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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007



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Commission File No. 1-12449

SCPIE HOLDINGS INC.

(Exact name of registrant as specified in its charter)



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

1888 Century Park East, Los Angeles, California 90067

www.scpie.com

(Address of principal
executive offices and internet site)

(310) 551-5900

(Registrants telephone number, including area code)



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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 whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 in the Exchange Act.

Large accelerated filer ̈Accelerated filer  x            Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x

Indicate the number of shares outstanding of each of the issuers
classes of stock, as of the latest practicable date.



|                                           |  |                                                                                                                              
|------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------
|Class                                      |  | Outstanding at May 4, 2007                                                                                                   
|Preferred stock, par value $l.00 per share |  | No shares outstanding                                                                                                        
|                                           | 
|Common stock, par value $0.0001 per share  |  | 10,070,220 shares, including 500,000 shares of Common Stock that have been issued to a wholly owned subsidiary of Registrant.



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

SCPIE HOLDINGS INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)



|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                |  | MARCH 31,2007 |         |   | DECEMBER 31,2006 |  
|                                                                                                                                                                |  | (unaudited)   |         |   |                  |  
|ASSETS                                                                                                                                                          |  |               |         |   |                  |   |         |  
|Securities available-for-sale:                                                                                                                                  |  |               |         |   |                  |   |         |  
|Fixed maturity investments, at fair value (amortized cost 2007 - $386,426; 2006 - $397,553)                                                                     |  | $             | 380,964 |   |                  | $ | 389,954 |  
|Equity investments, at fair value (cost 2007 - $1,656; 2006 - $1,723)                                                                                           |  |               | 1,970   |   |                  |   | 2,034   |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total securities available-for-sale                                                                                                                             |  |               | 382,934 |   |                  |   | 391,988 |  
|Cash and cash equivalents                                                                                                                                       |  |               | 156,623 |   |                  |   | 145,815 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total investments and cash and cash equivalents                                                                                                                 |  |               | 539,557 |   |                  |   | 537,803 |  
|Accrued investment income                                                                                                                                       |  |               | 4,742   |   |                  |   | 5,330   |  
|Premiums receivable                                                                                                                                             |  |               | 64,695  |   |                  |   | 18,697  |  
|Assumed reinsurance receivable                                                                                                                                  |  |               | 18,912  |   |                  |   | 17,089  |  
|Reinsurance recoverable                                                                                                                                         |  |               | 47,367  |   |                  |   | 45,564  |  
|Deferred policy acquisition costs                                                                                                                               |  |               | 10,120  |   |                  |   | 7,351   |  
|Deferred federal income taxes                                                                                                                                   |  |               | 42,064  |   |                  |   | 44,661  |  
|Property and equipment, net                                                                                                                                     |  |               | 1,501   |   |                  |   | 1,733   |  
|Other assets                                                                                                                                                    |  |               | 6,648   |   |                  |   | 7,281   |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                                    |  | $             | 735,606 |   |                  | $ | 685,509 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|                                                                                                                                                                |  |              
|LIABILITIES                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Reserves:                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Losses and loss adjustment expenses                                                                                                                             |  | $             | 406,806 |   |                  | $ | 405,448 |  
|Unearned premiums                                                                                                                                               |  |               | 95,420  |   |                  |   | 41,815  |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total reserves                                                                                                                                                  |  |               | 502,226 |   |                  |   | 447,263 |  
|Amounts held for reinsurance                                                                                                                                    |  |               | 4,502   |   |                  |   | 13,317  |  
|Other liabilities                                                                                                                                               |  |               | 17,225  |   |                  |   | 18,285  |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                               |  |               | 523,953 |   |                  |   | 478,865 |  
|Commitments and contingencies                                                                                                                                   |  |               |         |   |                  |   |         |  
|                                                                                                                                                                |  |              
|STOCKHOLDERS EQUITY                                                                                                                                            |  |               |         |   |                  |   |         |  
|Preferred stock  par value $1.00, 5,000,000 shares authorized, no shares issued or outstanding                                                                 |  |               |         |   |                  |   |         |  
|Common stock, par value $.0001, 30,000,000 shares authorized, 12,792,091 shares issued, 2007  9,557,906 shares outstanding 2006 
9,553,906 shares outstanding |  |               | 1       |   |                  |   | 1       |  
|Additional paid-in capital                                                                                                                                      |  |               | 37,127  |   |                  |   | 37,127  |  
|Retained earnings                                                                                                                                               |  |               | 275,392 |   |                  |   | 271,925 |  
|Treasury stock, at cost 2007  2,734,185 shares and 2006  2,738,185 shares                                                                                     |  |               | (95,081 | ) |                  |   | (95,278 | )
|Subscription notes receivable                                                                                                                                   |  |               | (1,849  | ) |                  |   | (1,849  | )
|Accumulated other comprehensive loss                                                                                                                            |  |               | (3,937  | ) |                  |   | (5,282  | )
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                      |  |               | 211,653 |   |                  |   | 206,644 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                      |  | $             | 735,606 |   |                  | $ | 685,509 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  



See accompanying notes to
Consolidated Financial Statements.



2



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SCPIE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)



|                                                          |  |                             |        |      |   |        |  
|--------------------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------ | -
|                                                          |  | THREE MONTHS ENDEDMARCH 31, |       
|                                                          |  | 2007                        |        | 2006 |  
|Revenues:                                                 |  |                             |        |      |   |        |  
|Net premiums earned                                       |  | $                           | 29,874 |      | $ | 31,630 |  
|Net investment income                                     |  |                             | 5,220  |      |   | 5,013  |  
|Realized investment gains (losses)                        |  |                             | 166    |      |   | (111   | )
|Other revenue                                             |  |                             | 31     |      |   | 53     |  
|                                                          |  |                             |        |      |   |        |  
|Total revenues                                            |  |                             | 35,291 |      |   | 36,585 |  
|                                                          |  |                            
|Expenses:                                                 |  |                             |        |      |   |        |  
|Losses and loss adjustment expenses                       |  |                             | 22,946 |      |   | 25,205 |  
|Underwriting and other operating expenses                 |  |                             | 6,606  |      |   | 7,607  |  
|                                                          |  |                             |        |      |   |        |  
|Total expenses                                            |  |                             | 29,552 |      |   | 32,812 |  
|Income before income taxes                                |  |                             | 5,739  |      |   | 3,773  |  
|Income tax expense                                        |  |                             | 2,045  |      |   | 1,395  |  
|                                                          |  |                             |        |      |   |        |  
|Net income                                                |  | $                           | 3,694  |      | $ | 2,378  |  
|                                                          |  |                             |        |      |   |        |  
|Basic earnings per share                                  |  | $                           | 0.39   |      | $ | 0.25   |  
|Diluted earnings per share                                |  | $                           | 0.38   |      | $ | 0.25   |  
|Cash dividend declared and paid per share of common stock |  | $                           |       |      | $ |       |  

See accompanying notes to Consolidated Financial Statements.



3



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CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

(DOLLARS IN THOUSANDS)

(UNAUDITED)



