Specialty Underwriters' Alliance, Inc. Reports First Quarter 2008 Results
May 08 2008 - 4:01PM
PR Newswire (US)
CHICAGO, May 8 /PRNewswire-FirstCall/ -- Specialty Underwriters'
Alliance, Inc. (NASDAQ:SUAI) today announced financial results for
the quarter ended March 31, 2008. -- Net income increased for the
first quarter of 2008 to $3.5 million, which includes the
recognition of $0.7 million of net deferred tax assets, from $3.0
million for the comparable quarter in 2007; -- Earnings per share
of $0.22 for the current quarter compared to $0.20 per share for
the first quarter of 2007; -- Gross written premiums of $24.1
million for the first quarter of 2008 compared to $35.0 million for
the first quarter of 2007; -- First quarter 2008 earned premium of
$35.8 million compared to $35.4 million for the comparable quarter
in 2007. Courtney Smith, president and chief executive officer,
stated, "Our decrease in gross written premium is attributable to
several factors. The soft insurance market has led to downward
premium pressure in all lines which we write. In addition, the
weakening economy has impacted both employment and construction
activity resulting in lower exposure and premium in our workers'
compensation and a reduction in our contractors program. "However,
we believe significant growth opportunities exist that we expect to
add to our top line this year beginning in the third and fourth
quarters. These include our recent signing of a fronting
arrangement for an auto repossesors program with AEON, increased
quoting activity utilizing our fronting relationship for public
entities, new programs with Risk Transfer for pest control
operators and temporary staffing, our recent signing of Northern
Star Management for trucking in the mid-Atlantic states and growth
in our trucking segment. We are also working towards launching new
programs with existing agents as well as signing up new agents.
Finally, our loss ratios demonstrate that we are maintaining our
underwriting and pricing discipline. As we have stated in the past,
we will look to grow our top line but not at the expense of healthy
bottom line results." Financial Results Earned premiums were $35.8
million for the first quarter of 2008 compared to $35.4 million for
the first quarter of 2007. Total expenses for the three months
ended March 31, 2008, were $35.7 million, consisting of loss and
loss adjustment expenses of $21.1 million, acquisition expenses of
$8.7 million and other operating expenses of $5.9 million. Total
expenses for the three months ended March 31, 2007, were $34.4
million, consisting of loss and loss adjustment expenses of $20.2
million, acquisition expenses of $8.7 million and other operating
expenses of $5.5 million. For the first quarter of 2008, net loss
and loss adjustment expense ratio was 58.9 percent versus 56.9
percent for the comparable quarter in 2007. The increase was
primarily driven by higher loss ratios in our workers' compensation
book of business due to lower rates. This was partially offset by
prior year reserve improvements of approximately $0.6 million
primarily in our commercial automobile business. Net investment
income for the three months ended March 31, 2008, was $2.7 million,
compared to $2.1 million for the prior year period. Total revenues
were $38.4 million for the first quarter of 2008, compared to $37.5
million for the first quarter of 2007. Net income for the three
months ended March 31, 2008, was $3.5 million, including a one-time
accounting benefit for deferred taxes of $0.7 million, compared to
$3.0 million for the comparable period in 2007. Earnings per share
for the three months ended March 31, 2008, was $0.22, compared to
$0.20 for the same period in 2007. Financial Condition As of March
31, 2008, the company reported investments of $239.5 million, total
assets of $421.3 million, total liabilities of $285.8 million and
shareholders' equity of $135.5 million. Within total investments,
the company held $4.3 million in fair value, or $5.0 million in
book value, of securities with sub-prime exposure, all of which
were rated "A" or better by established rating agencies. Book value
per share as of March 31, 2008, was $8.66 and tangible book value
per share was $7.97. 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. Conference Call
Details SUAI will host a conference call on Friday, May 9, 2008 at
11:00 a.m. Eastern Time to discuss first quarter results.
