Seabright (MM) (NASDAQ:SEAB)
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SeaBright Insurance Holdings, Inc. (Nasdaq:SEAB) today announced results
for the third quarter and nine-months ended September 30, 2008.
Net income for the third quarter was $1.8 million or $0.08 per fully
diluted share compared to $9.7 million or $0.46 per fully diluted share
in the year-earlier period. During the quarter, the Company recorded a
pre-tax charge of $11.5 million, or $0.54 per diluted share, related to
other-than-temporary impairments of the Company’s
investments in preferred stock issued by Fannie Mae, Freddie Mac and
Citigroup ($8.3 million) and equity indexed securities exchange-traded
funds ($3.2 million).
For the third quarter of 2008, premiums earned increased 15.1% to $68.7
million compared to $59.7 million for the same period in 2007. For the
quarter, total revenue was $65.4 million compared to $66.7 million for
the same period in 2007.
John Pasqualetto, SeaBright’s Chairman,
President and Chief Executive Officer, said, "Setting aside the negative
impact on third quarter earnings caused by investment portfolio
impairments, I am pleased with our results which reflect sound
operational fundamentals. Clearly, we continue to operate in a soft
insurance market and a very difficult economic environment.”
Mr. Pasqualetto concluded, “Our priority has
always been on profitable insurance underwriting and we remain firmly
committed to prudent underwriting discipline and outstanding customer
service. We will continue to employ a conservative approach to managing
our investment portfolio.”
The net loss ratio for the third quarter of 2008 was 57.1% compared to
57.8% in the same period of 2007. During the third quarter 2008, on a
pre-tax basis, the Company recognized approximately $5.1 million in
favorable development of prior years’ loss
reserve estimates to reflect a continuation of deflation trends in the
paid loss data for recent accident years. During the third quarter of
2007, on a pre-tax basis, the Company recognized $5.5 million in
favorable development of prior years' loss reserve estimates.
Total underwriting expenses for the third quarter 2008 were $17.4
million compared to $15.2 million in the prior year period. The net
underwriting expense ratio for the third quarter was 25.1% compared to
25.3% for the same period in 2007.
The net combined ratio for the third quarter of 2008 was 82.2% compared
to 83.1% for the same period in 2007.
Net investment income for the third quarter of 2008 was $5.6 million
compared to $5.2 million for the same period in 2007 as the Company’s
investment portfolio and cash increased 2.9% or $14.7 million to $529.4
million at September 30, 2008, from $514.7 million at December 31, 2007.
At September 30, 2008, SeaBright had 1,067 customers, an increase of
19.1% compared to 896 customers a year earlier. At September 30, 2008,
the average premium size per customer was approximately $256,000
compared to approximately $289,000 at September 30, 2007, a reflection
of the continued geographic diversification of SeaBright’s
business and lower premium rates related to the decline in loss costs.
For the nine months ended September 30, 2008, net income was $19.1
million or $0.90 per diluted share compared to $29.9 million or $1.43
per diluted share in the same period in 2007. Total revenue for the
period increased 4.9% to $191.3 million compared to $182.3 million for
the same period in 2007. For the nine months ended September 30, 2008,
net premiums earned increased 11.0% to $181.1 million compared to $163.1
million for the comparable period in 2007.
The net loss ratio was 55.8% for the nine months ended September 30,
2008 compared to 54.3% for the same period in 2007. For the nine months
ended September 30, 2008, on a pre-tax basis, the Company recognized
$20.9 million in favorable development of prior years’
loss reserve estimates, compared to $20.5 million, on a pre-tax basis,
recognized in the same period of 2007.
Total underwriting expenses for the nine months ended September 30, 2008
were $50.7 million compared to $42.5 million in the prior year period
and the net underwriting expense ratio was 27.9% compared to 26.0% in
the same period in 2007.
For the nine months ended September 30, 2008, the net combined ratio was
83.7% compared to 80.3% for the same period in 2007.
At September 30, 2008, the Company’s
investment portfolio and cash totaled $529.4 million and had an overall
credit rating of AA. The Company regularly reviews its investment
portfolio for other-than-temporary impairment declines in fair value
considering, among other things, the underlying credit quality of the
security, the magnitude and duration of the impairment, current economic
conditions and the intent and ability to retain the investment for a
period of time sufficient to allow for a recovery in value.
