                        380,415             263,293             335,210
Maturities - fixed maturities                                    29,967              36,501              38,073
Purchases - equities                                            (26,597)            (19,219)             (7,692)
Sales - equities                                                 24,776               6,979              10,312
Change in short-term investments, net                           (38,498)             18,876               4,201
                                                              ---------           ---------           ---------
Net cash provided by (used in) investing activities              79,694               5,514             (30,277)

FINANCING ACTIVITIES

Proceeds from bank loan                                          13,000                  --                  --
Issuance of common stock, net of expenses                            --                  --              36,387
Purchase of  treasury stock                                     (84,705)            (12,725)               (416)
Cash dividends                                                   (3,566)             (2,895)             (2,458)
                                                              ---------           ---------           ---------
Net cash provided by (used in) financing activities             (75,271)            (15,620)             33,513
                                                              ---------           ---------           ---------

Increase (decrease) in cash                                      (5,447)               (947)              9,040

Cash at beginning of year                                        12,305              13,252               4,212
                                                              ---------           ---------           ---------
Cash at end of year                                           $   6,858           $  12,305           $  13,252
                                                              =========           =========           =========
</TABLE>

                            See accompanying notes.

                                       46
<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.

  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
generally accepted accounting principles 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 se-curities 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.

DEFERRED ACQUISITION COSTS

  Deferred acquisition costs are capitalized and amortized as premiums are
earned over the terms of the related policies and are amortized over the
effective period of the related policies.

<TABLE>
<CAPTION>
      (IN THOUSANDS)                               1999            1998             1997
      --------------                             -------         -------         --------
      <S>                                        <C>             <C>             <C>
      Balance at beginning of year               $ 8,051         $   520           $  591
      Costs deferred                              15,237          12,871            2,944
      Costs amortized                             13,221           5,340            3,015
                                                 -------         -------         --------
</TABLE>

                                       47
<PAGE>

<TABLE>
      <S>                                        <C>             <C>             <C>
      Balance at end of year                     $10,067         $ 8,051           $  520
                                                 =======         =======           ======
</TABLE>

  As the Company has expanded its operations in other states during 1998 and
1999 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 adjustment expenses. The reserve for unpaid claims and related
adjustment expenses 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.

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, 1999 and 1998,
was $3.0 million and $2.7 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. The Company intends to lease its former headquarters entirely to third
parties.

INCOME TAXES

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

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.

                                       48
<PAGE>

  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, 1999, approximately 90% of total reinsurance premiums paid were
placed with reinsurance companies with an A.M. Best or Insurance Solvency
International rating of A- or better, including 36% with Lloyd's of London
syndicates, 22% with Hannover Ruickversicherungs, 11% with American Re, and 6%
with CNA. The remaining 25% of reinsurance premiums paid was placed among 18
other reinsurers.

STOCK-BASED COMPENSATION

  The Company grants stock options for a fixed number of shares to employees and
non-employee 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.

SEGMENT INFORMATION

  The Company operates principally in the United States of America and in only
one reportable industry segment, which provides professional liability insurance
for physicians, oral and maxillofacial surgeons, hospitals and other healthcare
providers principally in California.

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, 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
                                           ========      =======      =======    ========


December 31, 1998
Fixed-maturity securities:
  Bonds:
    U.S. Government and Agencies           $237,290      $15,874      $   364    $252,800
    State, municipalities and
      political subdivisions                348,161        8,080          839     355,402
    Mortgage-backed securities,
      U.S. Government                        68,542          602          206      68,938
    Corporate                                44,881          254          176      44,959
    Other                                        97           --           --          97
                                           --------      -------      -------    --------
Total fixed-maturity securities             698,971       24,810        1,585     722,196
Common stocks                                31,493        6,930        1,408      37,015
                                           --------      -------      -------    --------
Total                                      $730,464      $31,740      $ 2,993    $759,211
                                           ========      =======      =======    ========
</TABLE>

                                       49
<PAGE>

  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, 1999, are summarized by stated maturities as
follows:

<TABLE>
<CAPTION>
                                       AMORTIZED                   FAIR
         (IN THOUSANDS)                  COST                      VALUE
         --------------                ----------                ----------
         <S>                           <C>                       <C>
         Years to maturity:
          One or less                  $  2,731                  $  2,735
          After one through              90,491                    89,289
          five
          After five through            192,626                   182,712
          ten
          After ten                     236,144                   225,447
          Mortgage-backed                49,800                    48,841
          securities                   --------                  --------
         Totals                        $571,792                  $549,024
                                       ========                  ========
</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.