|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - | -------------------------- | - | ----------------- |  | - | -------------- | - |  | ---------------------------------- | ------- | - | -------------------------------------------- | - | ------ | -------------------------- |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                                                    |  | COMMON STOCK |   | ADDITIONAL PAID-IN CAPITAL |   | RETAINED EARNINGS |  |   | TREASURY STOCK |   |  | STOCK SUBSCRIPTION NOTESRECEIVABLE |         |   | ACCUMULATEDOTHER COMPREHENSIVE INCOME
(LOSS) |   |        | TOTAL STOCKHOLDERS EQUITY | 
|BALANCE AT JANUARY 1, 2007                                                                                                                                          |  | $            | 1 |                            | $ | 37,127            |  | $ | 271,925        |   |  | $                                  | (95,278 | ) |                                              | $ | (1,849 | )                          |  | $ | (5,282 | ) |  | $ | 206,644 |  
|Adoption of accounting principal, net of applicable income tax benefit of $123                                                                                      |  |              |  |                            |   |                  |  |   | (227           | ) |  |                                    |        |   |                                              |   |       |                            |  |   |       |   |  |   | (227    | )
|Net income                                                                                                                                                          |  |              |  |                            |   |                  |  |   | 3,694          |   |  |                                    |        |   |                                              |   |       |                            |  |   |       |   |  |   | 3,694   |  
|Unrealized losses on securities, net of reclassification adjustments of $-0- for gains included in net appreciation, net of applicable income
tax expense of $749   |  |              |  |                            |   |                  |  |   |               |   |  |                                    |        |   |                                              |   |       |                            |  |   | 1,391  |   |  |   | 1,391   |  
|Amortization of pension benefit amounts, net of applicable income tax benefit of $24                                                                                |  |              |  |                            |   |                  |  |   |               |   |  |                                    |        |   |                                              |   |       |                            |  |   | (46    | ) |  |   | (46     | )
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|Comprehensive Income                                                                                                                                                |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   | 5,039   |  
|Treasury stock reissued                                                                                                                                             |  |              |  |                            |   |                  |  |   |               |   |  |                                    | 197     |   |                                              |   |       |                            |  |   |       |   |  |   | 197     |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|BALANCE AT MARCH 31, 2007                                                                                                                                           |  | $            | 1 |                            | $ | 37,127            |  | $ | 275,392        |   |  | $                                  | (95,081 | ) |                                              | $ | (1,849 | )                          |  | $ | (3,937 | ) |  | $ | 211,653 |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|                                                                                                                                                                    |  |              |   |                            |   |                   | 
|                                                                                                                                                                    |  | COMMON STOCK |   | ADDITIONAL PAID-IN CAPITAL |   | RETAINED EARNINGS |  |   | TREASURY STOCK |   |  | STOCK SUBSCRIPTION NOTESRECEIVABLE |         |   | ACCUMULATEDOTHER COMPREHENSIVE INCOME
(LOSS) |   |        | TOTAL STOCKHOLDERS EQUITY | 
|BALANCE AT JANUARY 1, 2006                                                                                                                                          |  | $            | 1 |                            | $ | 37,127            |  | $ | 259,645        |   |  | $                                  | (97,063 | ) |                                              | $ | (2,649 | )                          |  | $ | (6,268 | ) |  | $ | 190,793 |  
|Net income                                                                                                                                                          |  |              |  |                            |   |                  |  |   | 2,378          |   |  |                                    |        |   |                                              |   |       |                            |  |   |       |   |  |   | 2,378   |  
|Unrealized losses on securities, net of reclassification adjustments of $-0- for gains included in net appreciation, net of applicable income
tax benefit of $1,868 |  |              |  |                            |   |                  |  |   |               |   |  |                                    |        |   |                                              |   |       |                            |  |   | (3,471 | ) |  |   | (3,471  | )
|Amortization of pension benefit amounts, net of applicable income tax benefit of $24                                                                                |  |              |  |                            |   |                  |  |   |               |   |  |                                    |        |   |                                              |   |       |                            |  |   | (68    | ) |  |   | (68     | )
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|Comprehensive Loss                                                                                                                                                  |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   | (1,161  | )
|Stock subscription notes repaid                                                                                                                                     |  |              |  |                            |   |                  |  |   |               |   |  |                                    |        |   |                                              |   | (6     | )                          |  |   |       |   |  |   | (6      | )
|Treasury stock reissued                                                                                                                                             |  |              |  |                            |   |                  |  |   |               |   |  |                                    | 747     |   |                                              |   |       |                            |  |   |       |   |  |   | 747     |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|BALANCE AT MARCH 31, 2006                                                                                                                                           |  | $            | 1 |                            | $ | 37,127            |  | $ | 262,023        |   |  | $                                  | (96,316 | ) |                                              | $ | (2,655 | )                          |  | $ | (9,807 | ) |  | $ | 190,373 |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |   |                |   |  |                                    |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  

See accompanying notes to Consolidated Financial Statements.



4



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SCPIE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

(UNAUDITED)



|                                                                                       |  |                             |         |   |      |   |         |  
|-------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                       |  | THREE MONTHS ENDEDMARCH 31, |        
|                                                                                       |  | 2007                        |         |   | 2006 |  
|OPERATING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Net income                                                                             |  | $                           | 3,694   |   |      | $ | 2,378   |  
|Adjustments to reconcile net income to net cash provided/used in operating activities: |  |                             |         |   |      |   |         |  
|Provisions for amortization and depreciation                                           |  |                             | 1,070   |   |      |   | 1,369   |  
|Provision for deferred federal income taxes                                            |  |                             | 2,045   |   |      |   | 1,395   |  
|Realized investment (gains) losses                                                     |  |                             | (166    | ) |      |   | 111     |  
|Changes in operating assets and liabilities:                                           |  |                             |         |   |      |   |         |  
|Deferred acquisition costs                                                             |  |                             | (2,769  | ) |      |   | (2,816  | )
|Accrued investment income                                                              |  |                             | 588     |   |      |   | 293     |  
|Unearned premiums                                                                      |  |                             | 53,605  |   |      |   | 57,493  |  
|Loss and loss adjustment expense reserves                                              |  |                             | 1,358   |   |      |   | 49      |  
|Reinsurance recoverable                                                                |  |                             | (1,803  | ) |      |   | 568     |  
|Amounts held for reinsurance                                                           |  |                             | (8,815  | ) |      |   | (2,379  | )
|Other liabilities                                                                      |  |                             | (1,060  | ) |      |   | (536    | )
|Premium receivable                                                                     |  |                             | (47,821 | ) |      |   | (52,116 | )
|Other assets                                                                           |  |                             | 443     |   |      |   | (95     | )
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                              |  |                             | 369     |   |      |   | 5,714   |  
|                                                                                       |  |                            
|INVESTING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Purchasesfixed maturities                                                             |  |                             |        |   |      |   | (7,292  | )
|Salesfixed maturities                                                                 |  |                             |        |   |      |   | 8,129   |  
|Maturitiesfixed maturities                                                            |  |                             | 10,251  |   |      |   |        |  
|Purchase of furniture and equipment, net                                               |  |                             | (9      | ) |      |   | (37     | )
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by investing activities                                              |  |                             | 10,242  |   |      |   | 800     |  
|                                                                                       |  |                            
|FINANCING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Issuance of treasury stock, net and repayment of stock subscription notes              |  |                             | 197     |   |      |   | 741     |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by in financing activities                                           |  |                             | 197     |   |      |   | 741     |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Increase in cash and cash equivalents                                                  |  |                             | 10,808  |   |      |   | 7,255   |  
|Cash and cash equivalents at beginning of period                                       |  |                             | 145,815 |   |      |   | 68,783  |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                             |  | $                           | 156,623 |   |      | $ | 76,038  |  
|                                                                                       |  |                             |         |   |      |   |         |  

See accompanying notes to Consolidated Financial Statements.



5



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SCPIE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

MARCH 31, 2007



|1. | BASIS OF PRESENTATION
|-- | ---------------------

The accompanying unaudited consolidated financial
statements include the accounts and operations, after intercompany eliminations, of SCPIE Holdings Inc. (SCPIE Holdings) and its direct and indirect wholly-owned subsidiaries, principally SCPIE Indemnity Company (SCPIE Indemnity), American
Healthcare Indemnity Company (AHI), American Healthcare Specialty Insurance Company (AHSIC), SCPIE Underwriting Limited (SUL) and SCPIE Management Company (SMC), collectively, the Company.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the
instructions to Form 10-Q and Article 7 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2007. For further information, refer to the consolidated financial statements and notes thereto included in the SCPIE Holdings Annual Report on Form 10-K/A for the year ended December 31, 2006.

