CHICAGO, March 5 /PRNewswire-FirstCall/ -- Specialty Underwriters'
Alliance, Inc. (NASDAQ:SUAI) today announced financial results for
the quarter and year ended December 31, 2008. 2008 Annual
Highlights -- Pre-tax and net income for 2008 was $8.0 million and
$7.4 million, respectively, compared to $12.8 million and $12.6
million for 2007; -- Shareholders' equity of $136.3 million as of
December 31, 2008, compared to $131.1 million as of December 31,
2007; -- Gross written premiums of $146.2 million during 2008,
compared to $160.4 million during 2007; -- Loss and loss adjustment
expense ratio of 62.3% for 2008, compared to 59.0% for 2007; -- Net
unrealized loss after tax of $3.4 million for the year ended
December 31, 2008, compared to a net unrealized gain after tax of
$2.2 million for the year ended December 31, 2007; -- Net realized
loss of $0.8 million as of December 31, 2008, compared to $0 as of
2007 year end. Courtney Smith, president and chief executive
officer stated, "A.M. Best recently revised our outlook to
positive. Despite the overall negative economic and industry
conditions, this is confirmation of our business model and
strategic direction. "In 2008, as has been the trend in the
industry, our revenues were reduced from prior year. However, we
have achieved significant milestones, both this year and since our
inception, which have allowed us to grow our top line while
maintaining our underwriting and claims discipline. Last year, we
activated two new Partner Agents which tripled the total number of
Partner Agents during our four years of operation. We also
significantly increased programs, states and class codes with our
current Partner Agents and added two new "A" paper fronting
facilities. "Additionally our conservative approach to investing
has minimized our exposure to the recent market volatility and
underscores our philosophy of bearing underwriting risk while
limiting our investment risk. Our overall unrealized loss
represents only 1.5% of our portfolio cost basis. We are incredibly
proud of the conservative decisions we made not to take increased
investment risk and our results reflect favorably on this
philosophy. "While our loss ratio showed slight deterioration in
2008, we are satisfied with our loss experience given the
competitive environment including mandated rate decreases in
Florida and overall worsening economic conditions. Although we were
subject to a further Florida mandated rate decrease in January of
this year of 18.6%, we are optimistic that the most recent Florida
workers' compensation rate increase of 6.4% as well as a 5%
suggested increase in California is indicative of additional price
increases. We have also instituted price increases where necessary
in our transportation segment in order to address certain
unfavorable experience in that book. Over the past few years, we
have successfully implemented our data warehouse which allows us to
more deeply understand our books of business and take action where
needed to write profitable business. "Finally, our highly scalable
infrastructure that we have developed allows us to write
significantly more business without adding expense. We are
delighted to now have all of our Partner Agents up on our systems
which will increase efficiency and lower expense. We also opened up
two new claims offices and are transitioning away from our TPAs
(except in California) in order to further reduce expenses and
achieve excellence in claims handling. "In the upcoming year, we
expect to add new Partner Agents as well as new programs and states
with existing agents and expand our "A" paper facility to allow us
to take advantage of appropriate market opportunities. We believe
we are well poised to take advantage of any future hardening in the
marketplace and, until then, to seek opportunities to write
profitable new business." Financial Results Gross written premiums
were $36.1 million for the three months ended December 31, 2008,
versus $43.3 million in the fourth quarter of 2007. For the year
ended December 31, 2008, gross written premiums were $146.2 million
versus $160.4 million for the same period in 2007. The reduction in
gross written premiums was primarily due to reduced rates in our
workers' compensation book and further deterioration in the general
economy. Earned premiums were $36.3 million for the fourth quarter
of 2008 compared to $39.5 million for the fourth quarter of 2007.
Earned premiums were $143.5 million for the year ended December 31,
2008 compared to $152.5 million for the comparable period in 2007.