Interested parties may access a live webcast by going to the
"Investor Relations/Event Calendar" page of SUAI's website at
http://www.suainsurance.com/ or by calling 888-679-8033, passcode
83652035. A replay of the call will be available by dialing
888-286-8010, passcode 28917321 through May 16, 2008. A replay of
the call will also remain on the company's website for 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 Ended March 31, 2008 2007 Results of operations Gross
written premiums $24.1 $35.0 Net written premiums 21.7 31.6 Earned
premiums $35.8 $35.4 Net investment income 2.7 2.1 Total revenues
38.5 37.5 Loss and loss adjustment expenses 21.1 20.2 Acquisition
expenses 8.7 8.7 Other operating expenses 5.9 5.5 Total expenses
35.7 34.4 Pre-tax income 2.8 3.1 Federal income tax
benefit/(expense) 0.7 (0.1) Net income (loss) $3.5 $3.0 Key ratios
Net loss and loss adjustment expense ratio 58.9% 56.9% Ratio of
acquisition expenses to earned premiums 24.3% 24.7% Ratio of all
other expenses to gross written premiums 24.6% 15.7% Net income
(loss) per share Basic and diluted $0.22 $0.20 Weighted average
common shares outstanding (basic and diluted) 15.6 15.4 Summary
Financial Data (in millions, except per share data) Assets As of As
of March 31, December 31, 2008 2007 Investments $239.5 $229.4 Cash
1.7 1.0 Insurance premiums receivable 60.6 68.9 Reinsurance
recoverable on unpaid loss and loss adjustment expenses* 74.8 77.2
Prepaid reinsurance premiums 1.0 0.6 Investment income accrued 1.9
1.9 Equipment and capitalized software at cost (less accumulated
depreciation of $10.5 and $8.9) 13.3 12.8 Intangible assets 10.7
10.7 Deferred acquisition costs 14.4 17.5 Deferred tax asset 0.5 -
Other assets 2.9 2.5 Total assets $421.3 $422.5 Liabilities Loss
and loss adjustment expense reserves* $189.6 $184.7 Unearned
insurance premiums 72.7 86.8 Insured deposit funds 13.7 12.5
Accounts payable and other liabilities 9.8 7.4 Total liabilities
285.8 291.4 Shareholders' equity Common stock at $.01 par value per
share - authorized 30.0 shares; issued and outstanding 14.7 shares
0.1 0.1 Class B common stock at $.01 par value per share -
authorized 2.0 shares; issued and outstanding 0.9 shares and 0.7
shares 0.0 0.0 Paid in capital - common stock 129.5 129.5 Paid in
capital - Class B common stock 6.5 6.1 Accumulated deficit (2.2)
(5.7) Accumulated other comprehensive income 1.6 1.1 Total
stockholders' equity 135.5 131.1 Total liabilities and
stockholders' equity $421.3 $422.5 Book value data Weighted average
shares outstanding 15.5 15.4 Book value per share $8.66 $8.42
Tangible book value per share $7.97 $7.73 * Includes $60.2 million
and $63.5 million as of March 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 (in millions, except percentages) Three Months Ended
Three Months Ended March 31, 2008 March 31, 2007 Percentage
Percentage Gross of Gross Gross of Gross Written Written Written
Written Premium Premium Premium Premium (dollars in millions) Risk
Transfer Holdings, Inc. $9.2 38.2% $14.1 40.2% American Team
Managers 6.2 25.7% 11.2 32.0% AEON Insurance Group, Inc. 5.6 23.2%
5.0 14.3% Appalachian Underwriters, Inc. 1.8 7.5% 4.4 12.6% First
Light Program Manages, Inc. 0.4 1.7% - - Insential, Inc. 0.3 1.2%
0.3 0.9% Flying Eagle Insurance Services, Inc. 0.2 0.8% - -
Specialty Risk Solutions, LLC - - - - Northern Star Management,
Inc. - - - - Other 0.4 1.7% - - Total $24.1 100.0% $35.0 100.0%
Three Months Ended Three Months Ended March 31, 2008 March 31, 2007
Percentage Percentage Gross of Gross Gross of Gross Written Written
Written Written Premium Premium Premium Premium (dollars in
millions) California $11.5 47.7% $13.8 20.9% Texas 4.9 20.3% 2.5
7.1% Florida 1.7 7.1% 7.3 39.4% Other States 6.0 24.9% 11.4 32.6%
Total $24.1 100.0% $35.0 100.0% Three Months Ended Three Months
Ended March 31, 2008 March 31, 2007 Percentage Percentage Gross of
Gross Gross of Gross Written Written Written Written Premium
Premium Premium Premium (dollars in millions) Workers' compensation
$11.9 49.4% $18.7 53.4% Commercial automobile 7.6 31.5% 7.0 20.0%
General liability 3.9 16.2% 8.6 24.6% All Other 0.7 2.9% 0.7 2.0%
Total $24.1 100.0% $35.0 100.0% To learn more about Specialty
Underwriters' Alliance Inc., please visit
http://www.suainsurance.com/. DATASOURCE: Specialty Underwriters'
Alliance, Inc. CONTACT: Scott Goodreau of Specialty Underwriters'
Alliance, Inc., 1-888-782-4672, ; or Leslie Loyet of Financial
Relations Board, +1-312-640-6672, , for Specialty Underwriters'
Alliance, Inc. Web site: http://www.suainsurance.com/
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