Seabright Has Q2 Net Loss of $15.5 Million

SeaBright Holdings Inc. reported a second quarter net loss of $15.5 million or $0.74 per basic and diluted share, primarily due to the recognition of adverse development of prior years’ loss reserves. This compares to net income of $4.3 million or $0.20 per diluted share for the same period in 2009. Total revenue for the quarter increased 14.9 percent to $76.5 million versus $66.6 million in the year-earlier period. For the second quarter of 2010, net premiums earned increased 9.3 percent to $65.6 million compared to $60.0 million for the same period in 2009.

“During the second quarter we undertook prudent measures to strengthen our loss reserves to reflect recent adverse claim development we have experienced, primarily in our California book of business,” noted John Pasqualetto, SeaBright’s chairman, president and CEO. “In California, we encountered increasing medical cost trends and longer average claim durations, made worse by protracted high unemployment levels. SeaBright has instituted rate increases in California over the last 18 months and based on the recent claim data, we filed yesterday for a 15.3 percent increase in that state.”

The net loss ratio for the second quarter of 2010 was 121.1 percent compared to 68.2 percent in the same period of 2009. During the second quarter of 2010, on a pre-tax basis, the company recognized $30.6 million, net of reinsurance, in adverse development of prior years’ loss reserve estimates, compared to approximately $2.9 million in adverse development of prior years’ loss reserve estimates in the second quarter of 2009. During the second quarter of 2010, the company also increased the net expected loss and allocated loss adjustment expense ratio for the 2010 accident year from 61.5 percent to 64.5 percent, the quarterly impact of which was approximately $1.9 million.

Total underwriting expenses for the second quarter 2010 were $17.1 million compared to $16.1 million for the same period in 2009. The net underwriting expense ratio for the second quarter was 25.9 percent compared to 26.7 percent in the same period in 2009.

The net combined ratio for the second quarter of 2010 was 147 percent compared to 94.9 percent for the same period in 2009.

Net investment income for the second quarter of 2010 was $5.9 million compared to $5.7 million for the same period in 2009 as the company continues to record positive cash flow from operations.

At June 30, 2010, SeaBright had nearly 1,700 customers. This represents an increase of approximately 300 customers from a year earlier, attributable to growth in the company’s program business, which includes SeaBright’s small maritime and alternative markets divisions. Customer count in the company’s core business was down 4 percent year-over-year. Average premium sizes at June 30, 2010, were approximately $96,000 in the program business and $232,000 in the core business compared to approximately $121,000 in the program business and $242,000 in the core business at June 30, 2009.

At June 30, 2010, the company had $666.9 million in fixed income securities. As of June 30, 2010, the overall credit quality of the ccompany’s $344.1 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, the company said. As of June 30, 2010, the company had $155.2 million in insured municipal bonds and $188.9 million in uninsured municipal bonds.

At June 30, 2010, the company had $26.5 million invested in collateralized mortgage obligations, $1.3 million in adjustable rate mortgages, $3.6 million in asset-backed securities, and $56.5 million in commercial mortgage-backed securities, none of which were direct subprime.

Topics California Profit Loss