---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q

QUARTERLY REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED MARCH 31, 2006



---

Commission File No. 1-12449

SCPIE HOLDINGS INC.

(Exact name of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|DELAWARE                                                      |  | 95-4557980                         
|(State or other jurisdictionof incorporation or organization) |  | (I.R.S. EmployerIdentification 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)



---

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 5,
2006                                                                                                   
|Preferred stock, par value $l.00 per share |  | No shares outstanding                                                                                                        
|Common stock, par value $0.0001 per share  |  | 10,049,516 shares, including 500,000 shares of Common Stock that have been issued to a wholly owned subsidiary of Registrant.



---



---

PART I  FINANCIAL INFORMATION



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

SCPIE HOLDINGS INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)



|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                |  | MARCH 31,2006 |         |   | DECEMBER 31,2005 |  
|                                                                                                                                                                |  | (unaudited)   |         |   |                  |  
|ASSETS                                                                                                                                                          |  |               |         |   |                  |   |         |  
|Securities available-for-sale:                                                                                                                                  |  |               |         |   |                  |   |         |  
|Fixed maturity investments, at fair value (amortized cost 2006 - $467,233; 2005 - $469,350)                                                                     |  | $             | 453,977 |   |                  | $ | 461,480 |  
|Equity investments, at fair value (cost 2006 - $1,897; 2005 - $1,934)                                                                                           |  |               | 2,105   |   |                  |   | 2,095   |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total securities available-for-sale                                                                                                                             |  |               | 456,082 |   |                  |   | 463,575 |  
|Cash and cash equivalents                                                                                                                                       |  |               | 76,038  |   |                  |   | 68,783  |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total investments and cash and cash equivalents                                                                                                                 |  |               | 532,120 |   |                  |   | 532,358 |  
|Accrued investment income                                                                                                                                       |  |               | 5,581   |   |                  |   | 5,874   |  
|Premiums receivable                                                                                                                                             |  |               | 71,920  |   |                  |   | 18,731  |  
|Assumed reinsurance receivable                                                                                                                                  |  |               | 5,887   |   |                  |   | 6,960   |  
|Reinsurance recoverable                                                                                                                                         |  |               | 55,365  |   |                  |   | 55,933  |  
|Deferred policy acquisition costs                                                                                                                               |  |               | 9,936   |   |                  |   | 7,120   |  
|Deferred federal income taxes                                                                                                                                   |  |               | 51,725  |   |                  |   | 51,214  |  
|Property and equipment, net                                                                                                                                     |  |               | 2,287   |   |                  |   | 2,449   |  
|Other assets                                                                                                                                                    |  |               | 6,350   |   |                  |   | 6,325   |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                                    |  | $             | 741,171 |   |                  | $ | 686,964 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|LIABILITIES                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Reserves:                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Losses and loss adjustment expenses                                                                                                                             |  | $             | 429,364 |   |                  | $ | 429,315 |  
|Unearned premiums                                                                                                                                               |  |               | 99,198  |   |                  |   | 41,705  |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total reserves                                                                                                                                                  |  |               | 528,562 |   |                  |   | 471,020 |  
|Amounts held for reinsurance                                                                                                                                    |  |               | 2,439   |   |                  |   | 4,818   |  
|Other liabilities                                                                                                                                               |  |               | 19,797  |   |                  |   | 20,333  |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                               |  |               | 550,798 |   |                  |   | 496,171 |  
|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, 2006  9,549,516 shares outstanding 2005 
9,516,916 shares outstanding |  |               | 1       |   |                  |   | 1       |  
|Additional paid-in capital                                                                                                                                      |  |               | 37,127  |   |                  |   | 37,127  |  
|Retained earnings                                                                                                                                               |  |               | 262,023 |   |                  |   | 259,645 |  
|Treasury stock, at cost 2006  2,742,575 shares and 2005  2,775,175 shares                                                                                     |  |               | (96,316 | ) |                  |   | (97,063 | )
|Subscription notes receivable                                                                                                                                   |  |               | (2,655  | ) |                  |   | (2,649  | )
|Accumulated other comprehensive (loss) income                                                                                                                   |  |               | (9,807  | ) |                  |   | (6,268  | )
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                      |  |               | 190,373 |   |                  |   | 190,793 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                      |  | $             | 741,171 |   |                  | $ | 686,964 |  
|                                                                                                                                                                |  |               |         |   |                  |   |         |  

See accompanying notes to Consolidated Financial Statements.



2



---

SCPIE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)