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

<TABLE>
<CAPTION>
(IN THOUSANDS)           YEAR ENDED DECEMBER 31,                      1999           1998           1997
------------------------------------------------                  ------------   ------------   ------------
<S>                                                               <C>            <C>            <C>
Fixed-maturity investments                                           $36,715        $39,670        $39,926
Equity investments                                                       590            812            840
Other                                                                  2,758          2,396          4,329
                                                                     -------        -------        -------
Total investment income                                               40,063         42,878         45,095
Investment expenses                                                    2,366          2,511          2,379
                                                                     -------        -------        -------
Net investment income                                                $37,697        $40,367        $42,716
                                                                     =======        =======        =======
</TABLE>

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

<TABLE>
<CAPTION>
(IN THOUSANDS)  YEAR ENDED DECEMBER 31,                                     1999            1998           1997
--------------------------------------                                  -------------   ------------   ------------
<S>                                                                     <C>             <C>            <C>
Fixed-maturity investments:
  Gross realized gains                                                     $6,952         $ 9,060         $4,959
  Gross realized losses                                                     7,340             131          2,022
                                                                           ------         -------         ------
Net realized gains (losses) on fixed-maturity investments                    (388)          8,929          2,937

Equity investments:
  Gross realized gains                                                      6,716           2,506          3,854
  Gross realized losses                                                     6,623             306            189
                                                                           ------         -------         ------
Net realized gains on equity investments                                       93           2,200          3,665
                                                                           ------         -------         ------

Total net realized gains (losses)                                          $ (295)        $11,129         $6,602
                                                                           ======         =======         ======
</TABLE>


  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 2,023,973
shares of its own common stock and to reposition the Company's investment
portfolio.

  The change in the Company's unrealized appreciation (depreciation) on fixed-
maturity securities was $(46.0 million), $7.2 million and $8.5 million for the
years ended December 31, 1999, 1998 and 1997, respectively; the corresponding
amounts for equity securities were $(5.5 million), $(1.0 million) and $2.0
million.

   At December 31, 1999, the Company's investments in fixed-maturity securities
with a fair value of $31.5 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, 1999.

                                       50
<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 1999, 1998 and 1997.

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                 1999              1998              1997
--------------                                            -----------       ------------      ------------
<S>                                                       <C>               <C>               <C>
Reserve for losses and LAE, net of related
  reinsurance recoverable, at beginning of year              $452,732          $433,440          $440,301

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                     183,959           197,870           176,586
Decrease in estimated losses and LAE for claims
  occurring in prior years, net of reinsurance                (61,179)          (65,662)          (53,209)
                                                             --------          --------          --------
Incurred losses during the year, net of reinsurance           122,780           132,208           123,377

Deduct losses and LAE payments for claims,
  net of reinsurance, occurring during:
  Current year                                                 13,742            14,408            11,814
  Prior years                                                 156,913           135,480           118,424
                                                             --------          --------          --------
                                                              170,655           149,888           130,238
Reserve for losses and LAE, net of related
  reinsurance recoverable, at end of year                     404,857           452,732           433,440

Reinsurance recoverable for losses and LAE,
  at end of year                                               45,007            24,899            21,531
                                                             --------          --------          --------
Reserves for losses and LAE, gross of
  reinsurance recoverable, at end of year                    $449,864          $477,631          $454,971
                                                             ========          ========          ========
</TABLE>

  The Company's reserves for unpaid losses and LAE, net of related reinsurance
recoverable, at December 31, 1998, 1997 and 1996, were decreased in the
following year by $61.2 million, $93.8 million, and $53.2 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 - Reinsurance).

