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.
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