|                                                          |  |                             |        |   |      |   |       
|--------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------
|                                                          |  | THREE MONTHS ENDEDMARCH 31,
|                                                          |  | 2006                        |        |   | 2005
|Revenues:                                                 |  |                             |        |   |      |   |       
|Net premiums earned                                       |  | $                           | 31,630 |   |      | $ | 32,586
|Net investment income                                     |  |                             | 5,013  |   |      |   | 4,667 
|Realized investment gains / (losses)                      |  |                             | (111   | ) |      |   | 16    
|Other revenue                                             |  |                             | 53     |   |      |   | 114   
|                                                          |  |                             |        |   |      |   |       
|Total revenues                                            |  |                             | 36,585 |   |      |   | 37,383
|Expenses:                                                 |  |                             |        |   |      |   |       
|Losses and loss adjustment expenses                       |  |                             | 25,205 |   |      |   | 25,911
|Underwriting and other operating expenses                 |  |                             | 7,607  |   |      |   | 8,865 
|                                                          |  |                             |        |   |      |   |       
|Total expenses                                            |  |                             | 32,812 |   |      |   | 34,776
|Income before income taxes                                |  |                             | 3,773  |   |      |   | 2,607 
|Income tax expense                                        |  |                             | 1,395  |   |      |   | 936   
|                                                          |  |                             |        |   |      |   |       
|Net income                                                |  | $                           | 2,378  |   |      | $ | 1,671 
|                                                          |  |                             |        |   |      |   |       
|Basic earnings per share                                  |  | $                           | 0.25   |   |      | $ | 0.18  
|Diluted earnings per share                                |  | $                           | 0.25   |   |      | $ | 0.18  
|Cash dividend declared and paid per share of common stock |  | $                           |       |   |      | $ |      

See accompanying notes to Consolidated Financial Statements.



3



---

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

(DOLLARS IN THOUSANDS)

(UNAUDITED)



|                                                                                                                                                                    |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - | -------------------------- | - | ----------------- |  | -------------- | ------- |  | --------------------------------- | ------- | - | -------------------------------------------- | - | ------ | -------------------------- |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                                                    |  | COMMON STOCK |   | ADDITIONAL PAID-IN CAPITAL |   | RETAINED EARNINGS |  | TREASURY STOCK |         |  | STOCK SUBSCRIPTON 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  | )
|Change in minimum pension liability, net of applicable income tax benefit of $37                                                                                    |  |              |  |                            |   |                  |  |                |        |  |                                   |        |   |                                              |   |       |                            |  |   | (68    | ) |  |   | (68     | )
|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 |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|BALANCE AT JANUARY 1, 2005                                                                                                                                          |  | $            | 1 |                            | $ | 37,127            |  | $              | 256,177 |  | $                                 | (97,654 | ) |                                              | $ | (3,018 | )                          |  | $ | 1,889  |   |  | $ | 194,522 |  
|Net income                                                                                                                                                          |  |              |  |                            |   |                  |  |                | 1,671   |  |                                   |        |   |                                              |   |       |                            |  |   |       |   |  |   | 1,671   |  
|Unrealized losses on securities, net of reclassification adjustments of $-0- for gains included in net appreciation, net of applicable income
tax benefit of $2,672 |  |              |  |                            |   |                  |  |                |        |  |                                   |        |   |                                              |   |       |                            |  |   | (4,965 | ) |  |   | (4,965  | )
|Change in minimum pension liability, net of applicable income tax benefit of $37                                                                                    |  |              |  |                            |   |                  |  |                |        |  |                                   |        |   |                                              |   |       |                            |  |   | (68    | ) |  |   | (68     | )
|Unrealized foreign currency gain                                                                                                                                    |  |              |  |                            |   |                  |  |                |        |  |                                   |        |   |                                              |   |       |                            |  |   | (45    | ) |  |   | (45     | )
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|Comprehensive loss                                                                                                                                                  |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   | (3,407  | )
|Treasury stock reissued                                                                                                                                             |  |              |  |                            |   |                  |  |                |        |  |                                   | 43      |   |                                              |   |       |                            |  |   |       |   |  |   | 43      |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  
|BALANCE AT MARCH 31, 2005                                                                                                                                           |  | $            | 1 |                            | $ | 37,127            |  | $              | 257,848 |  | $                                 | (97,611 | ) |                                              | $ | (3,018 | )                          |  | $ | (3,189 | ) |  | $ | 191,158 |  
|                                                                                                                                                                    |  |              |   |                            |   |                   |  |                |         |  |                                   |         |   |                                              |   |        |                            |  |   |        |   |  |   |         |  



4



---

SCPIE HOLDINGS INC. AND SUBISIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

(UNAUDITED)