As of September 30, 2008, the overall credit quality of the Company’s
$283.9 million fixed income municipal portfolio (including secondary
insurance) stood at AA/AA-. With secondary insurance removed, the
average rating of the municipal portfolio would be AA-. As of September
30, 2008, the Company had $202.8 million in insured municipal bonds with
a weighted average credit rating of AA. The underlying rating of the
insured bonds was AA-. The Company also had $81.1 million in uninsured
municipal bonds with a weighted average credit rating of AA/AA-.
At September 30, 2008, the Company had $2.6 million invested in
collateralized mortgage obligations, $2.1 million in adjustable rate
mortgages, $11.9 million in asset backed securities, none of which were
sub prime, and investments in Fannie Mae and Freddie Mac debt securities
and preferred stock of $12.9 million and $677,000, respectively.
About SeaBright Insurance Holdings, Inc.
SeaBright Insurance Holdings, Inc. is an insurance holding company whose
wholly owned subsidiary, SeaBright Insurance Company, operates as a
specialty underwriter of multi-jurisdictional workers’
compensation insurance. SeaBright Insurance Company distributes its
maritime, alternative dispute resolution and state act products through
selected independent insurance brokers and through its in-house
wholesale broker affiliate, PointSure Insurance Services. SeaBright
Insurance Company provides workers' compensation coverage to employers
in selected regions nationwide. To learn more about SeaBright Insurance
Company and SeaBright Insurance Holdings, Inc., visit our website at www.sbic.com.
Conference Call
The Company will host a conference call on Tuesday, October 21, 2008 at
4:30 p.m. Eastern Time featuring remarks by John G. Pasqualetto,
President and CEO, Richard J. Gergasko, Executive Vice President -
Operations, and Robert P. Cuthbert, Senior Vice President and Chief
Financial Officer. The conference call is available via webcast on the
Company’s website and can be accessed by
visiting http://investor.sbic.com.
Once there, select “Webcasts and Presentations”
on the left side of the page. The dial-in number for the conference call
is (877) 723-9521. Please call at least five minutes before the
scheduled start time.
For interested individuals unable to join the conference call, a replay
of the call will be available through October 28, 2008, at (888)
203-1112 (domestic) or (719) 457-0820 (international), (Passcode:
4497641). The online archive of the webcast will be available on the
Company’s website for 30 days following the
call.
Cautionary Statement
Some of the statements contained in this press release are “forward-looking
statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. In some cases, you can
identify forward-looking statements by terminology such as “may,”
“will,” “should,”
“expect,” “plan,”
“intend,” “anticipate,”
“believe,” “estimate,”
“predict,” “potential”
or “continue,” the
negative of these terms or other terminology. Forward-looking statements
are based on the opinions and estimates of management at the time the
statements are made and are subject to certain risks and uncertainties
that could cause actual results to differ materially from those
anticipated in the forward-looking statements. Factors that could affect
the Company's actual results include, among others, the fact that our
loss reserves are based on estimates and may be inadequate to cover our
actual losses; the uncertain effects of emerging claim and coverage
issues on our business; the geographic concentration of our business; an
inability to obtain or collect on our reinsurance protection; a
downgrade in the A.M Best rating of our insurance subsidiary; the impact
of extensive regulation of the insurance industry and legislative and
regulatory changes; a failure to realize our investment objectives; the
effects of intense competition; the loss of one or more principal
employees; the inability to acquire additional capital on favorable
terms; a failure of independent insurance brokers to adequately market
our products; the loss of our rights to fee income and protective
arrangements that were established in connection with the acquisition of
our business; and the effects of acts of terrorism or war. More
information about these and other factors that potentially could affect
our financial results is included in our 2007 Annual Report on Form
10-K, filed with the U.S. Securities and Exchange Commission on March
17, 2008, and in our other public filings filed with the U.S. Securities
and Exchange Commission. Readers are cautioned not to place undue
reliance upon these forward-looking statements, which speak only as of
the date of this release. The Company undertakes no obligation to update
any forward-looking statements.
Set forth in the tables below are summary results of operations for the
three and nine month periods ended September 30, 2008 and 2007 as well
as selected balance sheet data as of September 30, 2008 and December 31,
2007. The following information is preliminary and unaudited and is
subject to change until final results are publicly distributed upon the
filing of the Company’s quarterly report on
Form 10-Q. The Company currently expects to file its unaudited condensed
consolidated financial statements with the U.S. Securities and Exchange
Commission as part of its quarterly report on Form 10-Q in a timely
fashion on or before November 10, 2008.