  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.

                                      51
<PAGE>

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

<TABLE>
<CAPTION>
                                             1999                    1998                    1997
(IN THOUSANDS)                       ---------------------   ---------------------   ---------------------
YEAR ENDED DECEMBER 31,               WRITTEN     EARNED      WRITTEN     EARNED      WRITTEN     EARNED
-----------------------              ---------   ---------   ---------   ---------   ---------   ---------
<S>                                  <C>         <C>         <C>         <C>         <C>         <C>
Direct                                $152,708    $149,191    $125,213    $124,077    $123,910    $125,289
Assumed                                 15,564      17,932      39,297      42,080      11,673      13,603
Ceded                                   14,376      13,931       8,187       8,181       4,941       5,026
                                      --------    --------    --------    --------    --------    --------
Net premiums                          $153,896    $153,192    $156,323    $157,976    $130,642    $133,866
                                      ========    ========    ========    ========    ========    ========
</TABLE>

  Reinsurance ceded reduced losses and loss adjustment expenses paid by $12.4
million, $2.6 million and $5.4 million in 1999, 1998 and 1997, respectively.
Reinsurance ceded reduced loss and loss adjustment expenses reserves by $45.0
million, $24.9 million and $21.5 million in 1999, 1998 and 1997, 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 has 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. Premiums of $6.3
million and $30.9 million are included in assumed premiums written for 1999 and
1998, respectively. The Company now writes these two programs directly. 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 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, 1999, 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,                  1999       1998       1997
         ---------------------------------------------------          -------   --------   --------
         <S>                                                          <C>       <C>        <C>
         Current                                                       $4,556    $10,751    $ 9,825
         Deferred                                                       4,739      1,815        370
                                                                       ------    -------    -------
         Total                                                         $9,295    $12,566    $10,195
                                                                       ======    =======    =======
</TABLE>

  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,                    1999        1998        1997
        --------------------------------------------------------               ---------   ---------   ---------
        <S>                                                                    <C>         <C>         <C>
        Federal income tax at 35%                                               $13,719     $17,339     $14,830
        Increase (decrease) in taxes resulting from:
          Tax-exempt interest                                                    (4,657)     (4,964)     (4,775)
          Dividends received deduction                                              (84)       (158)       (136)
          Goodwill                                                                  210         210         220
          Other                                                                     107         139          56
                                                                                -------     -------     -------
        Total federal income tax expense                                        $ 9,295     $12,566     $10,195
                                                                                =======     =======     =======
</TABLE>

                                       52
<PAGE>

  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>                                                         DECEMBER 31,
(IN THOUSANDS)            DECEMBER 31,                         1999           1998
---------------------------------------------              ------------   ------------
<S>                                                        <C>            <C>
Deferred tax assets:
  Discounting of loss reserves                                $20,039        $23,107
  Unearned premium                                              1,771          1,721
  Unrealized investment losses                                  7,948             --
  Other                                                         2,484            214
                                                              -------        -------
Total deferred tax assets                                      32,242         25,042

Deferred tax liabilities:
  Deferred policy acquisition costs                             3,523          2,818
  Unrealized investment gains                                      --         10,061
  Other                                                         3,285             --
                                                              -------        -------
Total deferred tax liabilities                                  6,808         12,879
                                                              -------        -------
Net deferred tax assets                                       $25,434        $12,163
                                                              =======        =======
</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 1999, 1998 and 1997 were $8.1 million, $8.7
million and $11.0 million, respectively.

  In July 1997, the Internal Revenue Service (IRS) completed its examination of
the Company's 1993 federal income tax return and issued notices of proposed
adjustment that would have increased the Company's 1993 tax liability. In June
1998, the IRS proposed similar adjustments with respect to the Company's 1994
and 1995 federal income tax returns. All three years (1993 - 1995) were the
subject of a settlement accepted by the IRS as of July 16, 1999, that did not
increase the Company's federal income tax liability.