|                                                                                       |  |                             |         |   |      |   |         |  
|-------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                       |  | THREE MONTHS ENDEDMARCH 31, |        
|                                                                                       |  | 2006                        |         |   | 2005 |  
|OPERATING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Net income                                                                             |  | $                           | 2,378   |   |      | $ | 1,671   |  
|Adjustments to reconcile net income to net cash provided/used in operating activities: |  |                             |         |   |      |   |         |  
|Provisions for amortization and depreciation                                           |  |                             | 1,332   |   |      |   | 1,499   |  
|Provision for deferred federal income taxes                                            |  |                             | 1,395   |   |      |   | 936     |  
|Realized investment (gains)/losses                                                     |  |                             | 111     |   |      |   | (16     | )
|Changes in operating assets and liabilities:                                           |  |                             |         |   |      |   |         |  
|Deferred acquisition costs                                                             |  |                             | (2,816  | ) |      |   | (1,471  | )
|Accrued investment income                                                              |  |                             | 293     |   |      |   | 524     |  
|Unearned premiums                                                                      |  |                             | 57,493  |   |      |   | 58,350  |  
|Loss and loss adjustment expense reserves                                              |  |                             | 49      |   |      |   | (43,440 | )
|Reinsurance recoverable                                                                |  |                             | 568     |   |      |   | 24,097  |  
|Amounts held for reinsurance                                                           |  |                             | (2,379  | ) |      |   | (18,258 | )
|Other liabilities                                                                      |  |                             | (536    | ) |      |   | (3,875  | )
|Premium receivable                                                                     |  |                             | (52,116 | ) |      |   | (40,021 | )
|Other assets                                                                           |  |                             | (95     | ) |      |   | 970     |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided/(used) by operating activities                                       |  |                             | 5,677   |   |      |   | (19,034 | )
|INVESTING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Purchasesfixed maturities                                                             |  |                             | (7,292  | ) |      |   |        |  
|Salesfixed maturities                                                                 |  |                             | 8,129   |   |      |   | 38      |  
|Maturitiesfixed maturities                                                            |  |                             |        |   |      |   | 3,707   |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by investing activities                                              |  |                             | 837     |   |      |   | 3,745   |  
|FINANCING ACTIVITIES                                                                   |  |                             |         |   |      |   |         |  
|Issuance of treasury stock, net and repayment of stock subscription notes              |  |                             | 741     |   |      |   | 43      |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Net cash provided by in financing activities                                           |  |                             | 741     |   |      |   | 43      |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Increase / (decrease) in cash and cash equivalents                                     |  |                             | 7,255   |   |      |   | (15,246 | )
|Cash and cash equivalents at beginning of period                                       |  |                             | 68,783  |   |      |   | 94,390  |  
|                                                                                       |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                             |  | $                           | 76,038  |   |      | $ | 79,144  |  
|                                                                                       |  |                             |         |   |      |   |         |  

See accompanying notes to Consolidated Financial Statements.



5



---

SCPIE HOLDINGS INC. AND SUBISIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

MARCH 31, 2006



|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
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, 2006 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2006. For further information, refer to the consolidated financial statements and notes thereto included in the SCPIE Holdings Annual Report on Form 10-K for the year ended December 31, 2005.

Certain 2005 amounts have been reclassified to conform to the 2006 presentation.



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

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



|                                                                                                          |  |                                      |       |      |   |      
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | ---- | - | -----
|                                                                                                          |  | THREE MONTHS ENDEDMARCH 31,         
|                                                                                                          |  | 2006                                 |       | 2005
|                                                                                                          |  | (IN
THOUSANDS,EXCEPT PER SHARE DATA)
|Numerator                                                                                                 |  |                                      |       |      |   |      
|Net income                                                                                                |  | $                                    | 2,378 |      | $ | 1,671
|Numerator for:                                                                                            |  |                                      |       |      |   |      
|Basic earnings per share of common stock                                                                  |  |                                      | 2,378 |      |   | 1,671
|Diluted earnings per share of common stock                                                                |  |                                      | 2,378 |      |   | 1,671
|Denominator                                                                                               |  |                                      |       |      |   |      
|Denominator for basic earnings per share of common stock  weighted-average shares outstanding            |  |                                      | 9,518 |      |   | 9,405
|Effect of dilutive securities:                                                                            |  |                                      |       |      |   |      
|Stock options                                                                                             |  |                                      | 120   |      |   | 155  
|                                                                                                          |  |                                      |       |      |   |      
|Denominator for diluted earnings per share of common stock adjusted  weighted-average shares outstanding |  |                                      | 9,638 |      |   | 9,560
|Basic earnings per share of common stock                                                                  |  | $                                    | 0.25  |      | $ | 0.18 
|Diluted earnings per share of common stock                                                                |  | $                                    | 0.25  |      | $ | 0.18 



6



---

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

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



|                                 |  |                      |         |                      |   |                       |  |           |        |  |   |        
|-------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | --------- | ------ |  | - | -------
|                                 |  | COST ORAMORTIZEDCOST |         | GROSSUNREALIZEDGAINS |   | GROSSUNREALIZEDLOSSES |  | FAIRVALUE
|                                 |  | (IN THOUSANDS)      
|Fixed-maturity securities:       |  |                      |         |                      |   |                       |  |           |        |  |   |        
|Bonds:                           |  |                      |         |                      |   |                       |  |           |        |  |   |        
|U.S. government and agencies     |  | $                    | 190,207 |                      | $ | 140                   |  | $         | 4,595  |  | $ | 185,752
|Mortgage-backed and asset-backed |  |                      | 86,036  |                      |   | 28                    |  |           | 2,107  |  |   | 83,957 
|Corporate                        |  |                      | 190,990 |                      |   | 106                   |  |           | 6,828  |  |   | 184,268
|                                 |  |                      |         |                      |   |                       |  |           |        |  |   |        
|Total fixed-maturity securities  |  |                      | 467,233 |                      |   | 274                   |  |           | 13,530 |  |   | 453,977
|Common stocks                    |  |                      | 1,897   |                      |   | 208                   |  |           |       |  |   | 2,105  
|                                 |  |                      |         |                      |   |                       |  |           |        |  |   |        
|Total                            |  | $                    | 469,130 |                      | $ | 482                   |  | $         | 13,530 |  | $ | 456,082
|                                 |  |                      |         |                      |   |                       |  |           |        |  |   |        

The following table illustrates the gross unrealized losses included in the Companys investment portfolio
and the fair value of those securities, aggregated by investment category. The table also illustrates the length of time that they have been in a continuous unrealized loss position as of March 31, 2006.