Certain 2006 amounts have been reclassified to conform to the 2007 presentation.



|2. | EARNINGS PER SHARE
|-- | ------------------

The following table sets forth the computation of
basic and diluted earnings per share:



|                                                                                                          |  |                                      |       |      |   |      
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | ---- | - | -----
|                                                                                                          |  | THREE MONTHS ENDEDMARCH 31,         
|                                                                                                          |  | 2007                                 |       | 2006
|                                                                                                          |  | (IN
THOUSANDS,EXCEPT PER SHARE DATA)
|Numerator                                                                                                 |  |                                      |       |      |   |      
|Net income                                                                                                |  | $                                    | 3,694 |      | $ | 2,378
|                                                                                                          |  |                                     
|Numerator for:                                                                                            |  |                                      |       |      |   |      
|Basic earnings per share of common stock                                                                  |  |                                      | 3,694 |      |   | 2,378
|Diluted earnings per share of common stock                                                                |  |                                      | 3,694 |      |   | 2,378
|Denominator                                                                                               |  |                                      |       |      |   |      
|Denominator for basic earnings per share of common stock  weighted-average shares outstanding            |  |                                      | 9,556 |      |   | 9,518
|                                                                                                          |  |                                     
|Effect of dilutive securities:                                                                            |  |                                      |       |      |   |      
|Stock options                                                                                             |  |                                      | 117   |      |   | 120  
|                                                                                                          |  |                                      |       |      |   |      
|Denominator for diluted earnings per share of common stock adjusted  weighted-average shares outstanding |  |                                      | 9,673 |      |   | 9,638
|Basic earnings per share of common stock                                                                  |  | $                                    | 0.39  |      | $ | 0.25 
|Diluted earnings per share of common stock                                                                |  | $                                    | 0.38  |      | $ | 0.25 



6



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|3. | INVESTMENTS
|-- | -----------

The Companys investments in available-for-sale
securities at March 31, 2007 and December 31, 2006 are summarized as follows:



|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|-------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | --------- | ----- |  | - | -------
|                                 |  | COST ORAMORTIZEDCOST |         | GROSSUNREALIZEDGAINS |   | GROSSUNREALIZEDLOSSES |  | FAIRVALUE
|                                 |  | (IN THOUSANDS)      
|March 31, 2007                   |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Fixed-maturity securities:       |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Bonds:                           |  |                      |         |                      |   |                       |  |           |       |  |   |        
|U.S. government and agencies     |  | $                    | 175,843 |                      | $ | 307                   |  | $         | 2,102 |  | $ | 174,048
|Mortgage-backed and asset-backed |  |                      | 63,023  |                      |   | 49                    |  |           | 651   |  |   | 62,421 
|Corporate                        |  |                      | 147,560 |                      |   | 123                   |  |           | 3,188 |  |   | 144,495
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Total fixed-maturity securities  |  |                      | 386,426 |                      |   | 479                   |  |           | 5,941 |  |   | 380,964
|Common stocks                    |  |                      | 1,656   |                      |   | 314                   |  |           |      |  |   | 1,970  
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Total                            |  | $                    | 388,082 |                      | $ | 793                   |  | $         | 5,941 |  | $ | 382,934
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        



|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|-------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | --------- | ----- |  | - | -------
|                                 |  | COST ORAMORTIZEDCOST |         | GROSSUNREALIZEDGAINS |   | GROSSUNREALIZEDLOSSES |  | FAIRVALUE
|                                 |  | (IN THOUSANDS)      
|December 31, 2006                |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Fixed-maturity securities:       |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Bonds:                           |  |                      |         |                      |   |                       |  |           |       |  |   |        
|U.S. government and agencies     |  | $                    | 176,032 |                      | $ | 224                   |  | $         | 2,936 |  | $ | 173,320
|Mortgage-backed and asset-backed |  |                      | 69,963  |                      |   | 40                    |  |           | 1,028 |  |   | 68,975 
|Corporate                        |  |                      | 151,558 |                      |   | 83                    |  |           | 3,982 |  |   | 147,659
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Total fixed-maturity securities  |  |                      | 397,553 |                      |   | 347                   |  |           | 7,946 |  |   | 389,954
|Common stocks                    |  |                      | 1,723   |                      |   | 311                   |  |           |      |  |   | 2,034  
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        
|Total                            |  | $                    | 399,276 |                      | $ | 658                   |  | $         | 7,946 |  | $ | 391,988
|                                 |  |                      |         |                      |   |                       |  |           |       |  |   |        

The Company held 104 investment positions with unrealized losses as of March 31, 2007. All of the investments
are investment grade and the unrealized losses are primarily due to interest rate fluctuations. The Company held 101 securities that were in an unrealized loss position for 12 months or more at March 31, 2007.



|                                 |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        
|-------------------------------- |  | --------------------- | --- | ----------------- | - | --------------------- |  | --------- | ----- | --------------------- | - | --------- |  | - | ----- |  | - | -------
|                                 |  | LESS THAN 12 MONTHS   |     | 12 MONTHS OR MORE |   | TOTAL                
|                                 |  | GROSSUNREALIZEDLOSSES |     | FAIRVALUE         |   | GROSSUNREALIZEDLOSSES |  | FAIRVALUE |       | GROSSUNREALIZEDLOSSES |   | FAIRVALUE
|                                 |  | (IN THOUSANDS)       
|March 31, 2007                   |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        
|Fixed-maturity securities:       |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        
|Bonds:                           |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        
|U.S. government and agencies     |  | $                     | 111 |                   | $ | 25,256                |  | $         | 1,991 |                       | $ | 128,086   |  | $ | 2,102 |  | $ | 153,342
|Mortgage-backed and asset-backed |  |                       | 19  |                   |   | 5,750                 |  |           | 632   |                       |   | 53,401    |  |   | 651   |  |   | 59,151 
|Corporate                        |  |                       | 2   |                   |   | 553                   |  |           | 3,186 |                       |   | 132,414   |  |   | 3,188 |  |   | 132,967
|                                 |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        
|Total fixed maturity securities  |  | $                     | 132 |                   | $ | 31,559                |  | $         | 5,809 |                       | $ | 313,901   |  | $ | 5,941 |  | $ | 345,460
|                                 |  |                       |     |                   |   |                       |  |           |       |                       |   |           |  |   |       |  |   |        



7



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The Company has the ability and intent to hold securities with unrealized losses until they recover their value. In the
future, information may come to light or circumstances may change that would cause the Company to write-down or sell these securities and incur a realized loss.



|4. | FEDERAL INCOME TAXES
|-- | --------------------

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



|                                  |  |                             |       |      |   |      
|--------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                  |  | THREE MONTHS ENDEDMARCH 31,
|                                  |  | 2007                        |       | 2006
|                                  |  | (IN THOUSANDS)             
|Federal income tax expense at 35% |  | $                           | 2,009 |      | $ | 1,320
|Increase in taxes resulting from: |  |                             |       |      |   |      
|Other                             |  |                             | 36    |      |   | 75   
|                                  |  |                             |       |      |   |      
|Total income tax expense          |  | $                           | 2,045 |      | $ | 1,395
|                                  |  |                             |       |      |   |      



|5. | COMPREHENSIVE INCOME (LOSS)
|-- | ---------------------------

The following table reconciles net loss and
comprehensive income (loss) for the periods presented:



|                                                                |  |                             |       |   |      |   |        |  
|--------------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ------ | -
|                                                                |  | THREE MONTHS ENDEDMARCH 31, |      
|                                                                |  | 2007                        |       |   | 2006 |  
|                                                                |  | (IN THOUSANDS)              |      
|Net income                                                      |  | $                           | 3,694 |   |      | $ | 2,378  |  
|Other comprehensive income (loss) before tax:                   |  |                             |       |   |      |   |        |  
|Unrealized gains (losses) on securities                         |  |                             | 2,140 |   |      |   | (5,339 | )
|Amortization of pension benefit amounts                         |  |                             | (70   | ) |      |   | (105   | )
|                                                                |  |                             |       |   |      |   |        |  
|Other comprehensive income (loss) before tax                    |  |                             | 5,764 |   |      |   | (3,066 | )
|Income tax expense (benefit) related to securities              |  |                             | 749   |   |      |   | (1,868 | )
|Income tax expense (benefit) related to pension benefit amounts |  |                             | (24   | ) |      |   | (37    | )
|                                                                |  |                             |       |   |      |   |        |  
|Comprehensive income (loss)                                     |  | $                           | 5,039 |   |      | $ | (1,161 | )
|                                                                |  |                             |       |   |      |   |        |  



|6. | BUSINESS SEGMENTS
|-- | -----------------

The Company classifies its business into two segments:
Direct Healthcare Liability Insurance and Assumed Reinsurance. Segments are designated based on the types of products provided and based on the risks associated with the products. Direct healthcare liability insurance represents professional
liability insurance for physicians, oral and maxillofacial surgeons and dentists, healthcare facilities and other healthcare providers. Assumed reinsurance represents the book of assumed worldwide reinsurance of professional, commercial and personal
liability coverages, commercial and residential property risks and accident and health, workers compensation and marine coverages. Other includes items not directly related to the operating segments such as net investment income, realized
investment gains and losses, and other revenue. In December 2002, the Company entered into a 100% quota share reinsurance agreement with Rosemont Reinsurance Ltd. (Rosemont Re) (formerly known as GoshawK Re), a subsidiary of GoshawK Insurance
Holdings plc, a publicly held London-based insurer and reinsurer, that divested substantially all of the Companys ongoing assumed reinsurance operations.



