Exhibit 99.1
SeaBright Insurance Holdings, Inc. 1501 4th Avenue Suite 2600 Seattle, WA 98101 | Contact: SeaBright Insurance Holdings, Inc. Scott H. Maw Senior Vice President and Chief Financial Officer 206-269-8500 investor@sbic.com |
SeaBright Insurance Holdings Reports Fourth Quarter
And Year End 2009 Results
Seattle, WA – March 2, 2010 – SeaBright Insurance Holdings, Inc. (NYSE: SBX) today announced results for the quarter and year ended December 31, 2009.
For the fourth quarter of 2009, net loss was ($1.4 million) or ($0.07) per diluted share, compared to net income of $10.2 million or $0.48 per diluted share for the same period in 2008. Total revenue for the quarter was $69.6 million versus $75.9 million in the year-earlier period. For the fourth quarter, net premiums earned were $62.0 million compared to $67.6 million for the same period in 2008, a decrease of 8.3%.
For the year ended December 31, 2009, net income was $13.5 million or $0.63 per diluted share compared to $29.3 million or $1.38 per diluted share in the same period in 2008. Total revenue for the period increased 3.4% to $276.5 million compared to $267.3 million for the same period in 2008. For the year ended December 31, 2009, net premiums earned were $244.4 million compared to $248.6 million for the comparable period in 2008.
John Pasqualetto, SeaBright’s Chairman, President and Chief Executive Officer, said, “During the fourth quarter, we strengthened our reserves by $8.5 million for the prior accident years, primarily to reflect our experience in California and Illinois. Although this prudent action negatively impacted our fourth quarter profit, it demonstrates our continued commitment to disciplined balance sheet integrity.
“While our fourth quarter revenue was down year-over-year, we are encouraged by the double digit rate increases achieved in California during the quarter, a trend we expect to continue. Compared to the prior year, our 2009 revenue and customer count increased 3.4% and 36.6%, respectively, despite recessionary headwinds and increased competition. Our 99.8% combined ratio for 2009 marks our sixth consecutive year of underwriting profitability. Furthermore, our book value per share grew by 9.2% in 2009, driven by positive operating results and substantial improvement in the valuation of our investment portfolio. We produced strong positive cash flows of $68 million.
“We enter 2010 with a strong balance sheet and a historical high level of capitalization and liquidity. We are well positioned, and in the long run, expect to benefit directly from a recovering economy and improved profit potential as the prolonged soft market takes its toll on weaker competitors,” Pasqualetto added.
The net loss ratio for the fourth quarter of 2009 was 80.6% compared to 59.2% in the same period of 2008. During the fourth quarter of 2009, on a pre-tax basis, the Company recognized $8.5 million in reserve strengthening of prior years’ loss reserve estimates, compared to approximately $1.3 million of reserve strengthening of prior years' loss reserve estimates in the fourth quarter of 2008.
Total underwriting expenses for the fourth quarter 2009 were $19.0 million compared to $20.5 million in the prior year period. The net underwriting expense ratio for the fourth quarter was 30.6% compared to 30.2% in the same period in 2008.
The net combined ratio for the fourth quarter of 2009 was 111.2% compared to 89.4% for the same period in 2008.
A reconciliation of calendar year and accident year combined ratios, reflecting reserve development that occurred in the calender year, is as follows:
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Calendar year combined ratio | 111.2 | % | 89.4 | % | 99.8 | % | 85.2 | % | ||||||||
| Prior accident year items (favorable (unfavorable) reserve development): | ||||||||||||||||
| Loss and ALAE reserves | (13.7 | %) | (1.9 | %) | (5.9 | %) | 7.9 | % | ||||||||
| ULAE reserves | 3.8 | % | 0.6 | % | 2.1 | % | 0.4 | % | ||||||||
| Accident year combined ratio | 101.3 | % | 88.1 | % | 96.0 | % | 93.5 | % | ||||||||
Net investment income for the fourth quarter of 2009 was $5.9 million compared to $5.8 million for the same period in 2008 as the Company continues to record positive cash flow from operations offset by a lower interest rate environment.
At December 31, 2009, SeaBright had over 1,500 customers, an increase of over 36% compared to the same period in 2008. At December 31, 2009, the average premium size per customer was approximately $198,000 compared to approximately $248,000 at December 31, 2008, a reflection of SeaBright’s continued geographic diversification, lower premium rates and the introduction of our Alternative Markets and Small Maritime Program products.