|                                 |  |                       |       |                   |   |                       |  |           |       |                       |   |           |  |   |        |  |   |        
|-------------------------------- |  | --------------------- | ----- | ----------------- | - | --------------------- |  | --------- | ----- | --------------------- | - | --------- |  | - | ------ |  | - | -------
|                                 |  | LESS THAN 12 MONTHS   |       | 12 MONTHS OR MORE |   | TOTAL                
|                                 |  | GROSSUNREALIZEDLOSSES |       | FAIRVALUE         |   | GROSSUNREALIZEDLOSSES |  | FAIRVALUE |       | GROSSUNREALIZEDLOSSES |   | FAIRVALUE
|                                 |  | (IN THOUSANDS)       
|Fixed-maturity securities:       |  |                       |       |                   |   |                       |  |           |       |                       |   |           |  |   |        |  |   |        
|Bonds:                           |  |                       |       |                   |   |                       |  |           |       |                       |   |           |  |   |        |  |   |        
|U.S. government and agencies     |  | $                     | 3,358 |                   | $ | 121,585               |  | $         | 1,237 |                       | $ | 53,770    |  | $ | 4,595  |  | $ | 175,355
|Mortgage-backed and asset-backed |  |                       | 161   |                   |   | 16,593                |  |           | 1,946 |                       |   | 66,586    |  |   | 2,107  |  |   | 83,179 
|Corporate                        |  |                       | 2,728 |                   |   | 90,619                |  |           | 4,100 |                       |   | 88,036    |  |   | 6,828  |  |   | 178,655
|                                 |  |                       |       |                   |   |                       |  |           |       |                       |   |           |  |   |        |  |   |        
|Total fixed maturity securities  |  | $                     | 6,247 |                   | $ | 228,797               |  | $         | 7,283 |                       | $ | 208,392   |  | $ | 13,530 |  | $ | 437,189
|                                 |  |                       |       |                   |   |                       |  |           |       |                       |   |           |  |   |        |  |   |        

The Company held 119 investment positions with unrealized losses as of March 31, 2006. All of the investments
are investment grade and the unrealized losses are primarily due to interest rate fluctuations. The Company held 68 securities that were in an unrealized loss position for 12 months or more.

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.



7



---

|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,
|                                  |  | 2006                        |       | 2005
|                                  |  | (IN THOUSANDS)             
|Federal income tax expense at 35% |  | $                           | 1,320 |      | $ | 912
|Increase in taxes resulting from: |  |                             |       |      |   |    
|Other                             |  |                             | 75    |      |   | 24 
|                                  |  |                             |       |      |   |    
|Total income tax expense          |  | $                           | 1,395 |      | $ | 936
|                                  |  |                             |       |      |   |    



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

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



|                                                |  |                             |        |   |      |   |        |  
|----------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                |  | THREE MONTHS ENDEDMARCH 31, |       
|                                                |  | 2006                        |        |   | 2005 |  
|                                                |  | (IN THOUSANDS)              |       
|Net income                                      |  | $                           | 2,378  |   |      | $ | 1,671  |  
|Other comprehensive income (loss) before tax:   |  |                             |        |   |      |   |        |  
|Unrealized gains (losses) on securities         |  |                             | (5,339 | ) |      |   | (7,637 | )
|Unrealized foreign currency gains (losses)      |  |                             |       |   |      |   | (45    | )
|Change in minimum pension liability             |  |                             | (105   | ) |      |   | (105   | )
|                                                |  |                             |        |   |      |   |        |  
|Other comprehensive income (loss) before tax    |  |                             | (3,066 | ) |      |   | (6,116 | )
|Income tax benefit related to securities        |  |                             | (1,868 | ) |      |   | (2,672 | )
|Income tax benefit related to pension liability |  |                             | (37    | ) |      |   | (37    | )
|                                                |  |                             |        |   |      |   |        |  
|Comprehensive income (loss)                     |  | $                           | (1,161 | ) |      | $ | (3,407 | )
|                                                |  |                             |        |   |      |   |        |  



|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, 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 gains                 |  |                                      |        |                    |   |        |       |  |   | (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 |  
|                                          |  |                                      |         |                   
|THREE MONTHS ENDED MARCH 31, 2005         |  | DIRECT HEALTHCARE LIABILITYINSURANCE |         | ASSUMEDREINSURANCE |   |         | OTHER |  |   | TOTAL   |  
|Premiums written                          |  | $                                    | 91,494  |                    | $ | (558    | )     |  |   |         |   |  | $ | 90,936  |  
|                                          |  |                                      |         |                    |   |         |       |  |   |         |   |  |   |         |  
|Premiums earned                           |  | $                                    | 32,196  |                    | $ | 390     |       |  |   |         |   |  | $ | 32,586  |  
|Net investment income                     |  |                                      |        |                    |   |        |       |  | $ | 4,667   |   |  |   | 4,667   |  
|Realized investment gains                 |  |                                      |        |                    |   |        |       |  |   | 16      |   |  |   | 16      |  
|Other revenue                             |  |                                      |        |                    |   |        |       |  |   | 114     |   |  |   | 114     |  
|                                          |  |                                      |         |                    |   |         |       |  |   |         |   |  |   |         |  
|Total revenues                            |  |                                      | 32,196  |                    |   | 390     |       |  |   | 4,797   |   |  |   | 37,383  |  
|Losses and loss adjustment expenses       |  |                                      | 24,642  |                    |   | 1,269   |       |  |   |        |   |  |   | 25,911  |  
|Other operating expenses                  |  |                                      | 7,371   |                    |   | 1,494   |       |  |   |        |   |  |   | 8,865   |  
|                                          |  |                                      |         |                    |   |         |       |  |   |         |   |  |   |         |  
|Total expenses                            |  |                                      | 32,013  |                    |   | 2,763   |       |  |   |        |   |  |   | 34,776  |  
|                                          |  |                                      |         |                    |   |         |       |  |   |         |   |  |   |         |  
|Segment income (loss) before income taxes |  | $                                    | 183     |                    | $ | (2,373  | )     |  | $ | 4,797   |   |  | $ | 2,607   |  
|                                          |  |                                      |         |                    |   |         |       |  |   |         |   |  |   |         |  
|Segment assets                            |  | $                                    | 80,912  |                    | $ | 275,606 |       |  | $ | 612,530 |   |  | $ | 969,048 |  