NOTE 6. STATUTORY ACCOUNTING PRACTICES

  SCPIE Indemnity, AHI and AHSIC are domiciled in California, Delaware and
Arkansas, respectively, and prepare their statutory-basis financial statements
in accordance with accounting practices prescribed or permitted by the
respective insurance departments. Currently, "prescribed" statutory accounting
practices are interspersed throughout the state insurance law and regulations,
the National Association of Insurance Commissioner's (NAIC) Accounting Practices
and Procedures Manual and a variety of other NAIC publications. "Permitted"
statutory accounting practices encompass all accounting practices that are not
prescribed; such practices may differ from state to state, may differ from
company to company within a state, and may change in the future.

  In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification will likely change, to
some extent, prescribed statutory accounting practices and may result in changes
to the accounting practices that the Company's insurance subsidaries use to
prepare their statutory-basis financial statements. Codification will require
adoption by the various states before it becomes the prescribed statutory basis
of accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for each of the Company's
insurance subsidiaries, California, Delaware and Arkansas must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory-basis results to the Insurance Departments. At this
time, it is anticipated that the states of California, Delaware and Arkansas
will adopt Codification. Management believes that the impact of Codification
will not be material to the Company's statutory-basis financial statements.
Policyholders' surplus and net income, as reported to the domiciliary state
insurance department in accordance with its prescribed or permitted statutory
accounting practices, for the insurance subsidiaries are summarized as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)                                 1999            1998            1997
--------------                             -------------   -------------   -------------
<S>                                        <C>             <C>             <C>
Statutory net income for the year            $ 34,021        $ 35,936        $ 32,239
Statutory capital and surplus at
 year end                                     265,459         343,330         321,289
</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 NAIC published guidelines for establishing a reserve for future free tail
policies when the claims-

                                       53
<PAGE>

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 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 reserve as
an unpaid loss. SCPIE Indemnity's statutory surplus would be unaffected if the
California Department of Insurance were to rescind its permission for this
treatment.

  The maximum amount of dividends that may be paid by property/casualty
insurance companies without prior approval of the California Insurance
Commissioner is subject to restrictions relating to statutory surplus and net
income. Due to a special dividend paid during 1999, dividends of $30.6 million
may be distributed from SCPIE Indemnity to SCPIE Holdings after November 9,
2000, without prior approval of the California Insurance Commissioner.

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.
Under the 401(k) plan, the Company presently matches the employee's contribution
up to 6%. The contribution expense for the 401(k) plan was $634,000, $661,000
and $479,000 for the years ended December 31, 1999, 1998 and 1997, 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.

   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.

  The Company also maintains a defined benefit pension plan and a non-qualified
supplemental plan of which the net pension expense consists of the following
components:

<TABLE>
<CAPTION>
                                                                             Qualified Plan          Supplemental Plan
                                                                     ---------------------------------------------------
(IN THOUSANDS)    YEAR ENDED DECEMBER 31,                                1999     1998     1997    1999    1998    1997
-------------------------------------------                             ------   ------   ------   -----   -----   -----
<S>                                                                     <C>      <C>      <C>      <C>     <C>     <C>
Service cost                                                            $ 503    $ 344    $ 323    $ 220   $ 184   $ 139
Interest cost                                                             255      195      161      250     212     164
Actual return on plan assets                                             (254)    (220)    (170)       -       -       -
Amortization of:
  Transition obligation (asset)                                            (4)      (4)      (4)       -       7       7
  Prior service cost                                                       (1)      (1)      (1)      84      84      84
  Actuarial loss                                                            -        -        -       38      26       -
                                                                        -----    -----    -----    -----   -----   -----
Net pension expense                                                     $ 499    $ 314    $ 309    $ 592   $ 513   $ 394
                                                                        =====    =====    =====    =====   =====   =====
</TABLE>