8



---

The following tables present information about reportable segment income (loss) and segment assets as of and for the
periods indicated (dollars in thousands):



|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|----------------------------------------- |  | ------------------------------------ | ------ | ------------------ | - | ------ | ----- |  | ----- | ------- |  | - | -------
|THREE MONTHS ENDED MARCH 31, 2007         |  | DIRECT HEALTHCARE LIABILITYINSURANCE |        | ASSUMEDREINSURANCE |   |        | OTHER |  | TOTAL
|Premiums written                          |  | $                                    | 83,779 |                    | $ | (301   | )     |  |       |         |  | $ | 83,478 
|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|Premiums earned                           |  | $                                    | 30,175 |                    | $ | (301   | )     |  |       |         |  | $ | 29,874 
|Net investment income                     |  |                                      |       |                    |   |       |       |  | $     | 5,220   |  |   | 5,220  
|Realized investment gains                 |  |                                      |       |                    |   |       |       |  |       | 166     |  |   | 166    
|Other revenue                             |  |                                      |       |                    |   |       |       |  |       | 31      |  |   | 31     
|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|Total revenues                            |  |                                      | 30,175 |                    |   | (301   | )     |  |       | 5,417   |  |   | 35,291 
|Losses and loss adjustment expenses       |  |                                      | 21,266 |                    |   | 1,680  |       |  |       |        |  |   | 22,946 
|Other operating expenses                  |  |                                      | 6,699  |                    |   | (93    | )     |  |       |        |  |   | 6,606  
|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|Total expenses                            |  |                                      | 27,965 |                    |   | 1,587  |       |  |       |        |  |   | 29,552 
|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|Segment income (loss) before income taxes |  | $                                    | 2,210  |                    | $ | (1,888 | )     |  | $     | 5,417   |  | $ | 5,739  
|                                          |  |                                      |        |                    |   |        |       |  |       |         |  |   |        
|Segment assets                            |  | $                                    | 75,941 |                    | $ | 65,153 |       |  | $     | 594,512 |  | $ | 735,606



|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------------------ | ------- | ------------------ | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|THREE MONTHS ENDED MARCH 31, 2006         |  | DIRECT HEALTHCARE LIABILITYINSURANCE |         | ASSUMEDREINSURANCE |   |        | OTHER |  |   | TOTAL   |  
|Premiums written                          |  | $                                    | 88,626  |                    | $ | 497    |       |  |   |         |   |  | $ | 89,123  |  
|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|Premiums earned                           |  | $                                    | 31,132  |                    | $ | 498    |       |  |   |         |   |  | $ | 31,630  |  
|Net investment income                     |  |                                      |        |                    |   |       |       |  | $ | 5,013   |   |  |   | 5,013   |  
|Realized investment loss                  |  |                                      |        |                    |   |       |       |  |   | (111    | ) |  |   | (111    | )
|Other revenue                             |  |                                      |        |                    |   |       |       |  |   | 53      |   |  |   | 53      |  
|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|Total revenues                            |  |                                      | 31,132  |                    |   | 498    |       |  |   | 4,955   |   |  |   | 36,585  |  
|Losses and loss adjustment expenses       |  |                                      | 22,105  |                    |   | 3,100  |       |  |   |        |   |  |   | 25,205  |  
|Other operating expenses                  |  |                                      | 6,896   |                    |   | 154    |       |  |   | 557     |   |  |   | 7,607   |  
|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|Total expenses                            |  |                                      | 29,001  |                    |   | 3,254  |       |  |   | 557     |   |  |   | 32,812  |  
|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|Segment income (loss) before income taxes |  | $                                    | 2,131   |                    | $ | (2,756 | )     |  | $ | 4,398   |   |  | $ | 3,773   |  
|                                          |  |                                      |         |                    |   |        |       |  |   |         |   |  |   |         |  
|Segment assets                            |  | $                                    | 101,511 |                    | $ | 41,597 |       |  | $ | 598,063 |   |  | $ | 741,171 |  

Premiums written represents the premiums charged on policies issued during a fiscal period. Premiums earned
represents the portion of premiums written that is recognized as income in the financial statements for the periods presented and earned on a pro-rata basis over the term of the policies.



|7. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

The Company is named as a 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.



9



---

Highlands Insurance Group Contingent Liability

The Company is obligated to assume certain policy obligations of Highlands Insurance Company (Highlands) in the event Highlands is declared insolvent by a court of
competent jurisdiction and is unable to pay these obligations. The coverages principally involve workers compensation, commercial automobile and general liability. Highlands currently is under the jurisdiction of the Texas District Court which
appointed the Texas Insurance Commissioner as a permanent Receiver of Highlands in November 2003. The Receiver, through a Special Deputy Receiver (SDR) continues to resolve Highlands claim liabilities and otherwise conduct its business
as part of his efforts to rehabilitate Highlands. At March 31, 2007, Highlands had established case loss reserves of $3.5 million, net of reinsurance, for the subject policies. Based on a limited review of the exposures remaining, the Company
estimates that incurred but not reported (IBNR) losses are $2.7 million, for a total loss and loss adjustment expenses (LAE) reserve of $6.2 million. This estimate is not based on a full reserve analysis of the exposures and
is not recorded in the Companys reserves. If Highlands is declared insolvent and liquidated by court order, the Company would likely be required to assume Highlands remaining obligations under the subject policies.

The court order appointing the Receiver for Highlands expressly provided that it did not constitute a finding of insolvency. On July 24, 2006, the SDR filed an
Application for Approval of a Rehabilitation Plan with the Texas Court. Under the Plan, if approved, the SDR would continue to pay allowed policy claims (including those under the subject policies), and then to pay other claims with any remaining
funds. The Plan requires policyholders and others to submit claims in the proceeding and envisions claims would be resolved and paid over a number of years. As long as the Rehabilitation Proceeding is in effect, there would be no liquidation of
Highlands and, therefore, no obligation on the part of the Company under the subject policies. The Plan is subject to approval of the Texas Court. Certain creditors filed objections to aspects of the Plan and, in some cases, to the Plan in its
entirety. On April 18, 2007 the Receiver Special Master appointed by the Court to review the Rehabilitation Plan, recommended against approval of the plan. The Receiver for Highlands, as well as others, filed objections to the Special
Masters conclusions and requested a trial de novo. The Court has the authority to confirm, modify, correct, or reject the Rehabilitation Plan or send it back for reconsideration. No Court date has been set, as of yet, to hear these objections
and it would appear resolution of these issues may take several months. Until resolution on the issues is reached Highlands continues to pay and settle claims as the Receivership remains in place. If a Rehabilitation Plan ultimately is not approved,
Highlands could be placed in liquidation.

Letters of Credit

The Company has a letter of credit facility in the amount of $50 million with Barclays Bank PLC. Letters of credit issued under the facility guarantee the payment of loss reserves assumed under certain reinsurance
contracts. As of March 31, 2007, letter of credit issuance under the facility was approximately $16.9 million. Securities of $18.6 million are pledged as collateral under the facility.



|8. | STOCK-BASED COMPENSATION
|-- | ------------------------

At March 31, 2007, the Company maintains a
stock-based compensation plan, the 2003 Amended and Restated Equity participation Plan of SCPIE Holdings, Inc. (the Plan) which provides for grants of stock options to key employees and non-employee directors, grants of restricted shares to
non-employee directors, and stock appreciation rights (SARS) to key employees of the Company.

The compensation cost that has been charged against income
for this plan was $130,000 and $197,000 for the three-month periods ended March 31, 2007 and March 31, 2006, respectively. The income tax benefit recognized in the income statement for share-based compensation was $46,000 and $69,000 for
the three-month periods ended March 31, 2007 and March 31, 2006, respectively.

Effective January 1, 2006, the Company adopted SFAS 123(R),
Share-Based Payment which revised SFAS 123 Accounting for Stock Based Compensation and superseded APB 25 Accounting for Stock Issued to Employees.SFAS 123(R) requires recognition of the cost
of employee services received in exchange for an award of equity instruments in the financial statements based on the grant-date fair value of the award, recognized over the period the employee is required to perform services in exchange for the
award (presumptively the vesting period.)