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.



9



---

|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.

Highlands
Insurance Group

Between January 1, 2000, and April 30, 2001, the Company issued endorsements to certain policyholders of the insurance
company subsidiaries of Highlands Insurance Group, Inc. (HIG). Under these endorsements, the Company agreed to assume the policy obligations of the HIG insurance company subsidiaries, if the subsidiaries became unable to pay their obligations by
reason of having been declared insolvent by a court of competent jurisdiction. The coverages included property, workers compensation, commercial automobile, general liability and umbrella. The gross premiums written by the HIG subsidiaries
were approximately $88.0 million for the subject policies. In February 2002, the Texas Department of Insurance placed the principal HIG insurance company subsidiaries under its supervision while HIG voluntarily liquidated their claim liabilities.

During 2002 and 2003, all of the HIG insurance company subsidiaries (with the exception of a California subsidiary) were merged into a single Texas
domiciled subsidiary, Highlands Insurance Company (Highlands). Highlands has advised the Company that the HIG insurance company subsidiaries have paid losses and LAE under the subject policies of more than $66.0 million and that at March 31,
2006 had established case loss reserves of $5.9 million, net of reinsurance. Based on a limited review of the exposures remaining, the Company estimates that incurred but not reported losses are $3.6 million, for a total loss and loss expense
reserve of $9.5 million. This estimate is not based on a full reserve analysis of the exposures. To the extent Highlands is declared insolvent at some future date by a court of competent jurisdiction and is unable to pay losses under the subject
policies, the Company would be responsible to pay the amount of the losses incurred and unpaid at such date and would be subrogated to the rights of the policyholders as creditors of Highlands. The Company may also be entitled to indemnification of
a portion of this loss from certain of Highlands reinsurers.

On November 6, 2003, the State of Texas obtained an order in the Texas District
Court appointing the Texas Insurance Commissioner as the permanent Receiver of Highlands and placing the Receiver in possession of all assets of Highlands. The order expressly provided that it did not constitute a finding of Highlands
insolvency nor an authorization to liquidate Highlands. The Receiver continues to resolve Highlands claim liabilities and otherwise conduct its business, as part of his efforts to rehabilitate Highlands. If an order of liquidation is ultimately
entered and becomes final, the Company would likely be required to assume Highlands then remaining obligations under the subject policies.

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 fulfill the collateral requirements of Lloyds and guarantee loss reserves under certain other reinsurance contracts. As of March 31, 2006, letter of credit issuance under the facility was approximately $48.3
million. Securities of $53.2 million are pledged as collateral under the facility.



10



---

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

At March 31, 2006, 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 $197,000 and $43,000 for the three month periods ended March 31, 2006 and March 31, 2005, respectively. The income tax benefit recognized in the income statement for share-based compensation was $69,000 and $15,000
for the three month periods ended March 31, 2006 and March 31, 2005, respectively.

Prior to January 1, 2006, the Company accounted for
stock options under the recognition and measurement provisions of APB No. 25. The Company provided pro forma disclosure amounts as if the fair value method defined by SFAS No. 123 had been applied to its stock-based compensation. Effective
January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, using the modified prospective transition method and therefore had not restated prior periods results. Under this transition method,
stock-based compensation expense for the first quarter of fiscal 2006 included compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of, January 1, 2006, based on the grant-date fair value
estimated in accordance with the original provisions of SFAS No. 123. Stock-based compensation expense for all share-based payment awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123R. The Company recognizes these compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is the option vesting term of ten years. The cash
flows resulting from the tax benefits in excess of the compensation expense recorded for these options is classified as cash provided by financing activities.

As a result of adopting SFAS 123R, the Company recognized compensation expense related to stock options of $122,000 for the three months ended March 31, 2006. Had the Company applied the fair value recognition provisions of SFAS
No. 123 in the first quarter of 2005, compensation expense of $58,000 would have been recognized related to stock options for the three months ended March 31, 2005.