                                       54
<PAGE>

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

<TABLE>
<CAPTION>
                                                                          Qualified Plan       Supplemental Plan
                                                                       -------------------------------------------
(IN THOUSANDS)                   DECEMBER 31,                            1999       1998       1999        1998
-------------------------------------------------------                --------   --------   ---------   ---------
<S>                                                                    <C>        <C>        <C>         <C>
Change in Benefit Obligation
----------------------------
Net benefit obligation at beginning of year                            $ 3,214     $2,501     $ 3,308       2,724
Service cost                                                               503        344         220         184
Interest cost                                                              255        195         250         212
Actuarial (gain) loss                                                     (774)       182        (122)        187
Gross benefits paid                                                        (39)        (8)          -           -
                                                                       -------     ------     -------     -------
Net benefit obligation at end of year                                    3,159      3,214       3,656       3,307
                                                                       -------     ------     -------     -------

Change in Plan Assets
---------------------
Fair value of plan assets at beginning of year                           3,203      2,758           -           -
Actual return on plan assets                                               455        452           -           -
Employer contributions                                                       -          -           -           -
Gross benefits paid                                                        (39)        (8)          -           -
                                                                       -------     ------     -------     -------
Fair value of plan assets at end of year                                 3,619      3,202           -           -
                                                                       -------     ------     -------     -------

Funded status (underfunded)                                                461        (12)     (3,656)     (3,307)
Unrecognized actuarial (gain) loss                                      (1,185)      (209)        365         524
Unrecognized prior service cost                                            (10)       (11)        856         940
Unrecognized net transition                                                (20)       (23)          -           -
                                                                       -------     ------     -------     -------
Accrued pension expense                                                $  (754)    $ (255)    $(2,435)    $(1,843)
                                                                       =======     ======     =======     =======

Amounts recognized in the statement of
 financial position consists of
  Accrued benefit liability                                               (754)      (255)     (2,519)     (2,040)
  Intangible asset                                                           -          -          84         197
                                                                       -------     ------     -------     -------
Accrued pension expense                                                $  (754)    $ (255)    $(2,435)    $(1,843)
                                                                       =======     ======     =======     =======
</TABLE>

<TABLE>
<CAPTION>
                                                                           Qualified Plan         Supplemental Plan
                                                                        --------------------------------------------
DECEMBER 31,                                                            1999    1998    1997    1999    1998    1997
-------------------------------------------------------                 ----    ----    ----    ----    ----    ----
<S>                                                                     <C>     <C>     <C>     <C>     <C>     <C>
Weighted-average assumptions
  Discount rate                                                         7.75%   6.75%   7.00%   7.75%   6.75%   7.00%
  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>

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 allows company borrowings up to $75 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 (6.785% at December 31, 1999) is based upon
fluctuations in the London InterBank Offered Rate (LIBOR).  As of December 31,
1999, $13.0 million of borrowings were outstanding.  The entire amount is
payable March 21, 2000, and may be renewed at the option of the Company.  No
interest was paid during 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 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.

                                       55
<PAGE>

  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 which
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 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 $5.2 million for
leasehold improvements and equipment through December 31, 1999.  Rent expense
for the year ended December 31, 1999 was $2.5 million.

  Future minimum payments under noncancelable operating leases with initial
terms of one year or more consist of the following at December 31, 1999 (in
thousands).

<TABLE>
     <S>                                <C>
     2000                               $ 2,676
     2001                                 2,742
     2002                                 2,723
     2003                                 2,754
     2004                                 2,761
     Thereafter                          12,071
                                        -------
                                        $25,727
                                        =======
</TABLE>

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 non-employee directors of the Company.

  The Company has elected to follow APB No. 25, Accounting for Stock Issued to
Employees (APB 25) and related Interpretations in accounting for its stock-based
compensation. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. FASB 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, 1999, ranged from
$27.73 to $36.50. The weighted average remaining contractual life of those
options is nine years.