The net loss ratio was 70.0% for the year ended December 31, 2009 compared to 56.7% in the same period in 2008. For the year ended December 31, 2009, on a pre-tax basis, the Company recognized $14.4 million of adverse development of prior years’ loss reserve estimates, compared to $19.7 million of favorable development recognized in the same period of 2008.
Total underwriting expenses for the year ended December 31, 2009 were $73.0 million compared to $71.2 million in the prior year period and the net underwriting expense ratio was 29.8% compared to 28.5% in the same period in 2008.
For the year ended December 31, 2009, the net combined ratio was 99.8% compared to 85.2% for the same period in 2008.
At December 31, 2009, the Company had $626.6 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 recorded no other-than-temporary impairment charges in the fourth quarters of 2009 and 2008.
As of December 31, 2009, the overall credit quality of the Company’s $344.6 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 December 31, 2009, the Company had $212.3 million in insured municipal bonds with a weighted average credit rating of AA-. The underlying rating of the insured bonds was AA-/A+. The Company also had $132.3 million in uninsured municipal bonds with a weighted average credit rating of AA.
At December 31, 2009, the Company had $15.2 million invested in collateralized mortgage obligations, $1.5 million in adjustable rate mortgages, $1.4 million in asset- backed securities, and $41.3 million in commercial mortgage-backed securities, none of which were direct 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, March 2, 2010 at 4:30 p.m. Eastern Time featuring remarks by John G. Pasqualetto, Chairman, President and Chief Executive Officer of SeaBright Holdings, Richard J. Gergasko, Chief Operating Officer, Scott H. Maw, Senior Vice President and CFO, and M. Philip Romney, Vice President of Finance and Principal Accounting Officer. The conference call will be available via webcast and can be accessed through the Investor Relations section of the Company’s website at http://investor.sbic.com. Please allow extra time prior to the call to visit the site and download any necessary software to listen to the Internet broadcast. The dial-in number for the conference call is 888-312-9865 (domestic) or 719-325-2431 (international), Passcode: 9170504. Please call at least five minutes before the sch eduled start time.
For interested individuals unable to join the conference call, a replay of the call will be available through March 9, 2010, at 888-203-1112 (domestic) or 719-457-0820 (international), Passcode: 9170504. 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. Mor e information about these and other factors that potentially could affect our financial results is included in our 2008 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 16, 2009, 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 unaudited summary results of operations for the three month and twelve month periods ended December 31, 2009 and 2008 as well as selected balance sheet data as of December 31, 2009 and 2008. 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 2009 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 2009 annual report on Form 10-K in a timely fashion on or before March 16, 2010.
SEABRIGHT INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2009 | December 31, 2008 | |||||||
| (Unaudited) | (Audited) | |||||||
| (in thousands) | ||||||||
| ASSETS | ||||||||
| Fixed income securities available-for-sale, at fair value | $ | 626,608 | $ | 522,289 | ||||
| Equity securities available-for-sale, at fair value | - | 8,856 | ||||||
| Preferred stock available-for-sale, at fair value | - | 360 | ||||||
| Cash and cash equivalents | 12,896 | 22,872 | ||||||
| Accrued investment income | 6,734 | 6,054 | ||||||
| Premiums receivable, net of allowance | 14,477 | 16,374 | ||||||
| Deferred premiums | 182,239 | 163,322 | ||||||
| Service income receivable | 317 | 322 | ||||||
| Reinsurance recoverable | 34,339 | 18,544 | ||||||
| Due from reinsurer | 6,707 | 9,125 | ||||||