Option activity as of March 31, 2006 and changes during the three months ended March 31, 2006 were as follows:



|                               |  |         |  |                                 |       |                                                     |      |                                      |   |          
|------------------------------ |  | ------- |  | ------------------------------- | ----- | --------------------------------------------------- | ---- | ------------------------------------ | - | ---------
|                               |  | Shares  |  | Weighted Average Exercise Price |       | Weighted Average Remaining Contractual Term (years) |      | Aggregate Intrinsic Value (in 000s)
|Outstanding at January 1, 2006 |  | 892,034 |  | $                               | 13.69 |                                                     |      |                                      |   |          
|Granted                        |  |        |  |                                 |       |                                                     |      |                                      |   |          
|Exercised                      |  | 32,600  |  | $                               | 16.70 |                                                     |      |                                      |   |          
|Cancelled or Expired           |  |        |  |                                 |       |                                                     |      |                                      |   |          
|                               |  |         |  |                                 |       |                                                     |      |                                      |   |          
|Outstanding at March 31, 2006  |  | 859,434 |  | $                               | 13.62 |                                                     | 6.06 |                                      | $ | 9,348,145
|                               |  |         |  |                                 |       |                                                     |      |                                      |   |          
|Exercisable at March 31, 2006  |  | 775,432 |  | $                               | 13.80 |                                                     | 5.94 |                                      | $ | 7,521,347
|                               |  |         |  |                                 |       |                                                     |      |                                      |   |          

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, 2006 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,
2006. Total intrinsic value of options exercised during the three months ended March 31, 2006 was $258,000.

As of March 31, 2006, $328,000 of
total unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of 2.2 years.



11



---

|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 Company continues to settle and pay claims incurred in the non-core healthcare and assumed reinsurance
operations.

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. The capital requirements required by the reserve to surplus ratios continues to decline as the Company settles the claims in its non-core businesses.

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.



12



---

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 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 both its internal actuarial staff and independent consulting actuaries 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, especially those of Lloyds syndicates. Ceding entities, representing over 65% of the reinsurance assumed business for the 1999 to 2003
underwriting years (based on gross written premiums), submit reports to the Company containing ultimate incurred loss estimates reviewed by independent or internal actuaries of the ceding entities. These reported ultimate incurred losses are the
primary basis for the Companys reserving estimates. 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.



13



---

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 Company has established net reserves of $382.0 million as of March 31, 2006, after considering both prospective and retrospective reinsurance. 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, 2006      |  |              |  |                     |  |                    |  |               |  |                  
|Direct Healthcare   |  |              |  |                     |  |                    |  |               |  |                  
|Core                |  | 80,010       |  | 197,956             |  | 277,966            |  | 15,548        |  | 262,418          
|Non-Core            |  | 39,487       |  | 19,650              |  | 59,137             |  | 2,856         |  | 56,281           
|                    |  |              |  |                     |  |                    |  |               |  |                  
|                    |  | 119,497      |  | 217,606             |  | 337,103            |  | 18,404        |  | 318,699          
|Assumed Reinsurance |  | 59,319       |  | 32,942              |  | 92,261             |  | 28,921        |  | 63,340           
|                    |  |              |  |                     |  |                    |  |               |  |                  
|                    |  | 178,816      |  | 250,548             |  | 429,364            |  | 47,325        |  | 382,039          
|                    |  |              |  |                     |  |                    |  |               |  |                  
|December 31, 2005   |  |              |  |                     |  |                    |  |               |  |                  
|Direct Healthcare   |  |              |  |                     |  |                    |  |               |  |                  
|Core                |  | 76,726       |  | 194,114             |  | 270,840            |  | 13,934        |  | 256,906          
|Non-Core            |  | 42,730       |  | 20,523              |  | 63,253             |  | 2,638         |  | 60,615           
|                    |  |              |  |                     |  |                    |  |               |  |                  
|                    |  | 119,456      |  | 214,637             |  | 334,093            |  | 16,572        |  | 317,521          
|Assumed Reinsurance |  | 59,804       |  | 35,418              |  | 95,222             |  | 28,962        |  | 66,260           
|                    |  |              |  |                     |  |                    |  |               |  |                  
|                    |  | 179,260      |  | 250,055             |  | 429,315            |  | 45,534        |  | 383,781          
|                    |  |              |  |                     |  |                    |  |               |  |                  

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 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 2006 reserve levels, a 1% change in pure loss costs trend produces a change in prior reserves of approximately $6.8 million. Such changes are reflected in the period of change. Reserves
related to medical malpractice coverage account for over 90% 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



14



---

approximately $285,000 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 $2.4 million.

The sensitivity of the Companys reserves for Assumed Reinsurance is impacted
primarily by three factors: the accuracy of 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

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, 2006, the Company had $51.7 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 $24.4 million for a net operating loss carryforward that will expire in 2021. 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 should return to a position of taxable income, thus enabling it to utilize the net operating loss carryforward.



15



---

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 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 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 Part II, Other Information  Item 1A, Risk Factors below and
Risk Factors, Managements Discussion and Analysis  Overview, and Managements Discussion and Analysis  Critical Accounting Policies in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005. 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 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, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005

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, the premiums earned are allocated between core and non-core premium. Core premium represents California and Delaware business excluding dentist and hospital business. Non-core business represents 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.