10



---

The Company adopted SFAS 123(R) using the modified-prospective method. Under the modified-prospective method, prior
periods are not restated. However, for awards granted prior to the date of adoption that are unvested on the adoption date, compensation cost is recognized prospectively. In periods after adoption, compensation cost is recognized over the remaining
service period related to the award, based on amounts previously reported in the pro forma disclosures required under SFAS 123. Compensation cost is also recognized for awards granted after the effective adoption date based on the grant-date fair
value of the award, calculated and recognized under the measurement provisions of SFAS 123(R).

Option activity as of March 31, 2007 and changes
during the three months ended March 31, 2007 were as follows:



|                               |  |         |  |                                 |       |                                                     |      |                           |   |           
|------------------------------ |  | ------- |  | ------------------------------- | ----- | --------------------------------------------------- | ---- | ------------------------- | - | ----------
|                               |  | Shares  |  | Weighted Average Exercise Price |       | Weighted Average Remaining Contractual Term (years) |      | Aggregate Intrinsic Value
|Outstanding at January 1, 2007 |  | 794,100 |  | $                               | 13.28 |                                                     | 5.38 |                           | $ | 10,560,604
|Granted                        |  |        |  |                                 |       |                                                     |      |                           |   |           
|Exercised                      |  | 4,000   |  | $                               | 16.70 |                                                     |      |                           |   |           
|Cancelled or Expired           |  |         |  |                                 |       |                                                     |      |                           |   |           
|                               |  |         |  |                                 |       |                                                     |      |                           |   |           
|Outstanding at March 31, 2007  |  | 790,100 |  | $                               | 13.27 |                                                     | 5.14 |                           | $ | 7,960,230 
|                               |  |         |  |                                 |       |                                                     |      |                           |   |           
|Exercisable at March 31, 2007  |  | 765,095 |  | $                               | 13.33 |                                                     | 5.04 |                           | $ | 7,674,173 

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference
between the Companys closing stock price on March 31, 2007 and the exercise price, multiplied by the number of in-the-money-options) that would have been received by the option holders had all options been exercised on March 31,
2007.



|9. | ADOPTION OF ACCOUNTING PRINCIPLES
|-- | ---------------------------------

New accounting pronouncements that we
have adopted or will adopt in the near future are as follows:

SFAS 157, Fair Value Measurements  In September 2006, the FASB issued SFAS
157, which establishes a framework for measuring fair value and requires expanded disclosure about the information used to measure fair value. The statement applies whenever other statements require, or permit, assets or liabilities to be measured
at fair value. The statement does not expand the use of fair value in any new circumstances and is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We plan to adopt SFAS 157 on January
1, 2008. We do not expect the adoption of this statement to have a material impact on our financial condition or results of operations.

In June 2006, the
FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an Interpretation of FAS No. 109 (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in accordance with FAS 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As permitted by FIN 48, the
Company also adopted a policy of classifying interest and penalties related to income taxes as elements of income tax expense in the consolidated financial statements. The effect of this adoption on January 1, 2007, resulted in a $227,000
decrease to retained earnings. Adoption of FIN 48 had no impact on net income in the three months ended March 31, 2007.

In general, the Company is
not subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years prior to 2003.

SFAS 159, Fair Value
Option for Financial Assets and Financial Liabilities  In February 2007, the FASB issued SFAS 159, which permits entities to voluntarily choose to measure eligible items at fair value at specified election dates. The election is made on
an instrument-by-instrument basis and is irrevocable. If the fair value option is elected for an instrument, the statement specifies that entities report unrealized gains and losses at each subsequent reporting date. The statement is effective as of
the beginning of an entitys first fiscal year that begins after November 15, 2007. We plan to adopt SFAS 159 on January 1, 2008. We do not expect the adoption of this statement to have a material impact on our financial condition or
results of operations.



11



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Overview

SCPIE Holdings is a holding company owning subsidiaries engaged in providing insurance and
reinsurance products. The Company is primarily a provider of medical malpractice insurance and related liability insurance products to physicians, healthcare facilities and others engaged in the healthcare industry in California and Delaware, its
core healthcare liability markets. Previously, the Company had also been actively engaged in the medical malpractice insurance business and related products in other states and the assumed reinsurance business. During 2002 and 2003, the Company
largely completed its withdrawal from the assumed reinsurance market and medical malpractice insurance outside of California and Delaware.

The
Companys insurance business is organized into two reportable business segments: direct healthcare liability insurance and assumed reinsurance operations. Primarily due to significant losses on medical malpractice insurance outside of the state
of California and assumed reinsurance business losses arising out of the September 11, 2001, World Trade Center terrorist attack, the Company incurred significant losses. The resulting reductions in surplus and corresponding decrease in capital
adequacy ratios under both the A.M. Best Company (A.M. Best) and National Association of Insurance Commissioners (NAIC) capital adequacy models required the Company to take actions to improve its long-term capital adequacy position. The primary
actions taken by the Company were to effect an orderly withdrawal from healthcare liability insurance markets outside of California and Delaware and from the assumed reinsurance market in its entirety. All of the healthcare liability insurance
policies in these other markets expired during the first quarter of 2004. In December 2002, the Company entered into a 100% quota share reinsurance agreement to retrocede to Rosemont Re the majority of reinsurance business written in 2002 and 2001.
During 2003, the Company participated in only one ongoing reinsurance syndicate and had no ongoing reinsurance participations in 2004.

The actions taken
by the Company have significantly reduced capital requirements related to written premium to surplus ratios in both the A.M. Best and NAIC capital adequacy models. On November 3, 2006 A.M. Best raised its financial strength rating of the
Companys insurance subsidiaries to B+ (Good) from B (Fair). A.M. Best assigns a B+ rating to companies that have, in its opinion, a good ability to meet their ongoing obligations to policyholders. The outlook for this rating is stable. As the
Company settles and pays claims related to its non-core businesses, the capital adequacy position of the Company should continue to improve.

Critical Accounting Policies

The Companys discussion and analysis of its financial condition and results of operations are
based upon the Companys consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). Preparation of financial statements in accordance with GAAP requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related notes. Management believes that the following critical accounting policies, among others, affect the more significant
judgments and estimates used in the preparation of the consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Premium Revenue Recognition

Direct healthcare liability insurance premiums written are earned on a daily pro rata
basis over the terms of the policies. Accordingly, unearned premiums represent the portion of premiums written which is applicable to the unexpired portion of the policies in force. Reinsurance premiums assumed are estimated based on information
provided by ceding companies. The information used in establishing these estimates is reviewed and subsequent adjustments are recorded in the period in which they are determined. These premiums are earned over the terms of the related reinsurance
contracts.

Loss and Loss Adjustment Expense Reserves

Unpaid losses and loss adjustment expenses are comprised of case reserves for known claims, incurred but not reported reserves for unknown claims and any potential development for known claims, and reserves for the cost of administration
and settlement of both known and unknown claims. Such liabilities 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



12



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reserving process. Establishing appropriate reserves is an inherently uncertain process; the ultimate liability may be in excess of or less than the amount
provided. 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 Company utilizes its internal
actuarial staff in establishing its reserves. The Company does not discount its loss and loss adjustment expense reserves.

The Company had a growing
volume of assumed reinsurance business between 1999 and 2002. Assumed reinsurance is a line of business with inherent volatility. Ultimate loss experience for the assumed reinsurance operation is based primarily on reports received by the Company
from the underlying ceding insurers. Many losses take several years to be reported through the system. The Company relies heavily on the ceding entitys estimates of ultimate incurred losses. These reported ultimate incurred losses, along with
independent or internal actuarial reports, are reviewed by the Companys internal actuarial staff to determine their reasonableness. In other cases, the Company relies on its own internal estimates determined primarily by experience to date,
individual knowledge of the specific reinsurance contract, industry experience and other actuarial techniques to determine reserve requirements.