| Receivable under adverse development cover | 3,010 | 4,179 | ||||||
| Prepaid reinsurance | 6,760 | 1,619 | ||||||
| Property and equipment, net | 5,356 | 5,190 | ||||||
| Federal income tax recoverable | 4,774 | 1,671 | ||||||
| Deferred income taxes, net | 21,861 | 25,144 | ||||||
| Deferred policy acquisition costs, net | 25,537 | 23,175 | ||||||
| Intangible assets, net | 1,431 | 1,225 | ||||||
| Goodwill | 4,321 | 4,212 | ||||||
| Other assets | 7,494 | 8,154 | ||||||
| Total assets | $ | 964,861 | $ | 842,687 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Unpaid loss and loss adjustment expense | $ | 351,496 | $ | 292,027 | ||||
| Unearned premiums | 175,766 | 155,931 | ||||||
| Reinsurance funds withheld and balances payable | 7,312 | 1,615 | ||||||
| Premiums payable | 4,786 | 6,783 | ||||||
| Accrued expenses and other liabilities | 54,028 | 49,518 | ||||||
| Surplus notes | 12,000 | 12,000 | ||||||
| Total liabilities | 605,388 | 517,874 | ||||||
| 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 – 21,675,786 shares at December 31, 2009 and 21,392,854 shares at December 31, 2008 | 217 | 214 | ||||||
| Paid-in capital | 205,079 | 200,893 | ||||||
| Accumulated other comprehensive income (loss) | 12,927 | (4,009 | ) | |||||
| Retained earnings | 141,250 | 127,715 | ||||||
| Total stockholders’ equity | 359,473 | 324,813 | ||||||
| Total liabilities and stockholders’ equity | $ | 964,861 | $ | 842,687 | ||||
SEABRIGHT INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (in thousands, except share and earnings per share information) | ||||||||||||||||
| Revenue: (1) | ||||||||||||||||
| Premiums earned | $ | 61,967 | $ | 67,550 | $ | 244,427 | $ | 248,644 | ||||||||
| Claims service income | 229 | 208 | 1,011 | 959 | ||||||||||||
| Other service income | 60 | 67 | 207 | 246 | ||||||||||||
| Net investment income | 5,946 | 5,753 | 23,132 | 22,605 | ||||||||||||
| Other-than-temporary impairment losses: | ||||||||||||||||
| Total other-than-temporary impairment losses | – | – | (258 | ) | (13,405 | ) | ||||||||||
| Less portion of losses recognized in accumulated other comprehensive income (loss) | – | – | – | – | ||||||||||||
| Net impairment losses recognized in earnings | – | – | (258 | ) | (13,405 | ) | ||||||||||
| Other net realized losses recognized in earnings | (388 | ) | (75 | ) | (171 | ) | (476 | ) | ||||||||
| Other income | 1,824 | 2,418 | 8,132 | 8,689 | ||||||||||||
| 69,638 | 75,921 | 276,480 | 267,262 | |||||||||||||
| Losses and expenses: | ||||||||||||||||
| Loss and loss adjustment expenses | 50,177 | 40,216 | 172,169 | 141,935 | ||||||||||||
| Underwriting, acquisition and insurance expenses | 19,005 | 20,495 | 73,044 | 71,169 | ||||||||||||
| Interest expense | 133 | 201 | 599 | 867 | ||||||||||||
| Other expenses | 3,725 | 4,004 | 14,082 | 11,150 | ||||||||||||
| 73,040 | 64,916 | 259,894 | 225,121 | |||||||||||||
| Income (loss) before taxes | (3,402 | ) | 11,005 | 16,586 | 42,141 | |||||||||||
| Income tax expense (benefit) | (1,982 | ) | 792 | 3,051 | 12,863 | |||||||||||
| Net income (loss) | $ | (1,420 | ) | $ | 10,213 | $ | 13,535 | $ | 29,278 | |||||||
| Basic earnings (losses) per share | $ | (0.07 | ) | $ | 0.50 | $ | 0.65 | $ | 1.43 | |||||||
| Diluted earnings (losses) per share | $ | (0.07 | ) | $ | 0.48 | $ | 0.63 | $ | 1.38 | |||||||
| Weighted average basic shares outstanding | 20,736,168 | 20,593,132 | 20,702,572 | 20,498,305 | ||||||||||||
| Weighted average diluted shares outstanding | 21,590,676 | 21,366,581 | 21,515,153 | 21,232,762 | ||||||||||||
| Net loss ratio (2) | 80.6 | % | 59.2 | % | 70.0 | % | 56.7 | % | ||||||||
| Net underwriting expense ratio (3) | 30.6 | % | 30.2 | % | 29.8 | % | 28.5 | % | ||||||||
| Net combined ratio (4) | 111.2 | % | 89.4 | % | 99.8 | % | 85.2 | % | ||||||||
| (1) | Gross and net premiums written for the periods indicated were as follows: |
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Gross premiums written | $ | 80,355 | $ | 78,856 | $ | 290,002 | $ | 270,344 | ||||||||
| Net premiums written | 73,025 | 75,261 | 262,768 | 255,824 | ||||||||||||
| (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. |