16



---

The following table summarizes by core and non-core businesses the underwriting results of the direct healthcare
liability insurance segment for the periods indicated (dollars in thousands):

Direct Healthcare Liability Insurance Segment

Underwriting Results



|                                  |  |      |        |   |           |   |        |  |   |       
|--------------------------------- |  | ---- | ------ | - | --------- | - | ------ |  | - | ------
|                                  |  | CORE |        |   | NON-CORE* |   | TOTAL*
|THREE MONTHS ENDED MARCH 31, 2006 |  |      |        |   |           |   |        |  |   |       
|Premiums written                  |  | $    | 88,626 |   |           | $ |       |  | $ | 88,626
|                                  |  |      |        |   |           |   |        |  |   |       
|Premiums earned                   |  | $    | 31,132 |   |           | $ |       |  | $ | 31,132
|Losses and LAE incurred           |  |      | 22,105 |   |           |   |       |  |   | 22,105
|Underwriting expenses             |  |      | 6,896  |   |           |   |       |  |   | 6,896 
|                                  |  |      |        |   |           |   |        |  |   |       
|Underwriting gain                 |  | $    | 2,131  |   |           | $ |       |  | $ | 2,131 
|                                  |  |      |        |   |           |   |        |  |   |       
|Loss ratio                        |  |      | 71.0   | % |           |   |        |  |   |       
|Expense ratio                     |  |      | 22.2   | % |           |   |        |  |   |       
|Combined ratio                    |  |      | 93.2   | % |           |   |        |  |   |       
|THREE MONTHS ENDED MARCH 31, 2005 |  |      |        |   |           |   |        |  |   |       
|Premiums written                  |  | $    | 91,351 |   |           | $ | 143    |  | $ | 91,494
|                                  |  |      |        |   |           |   |        |  |   |       
|Premiums earned                   |  | $    | 32,044 |   |           | $ | 152    |  | $ | 32,196
|Losses and LAE incurred           |  |      | 24,627 |   |           |   | 15     |  |   | 24,642
|Underwriting expenses             |  |      | 7,296  |   |           |   | 75     |  |   | 7,371 
|                                  |  |      |        |   |           |   |        |  |   |       
|Underwriting loss                 |  | $    | 121    |   |           | $ | 62     |  | $ | 183   
|                                  |  |      |        |   |           |   |        |  |   |       
|Loss ratio                        |  |      | 76.9   | % |           |   |        |  |   |       
|Expense ratio                     |  |      | 22.7   | % |           |   |        |  |   |       
|Combined ratio                    |  |      | 99.6   | % |           |   |        |  |   |       



|* | The ratios for the segment total and non-core business are not meaningful due to the run-off status of non-core business.
|- | -------------------------------------------------------------------------------------------------------------------------

Core Business

Premiums written were $88.6 million and premiums
earned were $31.1 million in the first quarter 2006; compared to $91.4 million and $32.0 million in the first quarter 2005. Premiums written and earned decreased primarily due to a decline in policies in-force of 2.5% and smaller premiums for
loss-related groups due to lower frequency.

The loss ratio (losses and LAE related to premiums earned) for the first quarter 2006 was 71.0% compared to
76.9% in the first quarter 2005. The decrease in the loss ratio is due primarily to a decline in claim frequency.

The underwriting expense ratio (expenses
related to premiums earned) decreased to 22.2% in the first quarter 2006 from 22.7% in the first quarter 2005. This change is primarily attributable to a slight decline in premium acquisition expenses.

Non-Core Business

Outstanding reserves for the non-core healthcare
declined to $56.3 as of March 31, 2006 from $60.6 million at December 31, 2005 and the number of open claims decreased to 196 from 229 for the same period. No change in prior reserve estimates was required in the first quarter ended
March 31, 2006.

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.



17



---

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



|                                          |  |                                                 |        |   |      |   |        |  
|----------------------------------------- |  | ----------------------------------------------- | ------ | - | ---- | - | ------ | -
|                                          |  | Assumed Reinsurance SegmentUnderwriting Results |       
|FOR THE THREE MONTHS ENDED MARCH 31,      |  | 2006                                            |        |   | 2005 |  
|Premiums written                          |  | $                                               | 497    |   |      | $ | (558   | )
|                                          |  |                                                 |        |   |      |   |        |  
|Premiums earned                           |  | $                                               | 498    |   |      | $ | 390    |  
|Underwriting expenses                     |  |                                                 |        |   |      |   |        |  
|Losses                                    |  |                                                 | 3,100  |   |      |   | 1,269  |  
|Underwriting and other operating expenses |  |                                                 | 154    |   |      |   | 1,494  |  
|                                          |  |                                                 |        |   |      |   |        |  
|Underwriting loss                         |  | $                                               | (2,756 | ) |      | $ | (2,373 | )
|                                          |  |                                                 |        |   |      |   |        |  

The earned premium in 2006 and 2005 is primarily the one assumed reinsurance program for the 2003 underwriting
year and reinstatement premiums.

The underwriting loss in the first quarter 2006 is primarily related to increased reserve estimates reported to the
Company for a few contracts. Increased reserves related to contracts involving Lloyds syndicates and excess D & O and other liability coverage. The loss in 2005 related to increased reserves for contracts involving bail and immigration
bonds, Lloyds syndicates and the World Trade Center.

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 6.4% to $5.0
million for the first quarter 2006 from $4.7 million in 2005. Investment income reflects a slight decrease in fixed maturity investments offset by an increase in the average rate of return. The decline in invested assets was a result of the claim
payments related to the run-off of the non-core healthcare liability and assumed reinsurance businesses. The average rate of return on invested assets was 3.8% and 3.4% for the first quarters 2006 and 2005, respectively.