Because
the reserve establishment process is by definition an estimate, actual results will vary from amounts established in earlier periods. The Company recognizes such differences in the periods they are determined. Since reserves accumulate on the
balance sheet over several years until all claims are settled, a determination of inadequacy or redundancy could easily have a significant impact on earnings and therefore stockholders equity. The reserves attributable to the operating
segments of the Company are as follows:

Summary of Net Loss and LAE Reserves



|                    |  |              |  |                    |  |                    |  |               |  |                  
|------------------- |  | ------------ |  | ------------------ |  | ------------------ |  | ------------- |  | -----------------
|                    |  | CaseReserves |  | Bulk &IBNRReserves |  | TotalGrossReserves |  | CededReserves |  | Total NetReserves
|March 31, 2007      |  |              |  |                    |  |                    |  |               |  |                  
|Direct Healthcare   |  |              |  |                    |  |                    |  |               |  |                  
|Core                |  | 71,184       |  | 217,260            |  | 288,444            |  | 10,067        |  | 278,377          
|Non-Core            |  | 19,409       |  | 13,837             |  | 33,246             |  | 1,251         |  | 31,995           
|                    |  |              |  |                    |  |                    |  |               |  |                  
|                    |  | 90,593       |  | 231,097            |  | 321,690            |  | 11,318        |  | 310,372          
|Assumed Reinsurance |  | 58,310       |  | 26,806             |  | 85,116             |  | 28,921        |  | 56,195           
|                    |  |              |  |                    |  |                    |  |               |  |                  
|                    |  | 148,903      |  | 257,903            |  | 406,806            |  | 40,239        |  | 366,567          
|                    |  |              |  |                    |  |                    |  |               |  |                  
|December 31, 2006   |  |              |  |                    |  |                    |  |               |  |                  
|Direct Healthcare   |  |              |  |                    |  |                    |  |               |  |                  
|Core                |  | 70,869       |  | 213,018            |  | 283,887            |  | 9,758         |  | 274,129          
|Non-Core            |  | 23,408       |  | 15,778             |  | 39,186             |  | 1,532         |  | 37,654           
|                    |  |              |  |                    |  |                    |  |               |  |                  
|                    |  | 94,277       |  | 228,796            |  | 323,073            |  | 11,290        |  | 311,783          
|Assumed Reinsurance |  | 56,151       |  | 26,224             |  | 82,375             |  | 26,934        |  | 55,441           
|                    |  |              |  |                    |  |                    |  |               |  |                  
|                    |  | 150,428      |  | 255,020            |  | 405,448            |  | 38,224        |  | 367,224          
|                    |  |              |  |                    |  |                    |  |               |  |                  

For most, if not all medical malpractice and other long tail liability lines of business, Bulk and IBNR reserves
(which include loss adjustment expense reserves not allocated to specific cases) are the mathematical result of subtracting tabular case reserves from projected ultimate losses derived by the actuarial process. Bulk and IBNR reserves in the case of
medical malpractice insurance written on a claims-made reporting policy do not generally represent late reported claims but rather expected upward case reserve movement which will be recognized as additional information develops on individual cases.
The relationship between Bulk and



13



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IBNR reserves and case reserves can be significantly different between lines of insurance as well as between individual companies. These differences may
result from the length of time required to adequately investigate and evaluate individual cases, a companys individual case reserving philosophy or other reasons.

Reserve Sensitivity

The primary factor affecting the adequacy of reserve estimates in the core direct healthcare
area is the trend in pure loss costs (the combination of frequency and average severity changes) related to malpractice coverage. At March 31, 2007 reserve levels, a 1% change in pure loss costs trend produces a change in prior reserves of
approximately $4.1 million. Such changes are reflected in the period of change. Reserves related to medical malpractice coverage account for over 95% of core reserves.

In the non-core direct healthcare area, the adequacy of reserves is primarily dependent upon achieving fair settlements with the injured parties and reasonable litigation results. As the individual cases mature and
more information becomes available for evaluating individual cases, there is a declining need for Bulk and IBNR reserves. While the Company believes its reserves are adequate, several jurisdictions where the Company issued policies allow extended
periods of time to elapse before the judicial or settlement process is completed. Individual settlements or judgments will determine the final incurred losses and thus the adequacy of these reserves. The recent experience has been generally
consistent with Company expectations, but no assurance can be given that the Companys current experience will continue. The current average reserve (including Bulk and IBNR reserves) is approximately $283,000 per outstanding case. If the
average settlement ultimately achieved is different by $12,000 for the current average reserve, the ultimate reserves will be affected by approximately $1.4 million.

The sensitivity of the Companys reserves for Assumed Reinsurance is impacted primarily by three factors: the accuracy of internal and independent actuarial reviews of particular contracts; timely reporting of
losses through the worldwide reinsurance system; and the ultimate severity of large excess of loss claims. As time passes, the ability of the underlying insureds to accurately reserve the large excess of loss type cases should improve. However,
since the reporting of losses through the worldwide reinsurance market is often slow and is dependent upon the reporting by the ceding companies, the adequacy of these reserves has a potential for volatility and no assurances can be given that
further adverse development will not occur.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs include commissions, premium taxes and other variable costs incurred in connection with writing business. Deferred policy acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are estimated to be unrecoverable, they are expensed. Recoverability is analyzed based on the Companys assumptions related to the underlying policies written, including
the lives of the underlying policies, future investment income, and level of expenses necessary to maintain the policies over their entire lives. Deferred policy acquisition costs are amortized over the period in which the related premiums are
earned.

Investments

The Company considers its fixed
maturity and equity securities as available-for-sale securities. Available-for-sale securities are sold in response to a number of issues, including the Companys liquidity needs, the Companys statutory surplus requirements and tax
management strategies, among others. Available-for-sale securities are recorded at fair value. The related unrealized gains and losses, net of income tax effects, are excluded from net income and reported as a component of stockholders equity.

The Company evaluates the securities in its available-for-sale investment portfolio on at least a quarterly basis for declines in market value below cost
for the purpose of determining whether these declines represent other than temporary declines. Some of the factors the Company considers in the evaluation of its investments are:



| |  |  | the extent to which the market value of the security is less than its cost basis;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the length of time for which the market value of the security has been less than its cost basis;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the financial condition and near-term prospects of the securitys issuer, taking into consideration the economic prospects of the issuers industry and
geographical region, to the extent that information is publicly available; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



14



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A decline in the fair value of an available-for-sale security below cost that is judged to be other than temporary is
realized as a loss in the current period and reduces the cost basis of the security.

Income Taxes

At March 31, 2007, the Company had $42.1 million of net deferred income tax assets. Net deferred income tax assets consist of the net temporary differences created
as a result of amounts deductible or revenue recognized in periods different for tax return purposes than for accounting purposes. These deferred income tax assets include an asset of $22.4 million for a net operating loss carryforward that will
expire in 2022. A net operating loss carryforward is a tax loss that may be carried forward into future years. It reduces taxable income in future years and the tax liability that would otherwise be incurred.

The Company believes it is more likely than not that the deferred income tax assets will be realized through its future earnings. As a result, the Company has not
recorded a valuation allowance. The Companys core operations have historically been profitable on both a GAAP and tax basis. The losses incurred in 2001 to 2004 have been primarily caused by losses in the non-core healthcare and assumed
reinsurance businesses. Since the core healthcare liability operation has remained strong and improved over the past years and the non-core healthcare liability and assumed operations are now in run-off, the Company believes it will generate
sufficient taxable income in future periods to utilize the net operating loss carryforward.

The Companys estimate of future taxable income uses the
same assumptions and projections as in its internal financial projections. These projections are subject to uncertainties primarily related to future underwriting results. If the Companys results are not as profitable as expected, the Company
may be required in future periods to record a valuation allowance for all or a portion of the deferred income tax assets. Any valuation allowance would reduce the Companys earnings.