Total expenses for the three months ended December 31, 2008, were
$39.0 million, consisting of loss and loss adjustment expenses of
$24.9 million, acquisition expenses of $8.5 million and other
operating expenses of $5.6 million. Total expenses for the three
months ended December 31, 2007, were $38.9 million, consisting of
loss and loss adjustment expenses of $23.9 million, acquisition
expenses of $9.3 million and other operating expenses of $5.7
million. Total expenses for the year ended December 31, 2008, were
$145.5 million, consisting of loss and loss adjustment expenses of
$89.4 million, acquisition expenses of $33.0 million and other
operating expenses of $23.1 million. Total expenses for the year
ended December 31, 2007, were $149.2 million, consisting of loss
and loss adjustment expenses of $90 million, acquisition expenses
of $36.6 million and other operating expenses of $22.6 million. For
the fourth quarter of 2008, net loss and loss adjustment expense
ratio was 68.6% versus 60.5% for the comparable quarter in 2007 due
to rate reductions in workers' compensation and large losses in the
company's commercial auto and workers' compensation lines. For the
year ended December 31, 2008, net loss and loss adjustment expense
ratio was 62.3% versus 59% for the comparable year in 2007. This
increase was driven by higher loss ratios in the company's workers'
compensation book of business due primarily to mandated lower rates
in Florida and certain large losses in the company's commercial
automobile and workers' compensation lines, partially offset by
favorable prior year loss development of $1.8 million principally
in general liability lines. Although the company was subject to a
further mandated rate decrease in January of this year of 18.6%,
the company is optimistic that the most recent workers compensation
rate increase in Florida as of April of 6.4% is indicative of
further price increases to come. The company has instituted price
increases where needed in its transportation segment in order to
address certain unfavorable experience in that book. Net investment
income for the three months ended December 31, 2008, was $2.9
million, compared to $2.7 million for the prior year period. Net
investment income for the year ended December 31, 2008, was $10.8
million, compared to $9.5 million for the prior year period. Total
revenues were $153.5 million for the year ended December 31, 2008,
compared to $162 million for the comparable period in 2007. Net
income for the quarter ended December 31, 2008, was $0.4, compared
to $3.2 million for the comparable period in 2007. Net income for
the year ended December 31, 2008, was $7.4 million, compared to
$12.6 million for the comparable period in 2007. The decrease in
net income was primarily due to a decrease in the company's pre-tax
income and an increase in taxes resulting from the company's change
of status to a full taxpayer which occurred in the second quarter
of 2008. The decrease in the company's pre-tax income was primarily
due to a decrease in earned premium resulting from reductions in
workers' compensation rates, increased competition and weak
economic conditions, which was partially offset during 2008 by the
increase in investment income. In addition, during the third
quarter, there were other-than-temporary impairment write downs for
a realized loss of $0.8 million. Earnings per share for the three
months ended December 31, 2008, was $0.03 compared to $0.20 for the
same period in 2007. Earnings per share for the year ended December
31, 2008, was $0.48, basic and $0.47, diluted compared to $0.82,
basic and diluted for the same period in 2007. Financial Condition
As of December 31, 2008, the company reported investments of $263.4
million, total assets of $454.7 million, total liabilities of
$318.4 million and shareholders' equity of $136.3 million. Book
value per share as of December 31, 2008, was $8.62 and tangible
book value per share was $7.94. As of December 31, 2007, the
company reported investments of $229.4 million, total assets of
$422.5 million, total liabilities of $291.4 million and
shareholders' equity of $131.1 million. Book value per share as of
December 31, 2007 was $8.42 and tangible book value per share was
$7.73. Book value includes unrealized losses of $2.2 million as of
December 31, 2008 as compared to gains of $1.1 million as of
December 31, 2007. Conference Call Details SUAI will host a
conference call on Friday, March 6, 2009 at 11:00 a.m. Eastern Time
to discuss fourth quarter results. Interested parties may access
the call live by dialing 877-719-9804 or the live webcast by
visiting the "Investor Relations" page of SUAI's website at
http://www.suainsurance.com/. A replay of the call will be
available by dialing 888-203-1112, and entering pass code 4386395
through March 13, 2009. A replay of the call will also remain on
the company's website for at least 90 days following the event.
About Specialty Underwriters' Alliance, Inc. Specialty
Underwriters' Alliance, Inc., through its subsidiary SUA Insurance
Company, is a specialty property and casualty insurance company
providing commercial insurance products through exclusive wholesale
Partner Agents that serve niche groups of insureds. These targeted
customers require highly specialized knowledge due to their unique
risk characteristics. Examples include tow trucks, professional
employer organizations, public entities, and contractors. SUA's
innovative approach provides products and claims handling, allowing
the Partner Agent to focus on distribution and customer
relationships. Safe Harbor Statement The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. This release or any other written or
oral statements made by or on behalf of the company may include
forward-looking statements that reflect the company's current views
with respect to future events and financial performance. All
statements other than statements of historical fact included in
this release are forward-looking statements. Forward-looking
statements can generally be identified by the use of
forward-looking terminology such as "may," "will," "plan,"
"expect," "intend," "estimate," "anticipate," "believe" or
"continue" or their negative or variations or similar terminology.