Net realized investment losses of $111,000 were recorded for the first quarter 2006 versus net realized investment gains of $16,000 in the first quarter 2005.



18



---

Expense included in Underwriting and Other Operating Expenses and additional costs 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 2006, the Company had positive cash flow from operations of $5.7 million
compared to a negative operating cash flow of $19.0 million in 2005. 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 $76.0 million or 14.3% of invested assets, at March 31, 2006. 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 $2.1 million at March 31, 2006. 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 2008, 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 2006 without prior regulatory approval is approximately $14.5 million. As of March 31, 2006, 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, 2006, SCPIE Holdings held cash and short-term securities of $3.2 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.



19



---

The Companys capital adequacy position has been weakened by the losses in the non-core business. On
November 14, 2003, A.M. Best (the leading rating organization for the insurance industry), after a review of the third quarter 2003 results, reduced the rating of the insurance company subsidiaries to B (Fair), with a negative outlook. A.M.
Best assigns this rating to companies that have, in its opinion, a fair ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions. The NAIC has developed a
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, 2005, the RBC level of each insurance company subsidiary exceeded the threshold requiring the least regulatory attention. At December 31, 2005, SCPIE Indemnity exceeded
this threshold by $85.9 million.

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, 2006, the Companys statutory surplus was
approximately $148.8 million. The principal differences between statutory surplus and stockholders equity are 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. This process could be accelerated if additional capital were obtained by the Company. Although the Company believes an increase in the A.M. Best rating would be beneficial
to the Companys ongoing operations, especially in the area of new business opportunities, there is no assurance that such rating would be increased in the event the Company raised additional capital or whether the Company could raise such
capital in appropriate amounts and on reasonable terms.

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, 2006 comprised 85.3% of total investments at market value. Corporate bonds represent 40.6% and U.S. government bonds represent 40.9% 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, 2006 was 4.1 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, 2006, the carrying value of the investment portfolio included $13.0 million in net unrealized losses. At
December 31, 2005, the investment portfolio included $7.7 million in net unrealized losses.



20



---

|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 controls 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 controls over financial reporting.



21



---

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, is 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 significant number of bond losses emerged. There are a number of pending disputes between the primary insurers and
reinsurers involved in the CBC program. AHI has been actively engaged in arbitration proceedings with each of the primary insurers to resolve these disputes. On March 6, 2006, the arbitrators in the proceeding with Aegis made a final award,
under which AHI was required to pay an amount slightly in excess of that reserved by the Company at December 31, 2005. To the extent there are future LAE and bail bond losses, AHI will also be obligated to pay a ratable share. The Company does
not believe that this award will result in any material net loss to the Company. The arbitration proceedings with Sirius and Highlands are ongoing.



|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, 2005, under the caption Risk Factors.



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

None.



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

None.



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

None.



22



---

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

On February 7, 2006, the Compensation
Committee of the Board of Directors set the revenue and operating income targets and targeted bonus opportunities for 2006 under the Companys Annual Incentive Plan. The Annual Incentive Plan provides for the payment of cash bonuses based on a
combination of Company performance in relation to predetermined objectives and individual executive performance for each year under the plan. Under the Annual Incentive Plan, the Compensation Committee, together with the Chief Executive Officer,
establishes target objectives for operating income and revenue for the year and individual bonus opportunities based on industry comparisons. Plan payouts in relation to target amounts are adjusted upward or downward based on the Companys
performance in relation to targeted operating income and premium revenues. The greater weight is placed on actual operating income. Individual awards are then subject to increase or decrease by 50% based on the individual performance of the
executive during the year. For 2006, the Compensation Committee has set the individual targeted bonus opportunities (before adjustment for Company and individual performance) at 40% of base salary during 2006. Mr. Zuk set the target bonus
opportunities for officers other than senior vice presidents and the chief accounting officer.

On February 7, 2006, the Stock Option and Incentive
Bonus Committee of the Board of Directors (the Bonus Committee) set the revenue and operating income targets and targeted bonus opportunities for 2006 under the Companys Senior Executive Incentive Bonus Plan (the Senior
Plan). Donald J. Zuk is the only participant in the Senior Plan for 2006. Mr. Zuks bonus is determined under the Senior Plan in the same manner as bonuses are determined under the Annual Incentive Plan, except that his targeted
bonus opportunity is fixed in advance by the Stock Option and Incentive Bonus Committee. For 2006, the Bonus Committee has set Mr. Zuks targeted bonus opportunity (before adjustment for Company and individual performance) at 50% of base
salary during 2006.

Bonuses for 2006 under each of the Annual Incentive Plan and the Bonus Plan would be paid to participants in early 2007.



23



---

|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 Annual Report on Form 10-K 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 Annual Report on Form 10-K 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.



24



---

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 9, 2006 |  |  |  | By:                 |  | /s/ Donald J. Zuk    
|                  |  |  |  |                     |  |                       |  | Donald J. Zuk                                    
|                  |  |  |  |                     |  |                       |  | President and Chief Executive Officer            
|                  |  |  | 
|Date: May 9, 2006 |  |  |  | By:                 |  | /s/ Robert B. Tschudy
|                  |  |  |  |                     |  |                       |  | Robert B. Tschudy                                
|                  |  |  |  |                     |  |                       |  | Senior Vice President and Chief Financial Officer



25