SEABRIGHT INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30,
2008
(Unaudited)
Dec. 31,
2007
(Audited)
(in thousands)
ASSETS
Fixed income securities available-for-sale, at fair value
$
499,725
$
474,756
Equity securities available-for-sale, at fair value
11,333
11,193
Preferred stock available-for-sale, at fair value
851
8,488
Cash and cash equivalents
17,497
20,292
Accrued investment income
5,616
5,055
Premiums receivable, net of allowance
14,661
9,223
Deferred premiums
153,302
150,066
Service income receivable
–
436
Reinsurance recoverables
20,141
14,210
Receivable under adverse development cover
2,533
2,533
Prepaid reinsurance
1,677
1,820
Property and equipment, net
4,752
1,707
Deferred income taxes, net
24,522
16,488
Deferred policy acquisition costs, net
21,315
19,832
Intangible assets, net
1,225
1,233
Goodwill
3,386
2,881
Other assets
18,154
15,356
Total assets
$
800,690
$
755,569
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense
$
279,656
$
250,085
Unearned premiums
146,745
147,033
Reinsurance funds withheld and balances payable
1,829
220
Premiums payable
5,289
4,136
Accrued expenses and other liabilities
45,817
47,789
Surplus notes
12,000
12,000
Total liabilities
491,336
461,263
Commitments and contingencies
Stockholders’ equity:
Series A preferred stock, $0.01 par value; 750,000 shares
authorized; no shares issued and outstanding
–
–
Undesignated preferred stock, $0.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding
–
–
Common stock, $0.01 par value; 75,000,000 shares authorized;
issued and outstanding – 21,362,312
shares at September 30, 2008 and 20,831,102 shares at December 31,
2007
214
208
Paid-in capital
199,534
194,023
Accumulated other comprehensive income (loss)
(7,895
)
1,638
Retained earnings
117,501
98,437
Total stockholders’ equity
309,354
294,306
Total liabilities and stockholders’ equity
$
800,690
$
755,569
SEABRIGHT INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2008
2007
2008
2007
(dollars in thousands, except income per share amounts)
Revenue: (1)
Premiums earned
$
68,686
$
59,721
$
181,093
$
163,109
Claims service income
(78
)
432
752
1,331
Other service income
80
55
179
104
Net investment income
5,572
5,174
16,853
14,786
Net realized loss
(11,678
)
(25
)
(13,807
)
(85
)
Other income
2,820
1,376
6,271
3,018
65,402
66,733
191,341
182,263
Losses and expenses:
Loss and loss adjustment expenses
39,154
34,921
101,719
89,851
Underwriting, acquisition and insurance expenses
17,350
15,172
50,674
42,495
Interest expense
205
289
666
854
Other expenses
2,793
2,020
7,146
5,223
59,502
52,402
160,205
138,423
Income before taxes
5,900
14,331
31,136
43,840
Income tax expense (benefit):
Current
5,268
5,438
14,933
15,604
Deferred
(1,148
)
(757
)
(2,861
)
(1,690
)
4,120
4,681
12,072
13,914
Net income
$
1,780
$
9,650
$
19,064
$
29,926
Basic earnings per share
$
0.09
$
0.47
$
0.93
$
1.47
Diluted earnings per share
$
0.08
$
0.46
$
0.90
$
1.43
Weighted average basic shares outstanding
20,581,822
20,350,778
20,466,465
20,336,778
Weighted average diluted shares outstanding
21,369,033
20,989,481
21,143,263
20,950,968
Net loss ratio (2)
57.1
%
57.8
%
55.8
%
54.3
%
Net underwriting expense ratio (3)
25.1
%
25.3
%
27.9
%
26.0
%
Net combined ratio (4)
82.2
%
83.1
%
83.7
%
80.3
%
(1) Gross and net premiums written for the periods indicated were as
follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2008
2007
2008
2007
(in thousands)
Gross premiums written
$
61,668
$
67,990
$
191,489
$
195,476
Net premiums written
57,215
63,790
180,563
183,695
(2) The net loss ratio is calculated by dividing loss and loss
adjustment expenses for the period less claims service income by
the net premiums earned for the period.
(3) The net underwriting expense ratio is calculated by dividing
underwriting, acquisition and insurance expenses for the period
less other service income by the net premiums earned for the
period.
(4) The net combined ratio is the sum of the net loss ratio and
the net underwriting expense ratio.