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

<TABLE>
<CAPTION>

                                                              1999                                   1998
                                             -----------------------------------------------------------------------------
                                               Number of       Weighted-Average        Number of       Weighted-Average
                                                Options         Exercise Price          Options         Exercise Price
                                             -------------   ---------------------   -------------   ---------------------
<S>                                          <C>             <C>                     <C>             <C>
Options outstanding at beginning of year        256,790             $30.76                    -            $     -
Granted during year                             216,200              29.02              262,590              30.76
Exercised during year                                 -                  -                    -                  -
Forfeited during year                             6,600              29.19                5,800              30.76
                                                -------                                 -------
Options outstanding at end of year              466,390             $29.97              256,790             $30.76
                                                =======                                 =======
</TABLE>

                                       56
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             1999       1998
                                                                                           -------    -------
<S>                                                                                        <C>        <C>
Estimated weighted average of the fair value of options granted                            $  7.40    $ 10.72
Pro forma net income (in 000's)                                                            $28,373    $35,869
Pro forma earnings per share - Basic                                                       $  2.50    $  2.97
                             - Diluted                                                     $  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 5.6%;
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 non-transferable 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)                     1999                 1998                 1997
                                                        -------              -------              -------
<S>                                                     <C>                  <C>                  <C>
Numerator:
   Net income                                           $29,902              $36,976              $32,176

Numerator for:
   Basic earnings per share of common stock             $29,902              $36,976              $32,176
   Diluted earnings per share of common stock           $29,902              $36,976              $32,176

Denominator:
   Denominator for basic earnings per share of
   common stock - weighted-average shares
   outstanding                                           11,384               12,074               12,108

   Effect of dilutive securities:
     Stock options                                           19                   15                  N/A
                                                        -------              -------
     Denominator for diluted earnings per share
     of common stock adjusted - weighted-average
     shares outstanding                                  11,403               12,089                  N/A
                                                        =======              =======

Basic earnings per share of common stock                $  2.63              $  3.06              $  2.66
                                                        =======              =======              =======

Diluted earnings per share of common stock              $  2.62              $  3.06                  N/A
                                                        =======              =======
</TABLE>

NOTE 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

  The unaudited quarterly results of operations for 1999 and 1998 are summarized
as follows:

<TABLE>
<CAPTION>
                                                              1999                                          1998
                                            -----------------------------------------     ----------------------------------------
(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          $41,155    $39,468    $38,992     $34,270     $39,724    $40,026    $38,447    $40,268
Net investment income                         9,476      9,961      9,514       8,746      10,503     10,123      9,768      9,973
Realized investment gains (losses)            6,102        506     (1,325)     (5,578)      2,320      1,741      3,269      3,799
Net income                                   11,592      8,006      6,779       3,525       9,024      8,393      9,412     10,147

Basic earnings per share of common stock    $   .98    $   .69    $   .59     $   .33     $  0.74    $  0.69    $  0.79    $  0.85
Diluted earnings per share of common stock  $   .98    $   .69    $   .58     $   .33     $  0.74    $  0.69    $  0.78    $  0.85
</TABLE>

                                      57
<PAGE>

          Schedule II - Condensed Financial Information of Registrant

                              SCPIE Holdings Inc.
                           Condensed Balance Sheets
                                (In thousands)


<TABLE>
<CAPTION>

DECEMBER 31                                                             1999                      1998
                                                               -----------------------   ----------------------
        <S>                                                    <C>                       <C>
         ASSETS
         Securities available for sale:
         Fixed-maturity investments, at fair value
           (amortized cost: 1998 - $43)                               $     --                 $     43
         Equity investments, at fair value                              23,401                    2,000
         Short-term investments                                          2,724                    1,210
         Investment in subsidiaries                                    281,220                  383,555
                                                                      --------                 --------
         Total investments                                             307,345                  386,808
         Cash                                                              282                       72
         Other                                                             893                      652
                                                                      --------                 --------
         Total assets                                                 $308,520                 $387,532
                                                                      ========                 ========

         LIABILITIES
         Due to affiliates                                            $    640                 $  1,014
         Other                                                             180                       --
         Bank loan payable                                              13,000                       --
                                                                      --------                 --------
         Total liabilities                                              13,820                    1,014


         Stockholders' equity:
          Preferred stock - par value $0.0001,
           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,
           1999 - 9,513,189 shares outstanding
           1998 - 11,878,791 shares outstanding                              1                        1
         Additional paid-in capital                                     36,386                   36,386
         Accumulated other comprehensive income (loss)                 (14,764)                  18,685
         Retained earnings                                             370,923                  344,587
                                                                      --------                 --------
                                                                       392,546                  399,659
         Treasury stock, at cost (1999 - 2,778,902
          shares and 1998 - 413,300 shares)                            (93,796)                 (13,141)

         Stock subscription notes receivable                            (4,050)                      --
                                                                      --------                 --------
         Total stockholders' equity                                    294,700                  386,518
                                                                      --------                 --------
         Total liabilities and stockholders' equity                   $308,520                 $387,532
                                                                      ========                 ========
</TABLE>

                            See accompanying notes.

