SeaBright Insurance Holdings, Inc. (Nasdaq:SEAB) today announced
results for the fourth quarter and year ended December 31, 2007.
For the fourth quarter of 2007, net income increased to $10.0
million or $0.48 per diluted share, compared to net income of $8.8
million or $0.42 per diluted share for the same period in 2006.
Total revenue for the quarter increased 24.3% to $72.2 million
versus $58.1 million in the year-earlier period. For the fourth
quarter, net premiums earned increased 24.8% to $64.9 million
compared to $52.0 million for the same period in 2006. For the year
ended December 31, 2007, net income was $39.9 million or $1.90 per
diluted share compared to $33.2 million or $1.63 per diluted share
in the same period in 2006. Total revenue for the period increased
23.6% to $254.4 million compared to $205.9 million for the same
period in 2006. For the year ended December 31, 2007, net premiums
earned increased 22.8% to $228.0 million compared to $185.6 million
for the comparable period in 2006. John Pasqualetto, SeaBright�s
Chairman, President and Chief Executive Officer, said, "SeaBright
achieved excellent results in 2007 in a softening market
environment. Even our niche business strategy did not completely
insulate us from increased competition in the fourth quarter and
throughout the year. Consequently, it is particularly satisfying to
have accomplished both an earned premium growth of nearly 23% and a
net income growth of 20.1% when compared to 2006. Our combined
ratio of 81.3% continued to outperform the industry on this very
important measure. While we fully expect the competitive trends
experienced in 2007 to persist through the coming year, our
fundamental dedication to our business model, our underwriting
discipline and our superior level of service should continue to
serve us well." The net loss ratio for the fourth quarter of 2007
was 58.5% compared to 55.8% in the same period of 2006. During the
fourth quarter 2007, on a pre-tax basis, the Company recognized
$7.2 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 fourth quarter of
2006, on a pre-tax basis, the Company recognized $6.5 million in
favorable development of prior years' loss reserve estimates. Total
underwriting expenses for the fourth quarter 2007 were $16.4
million compared to $12.7 million in the prior year period. The net
underwriting expense ratio for the fourth quarter was 25.3%
compared to 24.4% in the same period in 2006. The increase in the
underwriting expense ratio over the same period in 2006 is
primarily the result of increased production expenses related to
SeaBright�s geographic expansion. The net combined ratio for the
fourth quarter of 2007 was 83.8% compared to 80.2% for the same
period in 2006. Net investment income for the fourth quarter of
2007 was $5.5 million compared to $4.4 million for the same period
in 2006 as the Company continues to record strong cash flow from
operations of $26.6 million for the fourth quarter of 2007. The net
loss ratio was 55.5% for the year ended December 31, 2007 compared
to 57.0% in the same period in 2006. For the year ended December
31, 2007, on a pre-tax basis, the Company recognized $27.7 million
of favorable development of prior years� loss reserve estimates,
compared to $20.4 million in 2006. Total underwriting expenses for
the year ended December 31, 2007 were $58.9 million compared to
$42.3 million in the prior year period and the net underwriting
expense ratio was 25.8% compared to 22.7% in the same period in
2006. The increase in the underwriting expense ratio over the same
period in 2006 is primarily the result of increased production
expenses related to SeaBright�s geographic expansion. For the year
ended December 31, 2007, the net combined ratio was 81.3% compared
to 79.7% for the same period in 2006. Net investment income for the
year ended December 31, 2007 was $20.3 million compared to $15.2
million for the same period in 2006 as the Company continued to
record strong cash flow from operations for the year of $94.6
million. At December 31, 2007, SeaBright had 953 customers, an
increase of 45.7% compared to the same period in 2006. At December
31, 2007, the average premium size per customer was approximately
$282,000 compared to approximately $330,000 at December 31, 2006, a
reflection of SeaBright�s continued geographic diversification of
its business and lower premium rates related to the decline in loss
costs. At December 31, 2007, the Company had $474.8 million in
fixed income securities. 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 any insured or uninsured bonds. The Company did
not record any impairment loss for 2007. As of December 31, 2007,
the overall credit quality of our $250.9 million fixed income
municipal portfolio (including secondary insurance) stood at AA+.
With secondary insurance removed, the average rating of the
municipal portfolio would be AA-. As of December 31, 2007, the
Company had $192.8 million in insured municipal bonds with a
weighted average credit rating of AAA. The underlying rating of the
insured bonds was AA-. The Company also had $58.1 million in
uninsured municipal bonds with a weighted average credit rating of
AA. At December 31, 2007, the Company had $1.9 million invested in
collateralized mortgage obligations, $2.7 million in adjustable
rate mortgages and $7.3 million in asset backed securities, none of
which were sub prime. 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,
February 26 at 4:30 p.m. Eastern Time featuring remarks by John G.