Forward Looking Statements

Certain statements in this
quarterly report on Form 10-Q that are not historical in fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides certain safe harbor
provisions for forward-looking statements. All forward-looking statements made in this quarterly report on Form 10-Q are made pursuant to the PSLRA. Words such as, but not limited to, believe, expect, anticipate,
estimate, intend, plan, and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors based on the
Companys estimates and expectations concerning future events that 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.
Actuarial estimates of losses and loss adjustment expenses (LAE), expectations concerning the Companys ability to retain current insureds at profitable levels, successful withdrawal from the assumed reinsurance business, continued solvency of
the Companys reinsurers, obtaining necessary rate change regulatory approvals, expansion of liability insurance business in its principal market and improved performance and profitability are dependent upon a variety of factors, including
future economic, competitive and market conditions, frequency and severity of catastrophic events, future legislative and regulatory actions, uncertainties and potential delays in obtaining premium rate approvals, the level of ratings from
recognized rating services, the importance of brokerage business to the Companys growth, the inherent uncertainty of loss and LAE estimates in both the core and discontinued non-core businesses (including a contingent liability related to
Highlands Insurance Company), and the cyclical nature of the property and casualty insurance industry, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. The Company is also
subject to certain structural risks as an insurance holding company, including statutory restrictions on dividends and other intercompany transactions. In light of the significant uncertainties inherent in the forward-looking information herein, the
inclusion of such information should not be regarded as a representation by the Company or any other person that the Companys objectives or plans will be realized. These risks and uncertainties, as well as the Companys critical
accounting policies, are discussed in more detail under Critical Accounting Policies, Managements Discussion and Analysis of Financial Condition and Results of Operations  Overview, and in Managements
Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies and Risk Factors in the Companys Annual Report on Form 10-K/A for the fiscal year ended December 31, 2006. The
Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Information Regarding Non-GAAP Measures

The Company has presented information in this report with respect to premiums written, an
operating measure which in managements opinion provides investors useful industry specific information to evaluate and perform meaningful comparisons of



15



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the Companys performance. Premiums written is a non-GAAP financial measure which represents the premiums charged on policies issued during a fiscal
period less any reinsurance. Premiums written is a statutory measure of production levels. Premiums earned, the most directly comparable GAAP measure, represents the portion of premiums written that is recognized as income in the financial
statements for the periods presented and earned on a pro-rata basis over the term of the policies. The change in unearned premium reconciles the difference between the two measures.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006

Direct Healthcare Liability Insurance Segment

The Company
underwrites professional and related liability policy coverages for physicians (including oral and maxillofacial surgeons), physician medical groups and clinics, hospitals, dentists, managed care organizations and other providers in the healthcare
industry. As a result of the Companys withdrawal from certain segments of the healthcare industry, premiums earned are primarily California and Delaware physician based business. Non-core business related to physician and dental programs
formerly conducted for the Company primarily in states outside California and Delaware by a national independent insurance agency, other state non-standard physician programs and hospital programs including those in California have been in run-off
since 2004.

The following table summarizes the core business underwriting results of the direct healthcare liability insurance segment for the periods
indicated (dollars in thousands):



|                        |  |               |        |   |               |   |        |  
|----------------------- |  | ------------- | ------ | - | ------------- | - | ------ | -
|THREE MONTHS ENDED      |  | MARCH 31,2007 |        |   | MARCH 31,2006 |  
|Premiums written        |  | $             | 83,779 |   |               | $ | 88,626 |  
|                        |  |               |        |   |               |   |        |  
|Premiums earned         |  | $             | 30,175 |   |               | $ | 31,132 |  
|Losses and LAE incurred |  |               | 21,266 |   |               |   | 22,105 |  
|Underwriting expenses   |  |               | 6,699  |   |               |   | 6,896  |  
|                        |  |               |        |   |               |   |        |  
|Underwriting gain       |  | $             | 2,210  |   |               | $ | 2,131  |  
|                        |  |               |        |   |               |   |        |  
|Loss ratio              |  |               | 70.5   | % |               |   | 71.0   | %
|Expense ratio           |  |               | 22.2   | % |               |   | 22.2   | %
|Combined ratio          |  |               | 92.7   | % |               |   | 93.2   | %

Core Business

Premiums written were $83.8 million and premiums earned were $30.2 million in the first quarter 2007; compared to $88.6 million and $31.1 million in the first quarter 2006. Premiums written and earned decreased primarily due to lower
premiums from loss-related groups as a result of improved claim frequency and a decline in policies in-force of 1.0%.

The loss ratio (losses and LAE
related to premiums earned) for the first quarter 2007 was 70.5% compared to 71.0% in the first quarter 2006. The decrease in the loss ratio is due primarily to a continued improved trend in claim frequency.

The underwriting expense ratio (expenses related to premiums earned) remained flat at 22.2% in the first quarter 2007 and in the first quarter 2006.

Non-Core Business

Outstanding reserves for the non-core healthcare
declined to $32.0 as of March 31, 2007 from $37.7 million at December 31, 2006 and the number of open claims decreased to 113 from 136 for the same period. No change in prior reserve estimates was required in the first quarter ended
March 31, 2007.



16



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Assumed Reinsurance Segment

Assumed reinsurance represents the book of assumed worldwide reinsurance of professional, commercial and personal liability coverages, commercial and residential property risks and accident and health, workers compensation and marine
coverages.

The following table summarizes the underwriting results of the assumed reinsurance segment for the periods indicated (dollars in thousands):



|                                          |  |                                                  |        |   |      |   |        |  
|----------------------------------------- |  | ------------------------------------------------ | ------ | - | ---- | - | ------ | -
|                                          |  | Assumed Reinsurance Segment Underwriting Results |       
|FOR THE THREE MONTHS ENDED MARCH 31,      |  | 2007                                             |        |   | 2006 |  
|Premiums written                          |  | $                                                | (301   | ) |      | $ | 497    |  
|                                          |  |                                                  |        |   |      |   |        |  
|Premiums earned                           |  | $                                                | (301   | ) |      | $ | 498    |  
|Underwriting expenses                     |  |                                                  |        |   |      |   |        |  
|Losses                                    |  |                                                  | 1,680  |   |      |   | 3,100  |  
|Underwriting and other operating expenses |  |                                                  | (93    | ) |      |   | 154    |  
|                                          |  |                                                  |        |   |      |   |        |  
|Underwriting loss                         |  | $                                                | (1,888 | ) |      | $ | (2,756 | )
|                                          |  |                                                  |        |   |      |   |        |  

The earned premium in 2007 and 2006 is primarily due to residual premiums and adjustments reported by cedants on
various contracts.

The underwriting loss in the first quarter 2007 is primarily related to an adverse arbitration award and upward developments on a few
contracts. The loss in 2006 related to increased reserves for contracts involving bail and immigration bonds.

The Rosemont Re reinsurance treaty entered
into in December 2002 effectively ceded all of the unearned premium and future reported premium after June 30, 2002, for the assumed reinsurance business written for underwriting years 2001 and 2002 by the Company. This treaty relieved the
Company of significant underwriting risk and written premium leverage and significantly improves the Companys risk-based capital adequacy ratios under both the A.M. Best and NAIC models. The treaty has no limitations on loss recoveries and
includes a profit-sharing provision should the combined ratios calculated on the base premium ceded be below 100%. The treaty requires Rosemont Re to reimburse the Company for its acquisition and administrative expenses. In addition, the Company was
also required to pay Rosemont Re additional premium in excess of the base premium ceded of 14.3%.

The Rosemont Re reinsurance treaty has both prospective
and retroactive elements as defined in FASB No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts. As such, any gains under the contract will be deferred and amortized to income based upon the
expected recovery. No gains are anticipated currently. Losses related to future earned premium ceded, as well as development on losses related to existing earned premium ceded after June 30, 2002, will ultimately determine whether a gain will
be recorded under the contract. The retroactive accounting treatment required under FASB 113 requires that a charge to income be recorded to the extent premiums ceded under the contract are in excess of the estimated losses and expenses ceded under
the contract.

During the third and fourth quarters of 2005, Rosemont Re suffered significant losses due to Hurricanes Katrina and Rita. A.M. Best reduced
its rating for Rosemont Re to B (Fair) and the company voluntarily went in run-off and will be liquidated. Assets approximately equal to Rosemont Res estimated liabilities under the reinsurance agreement with the Company are currently held in
trust to satisfy the liabilities under the agreement. If the estimated recoveries were to increase in the future, the Company would have to rely on Rosemont Res continuing financial ability to fund these amounts.

Other Operations

Net investment income increased 4.1% to $5.2
million for the first quarter 2007 from $5.0 million in 2006. Investment income reflects a slight increase in overall investment assets. The average rate of return on invested assets was 3.9% and 3.8% for the first quarters 2007 and 2006,
respectively.



17



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Net realized investment gain of $166,000 was recorded for the first quarter 2007 versus net realized investment losses of
$111,000 for the first quarter 2006.

Included in Underwriting and Other Operating Expenses for 2006 were costs of $557,000 related to a proxy challenge
against the Companys slate of director nominees for 2006.