                                       58
<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                                            1999            1998            1997
------------------                                       -------------   -------------   -------------
         <S>                                             <C>             <C>             <C>
         Dividend from subsidiary                           $106,000         $25,000         $20,000
         Net investment income                                   638             142             804
         Realized investment gains (losses)                   (4,278)              2             (10)
         Other expenses                                       (2,229)         (1,956)         (1,287)
                                                            --------         -------         -------
         Earnings before federal income taxes and
           equity in income (loss) of subsidiaries           100,131          23,188          19,507
         Federal income taxes                                    (22)            (28)            (37)
                                                            --------         -------         -------

         Earnings before equity in income (loss) of
           subsidiaries                                      100,109          23,160          19,470
         Equity in income (loss) of subsidiaries             (70,207)         13,816          12,706
                                                            --------         -------         -------
         Net income (loss)                                  $ 29,902         $36,976         $32,176
                                                            ========         =======         =======
</TABLE>

                                      59
<PAGE>

                       Condensed Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
FOR THE YEAR ENDED                                                                  1999            1998            1997
------------------                                                             -------------    -------------   -------------
         <S>                                                                    <C>             <C>             <C>
         OPERATING ACTIVITIES
         Net income                                                              $ 29,902        $ 36,976        $ 32,176
         Adjustments to reconcile net loss to net cash
          provided by operating activities:
           Realized investment (gains) losses                                       4,278              (2)             10
           Due to affiliates                                                         (374)          1,088             (74)
           Provision for amortization                                                 839             601              --
           Changes in other assets and liabilities                                    (61)            591          (1,345)
           Equity in undistributed (income) loss of subsidiaries                   70,207         (13,816)        (12,706)
                                                                                 --------        --------        --------
         Net cash provided by operating activities                                104,791          25,438          18,061

         INVESTING ACTIVITIES
         Sales - fixed maturities                                                      43           2,965          19,389
         Purchase - securities                                                    (25,839)         (2,000)        (22,881)
         Change in short-term investments                                          (1,514)           (938)           (272)
         Capital contribution to subsidiaries                                      (2,000)        (10,000)        (48,000)
                                                                                 --------        --------        --------
         Cash used in investing activities                                        (29,310)         (9,973)        (51,764)

         FINANCING ACTIVITIES
         Issuance of common stock, net of expenses                                                                 36,387
         Proceeds from bank loan                                                   13,000              --              --
         Purchase of treasury stock                                               (84,705)        (12,725)           (416)
         Cash dividends                                                            (3,566)         (2,895)         (2,458)
                                                                                 --------        --------        --------
         Cash provided by (used in) financing activities                          (75,271)        (15,620)         33,513

         Increase (decrease) in cash                                                  210            (155)           (190)
         Cash at beginning of period                                                   72             227             417
                                                                                 --------        --------        --------
         Cash at end of period                                                   $    282        $     72        $    227
                                                                                 ========        ========        ========
</TABLE>

                            See accompanying notes.

                                       60
<PAGE>

    Schedule II - Condensed Financial Information of Registrant (continued)

                              SCPIE Holdings Inc.
                    Notes to Condensed Financial Statements
                               December 31, 1999


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 $75 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 (6.785% at December 31, 1999) is based upon
fluctuations in the London InterBank Offered Rate (LIBOR).  As of December 31,
1999, $13.0 million of borrowings were outstanding.  The entire amount is
payable March 21, 2000, and may be renewed at the option of the Company.  No
interest was paid during 1999.

                                      61