Pasqualetto, President and CEO, Richard J. Gergasko, Executive Vice
President - Operations, and Joseph S. De Vita, Senior Vice
President and CFO. 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) 852-6580. Please call at least five
minutes before the scheduled start time. 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 2006 Annual Report on Form 10-K, filed
with the U.S. Securities and Exchange Commission on March 16, 2007,
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 twelve
month periods ended December 31, 2007 and 2006 as well as selected
balance sheet data as of December 31, 2007 and December 31, 2006.
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 2007 annual report on Form 10-K. The
Company currently expects to file its audited consolidated
financial statements with the U.S. Securities and Exchange
Commission as part of its 2007 annual report on Form 10-K in a
timely fashion on or before March 17, 2008. SEABRIGHT INSURANCE
HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE
SHEETS � December 31, 2007 (Unaudited) December 31, 2006 (Audited)
(in thousands) ASSETS � Fixed income securities available-for-sale,
at fair value $ 474,756 $ 399,119 Equity securities
available-for-sale, at fair value 11,193 813 Preferred stock
available-for-sale, at fair value 8,488 - Cash and cash equivalents
20,292 20,412 Accrued investment income 5,055 4,208 Premiums
receivable, net of allowance 9,223 8,877 Deferred premiums 150,066
118,788 Federal income tax recoverable - 1,263 Service income
receivable 436 792 Reinsurance recoverables 14,210 13,675
Receivable under adverse development cover 2,533 2,781 Prepaid
reinsurance 1,820 1,917 Property and equipment, net 1,707 1,241
Deferred income taxes, net 16,488 12,198 Deferred policy
acquisition costs, net 19,832 15,433 Intangible assets, net 1,233
1,217 Goodwill 2,881 1,527 Other assets � 15,356 � 10,014 � Total
assets $ 755,569 $ 614,275 � � LIABILITIES AND STOCKHOLDERS� EQUITY
� Liabilities: Unpaid loss and loss adjustment expense $ 250,085 $
198,356 Unearned premiums 147,033 114,312 Reinsurance funds
withheld and balances payable 220 309 Premiums payable 4,136 3,047
Accrued expenses and other liabilities 47,789 37,125 Surplus notes
� 12,000 � 12,000 � Total liabilities � 461,263 � 365,149 � �
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 � 20,831,102 shares at December
31, 2007 and 20,553,400 shares at December 31, 2006 � 208 � 205
Paid-in capital 194,023 190,593 Accumulated other comprehensive
income (loss) 1,638 (197 ) Retained earnings � 98,437 � 58,525 �
Total stockholders� equity � 294,306 � 249,126 � Total liabilities
and stockholders� equity $ 755,569 $ 614,275 � SEABRIGHT INSURANCE
HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS � � � Three Months Ended December 31, Year Ended
December 31, 2007 (Unaudited) 2006 (Unaudited) 2007 (Unaudited)
2006 (Audited) (dollars in thousands, except income per share
amounts) Revenue: (1) Premiums earned $ 64,886 $ 52,015 $ 227,995 $
185,591 Claims service income 380 473 1,711 2,026 Other service
income 44 26 148 104 Net investment income 5,521 4,409 20,307
15,245 Net realized loss (20 ) (21 ) (105 ) (410 ) Other income �
1,351 � � 1,238 � � 4,369 � � 3,371 � � 72,162 � � 58,140 � �
254,425 � � 205,927 � Losses and expenses: Loss and loss adjustment
expenses 38,334 29,477 128,185 107,884 Underwriting, acquisition
and insurance expenses 16,437 12,725 58,932 42,306 Interest expense
285 288 1,139 1,101 Other expenses � 2,550 � � 2,389 � � 7,773 � �
6,248 � � 57,606 � � 44,879 � � 196,029 � � 157,539 � Income before
taxes � 14,556 � � 13,261 � � 58,396 � � 48,388 � � Income tax
expense (benefit): Current 8,158 4,854 23,762 18,609 Deferred �
(3,588 ) � (374 ) � (5,278 ) � (3,450 ) � 4,570 � � 4,480 � �
18,484 � � 15,159 � Net income $ 9,986 � $ 8,781 � $ 39,912 � $
33,229 � � Basic earnings per share $ 0.49 $ 0.43 $ 1.96 $ 1.66
Diluted earnings per share $ 0.48 $ 0.42 $ 1.90 $ 1.63 � Weighted
average basic shares outstanding 20,357,222 20,319,525 20,341,931
19,986,244 Weighted average diluted shares outstanding 20,994,714
20,770,028 20,976,525 20,403,089 � Net loss ratio (2) 58.5 % 55.8 %
55.5 % 57.0 % Net underwriting expense ratio (3) � 25.3 % � 24.4 %
� 25.8 % � 22.7 % Net combined ratio (4) � 83.8 % � 80.2 % � 81.3 %
� 79.7 % � � (1) Gross and net premiums written for the periods
indicated were as follows: � Three Months Ended December 31, Year
Ended December 31, � 2007 � � 2006 � � 2007 � � 2006 � (in
thousands) Gross premiums written $ 87,183 $ 80,365 $ 282,658 $
230,253 Net premiums written 83,663 76,772 267,358 214,763 � (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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