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 the first three months of 2007, the Company had positive cash flow from operations of $369,000 compared to
a positive cash flow of $5.7 million in 2006. The positive cash flow in 2006 is primarily related to a significant reduction in claims payments associated with the non-core physician and assumed reinsurance programs, which are now in run-off. The
Company maintains a significant portion of its investment portfolio in high-quality short-term securities and cash to meet short-term operating liquidity requirements, including the payment of losses and LAE. Cash and cash equivalents investments
totaled $156.6 million or 29.0% of invested assets, at March 31, 2007. The Company believes that all of its short-term and fixed maturity securities are readily marketable and have scheduled maturities in line with projected cash needs.
Premiums generated by the Companys core operations have historically produced positive cash flow after consideration of investment income.

The
Company invests its cash flow from operations principally in taxable fixed maturity securities. The Companys current policy is to limit its investment in unaffiliated equity securities and mortgage loans to no more than 8% of the total market
value of its investments. The market value of the Companys portfolio of unaffiliated equity securities was $2.0 million at March 31, 2007. The Company plans to continue its emphasis on fixed maturity securities investments for the
indefinite future.

The Company leases approximately 95,000 square feet of office space for its headquarters. The lease is for a term ending in 2009, and
the Company has two options to renew the lease for a period of five years each.

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, SCPIE Indemnity, may pay dividends to SCPIE Holdings in any 12-month period, without regulatory approval, to the extent such dividends do not exceed the greater of (i) 10% of its statutory surplus at the
end of the preceding year or (ii) its statutory net income for the preceding year. Applicable regulations further require that an insurers statutory surplus following a dividend or other distribution be reasonable in relation to its
outstanding liabilities and adequate to meet its financial needs, and permit the payment of dividends only out of statutory earned (unassigned) surplus unless the payment out of other funds receives regulatory approval. The amount of dividends that
SCPIE Indemnity is able to pay to SCPIE Holdings during 2007 without prior regulatory approval is approximately $22.4 million. As of March 31, 2007, no dividends had been paid to SCPIE Holdings.

In March 2004, the Board of Directors suspended the Companys quarterly dividends. The 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 of March 31, 2007, SCPIE Holdings held cash and short-term securities of $5.2 million. Based on historical trends,
market conditions and its business plans, the Company believes that its sources of funds (including dividends from the insurance company subsidiaries) will be sufficient to meet the liquidity needs of SCPIE Holdings over the next 18 months.



18



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The Companys capital adequacy position was weakened in the past by the losses in the non-core businesses. The
Companys current rating from A.M. Best is B+ (Good), with a stable outlook. A.M. Best assigns this rating to companies that have, in its opinion, a good ability to meet their current obligations to policyholders. The Company believes that it
has strengthened its capital adequacy position at December 31, 2006, under the methodology followed by A.M. Best, but does not know whether this will result in a further rating change. The NAIC has developed a different methodology for
measuring the adequacy of an insurers surplus which includes a risk-based capital (RBC) formula designed to measure state statutory capital and surplus needs. The RBC rules provide for different levels of regulatory attention based on four
thresholds determined under the formula. At December 31, 2006, the RBC level of each Insurance Subsidiary exceeded the threshold requiring the least regulatory attention. At December 31, 2006, SCPIE Indemnitys adjusted surplus level
of $164.5 million was 340% of this threshold.

The Company believes that it has the ability to fund its continuing operations from its premiums written and
investment income. The Company plans to continue its focus on the efficient operation of its core business, while at the same time continuing to adjudicate and settle claims incurred in its discontinued non-core business. As the Company continues to
run-off the non-core loss and LAE reserves, its capital adequacy position should improve.

As of March 31, 2007, the Companys statutory surplus
was approximately $167.7 million. The principal differences between statutory surplus and stockholders equity is the effect of the treatments of deferred policyholder acquisition costs and the deferred federal income tax asset. The Company
believes its statutory surplus will increase over time and provide a basis for improved ratings from A.M. Best.

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 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

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 March 31, 2007 comprised 70.6% of total investments at market value. Corporate bonds represent 37.9% and U.S. government bonds represent 45.7% of the fixed-maturity investments, with the remainder consisting of
mortgage-backed and asset-backed securities. Equity securities, consisting primarily of common stocks, account for less than 1.0% of total investments at market value. The remainder of the investment portfolio consists of cash and highly liquid
short-term investments, which are primarily overnight bank repurchase agreements and 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 increases with the opposite holding true in rising interest rate environments. A common measure of the interest sensitivity of fixed-maturity
assets is modified or effective 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 effective duration of the fixed maturity portfolio at March 31, 2007 was 2.3 years.

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.

At March 31, 2007, the carrying value of the investment portfolio included $5.1 million in net unrealized losses. At
December 31, 2006, the investment portfolio included $7.3 million in net unrealized losses.



19



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|ITEM 4. | DISCLOSURE CONTROLS AND PROCEDURES
|------- | ----------------------------------

The Company maintains
disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective at the reasonable assurance level.

There have been no significant changes in the Companys internal control over financial reporting during the Companys most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.



20



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

General

The Company is named as a 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.

Bail and Immigration Bond Proceedings

The Companys Insurance Subsidiary, AHI, was a party to reinsurance agreements with Highlands Insurance Company, now in Receivership (Highlands), Sirius America Insurance Company (Sirius) and Aegis Security Insurance Company (Aegis),
each of which acted as a primary insurer for various periods under bail and immigration bond programs administered and guaranteed by Capital Bonding Corporation (CBC), as managing general agent. As part of these programs, the primary insurers
(through CBC) issued bail bonds in a number of states and also issued federal immigration bonds. AHI participated as a reinsurer of these programs during 2001 and 2002. The Companys reinsurance participation was 20% of the bond losses during
2001 and 25% during 2002. The Companys share of the losses under these treaties was substantially reinsured with Rosemont Re during 2002 and to a lesser extent during 2001.

During 2004, CBC failed and a large number of bond losses emerged for 2000 and subsequent years. There were a number of disputes between the primary insurers and reinsurers in the CBC program. AHI has been engaged in
arbitration proceedings with each of the primary insurers to resolve these disputes. The Sirius, Highlands and Aegis proceedings were instituted on June 13, 2005, August 31, 2005 and December 7, 2005, respectively. The
Companys arbitration proceeding with Aegis was concluded and the Company has commuted any future LAE and bail bond losses with Aegis. The Company paid to Aegis a total amount slightly in excess of the amount reserved for this agreement at
December 31, 2005. The arbitration hearing with Sirius was concluded on April 12, 2007. As a result of the arbiters rulings in the Sirius proceeding, the company recorded additional net losses and expenses of approximately $840,000.
The Highlands arbitration proceeding is still in its early stages.

The Company has recorded in the financial statements its best reserve estimate of $3.4
million to cover the ultimate net liability under the Sirius and Highlands reinsurance agreements. Highlands has provided claim information to the Company only with respect to alleged losses during 2001 and 2002 under bail bonds issued in the State
of New Jersey. In December 2006, Highlands announced that it had entered into a settlement of the federal immigration bonds written from 2000 to May, 2002, when it ceased writing these bonds. Highlands has indicated in filings that it has additional
exposure under bail bonds issued in states other than New Jersey. Highlands has not provided sufficient information to measurably quantify certain of these additional losses or allocate such losses among the 2001 and 2002 years in which AHI
participated and the 2000 year in which the Company did not participate. Given the uncertainties of these actual and prospective bail bond and other claims, future loss development on the CBC program could be materially greater than the reserves
estimated by the Company at March 31, 2007. The Company intends to vigorously contest the claims of Highlands.



21



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|ITEM  1A. | RISK FACTORS
|--------- | ------------

There have been no material changes in the risk
factors as previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2006, under the caption Risk Factors.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



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

None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



22



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|ITEM 6. | EXHIBITS
|------- | --------

The following exhibits are included
herewith.



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NUMBER |  | DOCUMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|31.1   |  | Certification of Registrants Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                    
|31.2   |  | Certification of Registrants Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                    
|32.1   |  | Certification of Registrants Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002. This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Company.
|32.2   |  | Certification of Registrants Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002. This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Company.

SIGNATURES

Pursuant to the requirements 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.
|                  |  |  | 
|Date: May 8, 2007 |  |  |  | By:                 |  | /s/ Donald J. Zuk    
|                  |  |  |  |                     |  |                       |  | Donald J. Zuk President and Chief Executive Officer                
|                  |  |  |  |                    
|                  |  |  | 
|Date: May 8, 2007 |  |  |  | By:                 |  | /s/ Robert B. Tschudy
|                  |  |  |  |                     |  |                       |  | Robert B. Tschudy Senior Vice President and Chief Financial Officer



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