All forward-looking statements address matters that involve risks
and uncertainties. Accordingly, there are or will be important
factors that could cause our actual results to differ materially
from those indicated in these statements. We believe that these
factors include but are not limited to ineffectiveness or
obsolescence of our business strategy due to changes in current or
future market conditions; increased competition on the basis of
pricing, capacity, coverage terms or other factors; greater
frequency or severity of claims and loss activity, including as a
result of natural or man-made catastrophic events, than our
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; the effects of acts of
terrorism or war; developments in the world's financial and capital
markets that adversely affect the performance of our investments;
changes in regulations or laws applicable to us, our subsidiaries,
brokers or customers; acceptance of our products and services,
including new products and services; changes in the availability,
cost or quality of reinsurance and failure of our reinsurers to pay
claims timely or at all; decreased demand for our insurance or
reinsurance products; loss of the services of any of our executive
officers or other key personnel; the effects of mergers,
acquisitions and divestitures; changes in rating agency policies or
practices; changes in legal theories of liability under our
insurance policies; changes in accounting policies or practices;
and changes in general economic conditions, including inflation and
other factors. Forward-looking statements speak only as of the date
on which they are made, and the company undertakes no obligation to
update publicly or revise any forward-looking statement, whether as
a result of new information, future developments or otherwise.
Summary Financial Data (in millions, except per share data) For the
Three Months For the Year Ended December 31, Ended December 31,
2008 2007 2008 2007 Results of operations Gross written premiums
$36.1 $43.3 $146.2 $160.4 Net written premiums 33.6 40.7 137.3
149.4 Earned premiums $36.3 $39.5 $143.5 152.5 Net investment
income 2.9 2.7 10.8 9.5 Net Realized gains (losses) - (0.1) (0.8) -
Total revenues 39.2 42.1 153.5 162.0 Loss and loss adjustment
expenses 24.9 23.9 89.4 90.0 Acquisition expenses 8.5 9.3 33.0 36.6
Other operating expenses 5.6 5.7 23.1 22.6 Total expenses 39.0 38.9
145.5 149.2 Pre-tax income 0.2 3.2 8.0 12.8 Income tax
benefit/(expense) 0.2 - (0.6) (0.2) Net income (loss) $0.4 $3.2
$7.4 $12.6 Key ratios Net loss and loss adjustment expense ratio
68.6% 60.5% 62.3% 59.0% Ratio of acquisition expenses to earned
premiums 23.4% 23.5% 23.0% 24.0% Ratio of all other expenses to
gross written premiums 15.5% 13.2% 15.8% 14.1% Net income (loss)
per share Basic $0.03 $0.20 $0.48 $0.82 Diluted $0.02 $0.20 $0.47
$0.82 Weighted Average Shares Outstanding Basic 15.6 15.4 15.6 15.4
Diluted 15.8 15.4 15.8 15.4 Summary Financial Data (in millions,
except per share data) As of As of December 31, December 31, Assets
2008 2007 Investments $263.4 $229.4 Cash 0.2 1.0 Insurance premiums
receivable 60.7 68.9 Reinsurance recoverable on unpaid loss and
loss adjustment expenses* 79.6 77.2 Prepaid reinsurance premiums
0.3 0.6 Investment income accrued 2.5 1.9 Equipment and capitalized
software at cost (less accumulated depreciation of $15,701 and
$8,927) 13.6 12.8 Intangible assets 10.7 10.7 Deferred acquisition
costs 18.2 17.5 Deferred tax asset 3.1 - Other assets 2.4 2.5 Total
assets $454.7 $422.5 Liabilities Loss and loss adjustment expense
reserves* $214.9 $184.7 Unearned insurance premiums 80.6 86.8
Insured deposit funds 15.8 12.5 Accounts payable and other
liabilities 7.1 7.4 Total liabilities 318.4 291.4 Shareholders'
equity Common stock at $.01 par value per share - authorized: 30.0
shares; issued: 14.7 shares; outstanding: 14.4 shares and 14.7
shares 0.1 0.1 Class B common stock at $.01 par value per share -
authorized: 2.0 shares; issued and outstanding: 1.4 shares and 0.9
shares 0.0 0.0 Paid in capital - common stock 129.9 129.5 Paid in
capital - Class B common stock 8.1 6.1 Accumulated deficit 1.7
(5.7) Treasury stock (1.3) - Accumulated other comprehensive income
(2.2) 1.1 Total stockholders' equity 136.3 131.1 Total liabilities
and stockholders' equity $454.7 $422.5 Book value data Shares
outstanding 15.8 15.6 Book value per share $8.62 $8.42 Tangible
book value per share $7.94 $7.73 * Includes $53.3 million and $63.5
million as of December 31, 2008 and December 31, 2007 of direct
gross loss and loss adjustment expense reserves of Potomac
Insurance Company of Illinois, which reinsured all of its direct
liabilities to OneBeacon Insurance Company and is reflected on
SUA's balance sheet as a reinsurance recoverable. Gross Written
Premium Data For the Three Months Ended December 31 (in millions,
except percentages) Three Months Ended Three Months Ended December
31, 2008 December 31, 2007 Percentage Percentage of of Gross Gross
Gross Gross Written Written Written Written Premium Premium Premium
Premium (dollars in millions) Risk Transfer Holdings, Inc. $21.4
59.3% $29.0 67.0% American Team Managers 4.5 12.5% 6.2 14.4% AEON
Insurance Group, Inc. 3.6 10.0% 6.0 13.8% Appalachian Underwriters,
Inc. 2.7 7.5% 1.0 2.3% Northern Star Management, Inc. 2.0 5.8% - -
First Light Program Manages, Inc. 1.2 3.0% - - Insential, Inc. 0.2
0.6% 0.4 0.9% Specialty Risk Solutions, LLC 0.1 0.3% 0.1 0.2%
Flying Eagle Insurance Services, Inc. 0.1 0.3% 0.5 1.2% Other 0.3
0.8% 0.1 0.2% Total $36.1 100.0% $43.3 100.0% Three Months Ended
Three Months Ended December 31, 2008 December 31, 2007 Percentage
Percentage of of Gross Gross Gross Gross Written Written Written
Written Premium Premium Premium Premium (dollars in millions)
Florida $14.8 41.0% $18.8 43.4% California 10.1 28.0% 11.1 25.6%
Texas 1.6 4.4% 4.5 10.4% Other States 9.6 26.6% 8.9 20.6% Total
$36.1 100.0% $43.3 100.0% Three Months Ended Three Months Ended
December 31, 2008 December 31, 2007 Percentage Percentage of of
Gross Gross Gross Gross Written Written Written Written Premium
Premium Premium Premium (dollars in millions) Workers' compensation
$26.2 72.6% $31.8 73.4% Commercial automobile 7.5 20.5% 6.1 14.1%
General liability 1.8 5.0% 4.4 10.2% All Other 0.6 1.9% 1.0 2.3%
Total $36.1 100.0% $43.3 100.0% Gross Written Premium Data For the
Year Ended December 31 (in millions, except percentages) Year Ended
Year Ended December 31, 2008 December 31, 2007 Percentage
Percentage of of Gross Gross Gross Gross Written Written Written
Written Premium Premium Premium Premium (dollars in millions) Risk
Transfer Holdings, Inc. $65.4 44.7% $78.6 49.0% American Team
Managers 23.4 16.0% 33.5 20.9% AEON Insurance Group, Inc. 19.5
13.4% 25.7 16.0% Specialty Risk Solutions, LLC 17.1 11.7% 3.1 1.9%
Appalachian Underwriters, Inc. 8.2 5.6% 13.9 8.7% Northern Star
Management, Inc. 5.6 3.8% - - First Light Program Manages, Inc. 3.2
2.2% - - Insential, Inc. 1.2 0.8% 1.7 1.1% Flying Eagle Insurance
Services, Inc. 0.7 0.5% 2.8 1.7% Other 1.9 1.3% 1.1 0.7% Total
$146.2 100.0% $160.4 100.0% Year Ended Year Ended December 31, 2008
December 31, 2007 Percentage Percentage of of Gross Gross Gross
Gross Written Written Written Written Premium Premium Premium
Premium (dollars in millions) California $61.9 42.3% $53.9 33.6%
Florida 30.5 20.9% 44.1 27.5% Texas 14.7 10.1% 16.7 10.4% Other
States 39.1 26.7% 45.7 28.5% Total $146.2 100.0% $160.4 100.0% Year
Ended Year Ended December 31, 2008 December 31, 2007 Percentage
Percentage of of Gross Gross Gross Gross Written Written Written
Written Premium Premium Premium Premium (dollars in millions)
Workers' compensation $80.2 54.9% $92.0 57.4% Commercial automobile
34.5 23.6% 31.9 19.9% General liability 28.7 19.6% 32.5 20.2% All
Other 2.8 1.9% 4.0 2.5% Total $146.2 100.0% $160.4 100.0% To learn
more about Specialty Underwriters' Alliance Inc., please visit
http://www.suainsurance.com/. DATASOURCE: Specialty Underwriters'
Alliance, Inc. CONTACT: Leslie Loyet of Financial Relations Board,
+1-312-640-6672, , for Specialty Underwriters' Alliance, Inc.; or
Scott Goodreau of Specialty Underwriters' Alliance, Inc.,
1-888-782-4672, Web Site: http://www.suainsurance.com/
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