CHICAGO, Aug. 2 /PRNewswire-FirstCall/ -- Specialty Underwriters'
Alliance, Inc. (NASDAQ:SUAI) "SUA" today reported net income of
$2.2 million, or $0.14 per share, for the three months ended June
30, 2006, compared with a net loss of $4.0 million, or $0.27 per
share, in the prior year quarter. Net income for the first six
months was $2.0 million, or $0.13 per share, compared with a loss
of $8.5 million, or $0.58 per share in the prior year. Courtney
Smith, president and chief executive officer stated, "We are very
pleased to announce that we have reached our stated objective of
profitability in the first half of 2006." Total revenues for the
three months ended June 30, 2006 were $26.7 million, comprised of
earned insurance premiums of $25.2 million and investment income of
$1.5 million. This compares with total revenues of $4.0 million,
comprised of earned insurance premiums of $3.0 million and
investment income of $1.0 million in the prior year period. Total
revenues for the six months ended June 30, 2006 were $51.1 million,
comprised of earned premiums of $48.5 million and investment income
of $2.6 million. Total revenues for the same period a year ago were
$5.3 million comprised of earned premiums of $3.5 million and
investment income of $1.8 million. Gross written premiums for the
three and six months ended June 30, 2006 were $37.4 million and
$68.2 million, respectively, compared with $25.0 million and $33.5
million for the same periods ended June 30, 2005. Net written
premiums were $34.9 million and $62.3 million, respectively, for
the three and six months ended June 30, 2006, compared with $22.2
million and $29.8 million for the prior year periods. For the
second quarter of 2006, total expenses were $24.4 million - $14.5
million of losses and loss adjustment expenses and $9.9 million of
acquisition costs and general administrative and operating
expenses. General administrative expenses totaled $4.7 million.
Other major categories of expense included $1.4 million of salaries
and benefit costs (excluding $1.0 million of salary and benefit
costs classified as loss adjustment and acquisition expenses), $0.8
million of professional and consulting fees, $0.6 million of
depreciation and amortization and $1.9 million of other expenses.
During the second quarter of 2005, total expenses were $8.0 million
- $2.3 million of losses and loss adjustment expenses and $5.7
million of acquisition costs and general administrative and
operating expenses. General administrative expenses totaled $5.1
million, of which $2.2 million was service company fees with
Syndicated Services Company ("SSC"). Other major categories of
expense included $1.7 million of salaries and benefit costs
(excluding $0.7 million of salary and benefit costs classified as
loss adjustment and acquisition expenses), $0.6 million of
professional and consulting fees, $0.3 million of depreciation and
amortization and $0.3 million of other expenses. For the six months
ended June 30, 2006, total expenses were $49.0 million - $28.5
million of losses and loss adjustment expenses and $20.5 million of
acquisition costs and general administrative and operating
expenses. For this six month period, general administrative
expenses totaled $9.8 million. Other major categories of expense
included $2.8 million of salaries and benefit costs (excluding $2.1
million of salary and benefit costs classified as loss adjustment
and acquisition expenses), $2.2 million of professional and
consulting fees, $1.0 million of depreciation and amortization and
$3.8 million of other expenses. Year to date expenses include a
reclassification of first quarter expenses of $0.4 million
resulting in a decrease in acquisition expense from $5.9 million to
$5.5 million and an increase in operating expense from $4.6 million
to $5.0 million for the three months ended March 31, 2006. For the
six months ended June 30, 2005, total expenses were $13.8 million -
$2.8 million of losses and loss adjustment expenses and $11.0
million of acquisition costs and general administrative and
operating expenses. For the six month period, general
administrative expenses totaled $10.3 million, of which $4.4
million was service company fees with SSC. Other major categories
of expense included $2.8 million of salaries and benefit costs
(excluding $1.1 million of salary and benefit costs classified as
loss adjustment and acquisition expenses), $1.2 million of
professional and consulting fees, $0.8 million of depreciation and
amortization and $1.1 million of other expenses. As of June 30,
2006, the company reported investments of $131.9 million, total
assets of $317.4 million, total liabilities of $213.5 million and
shareholders' equity of $103.9 million. Book value per share was
$6.81 and tangible book value per share was $6.11. As of December
31, 2005, the company reported investments of $103.0 million, total
assets of $277.2 million, total liabilities of $176.4 million and
shareholders' equity of $100.8 million. Book value per share was
$6.76 and tangible book value per share was $6.04. Progress in
Premium Growth and Diversification Smith noted, "We achieved a
twenty-two percent increase over the prior quarter in written
premium. Also, we improved our mix of business; workers'
compensation was 63 percent for the three months ended June 30,
2006 as compared to 69 percent for the year ended December 31,
2005. We continue to work toward signing new Partner Agents that
diversify our book of business and fit our business model. In
addition, we increased the number of states in which our current
Partner Agents can produce business with more states to follow."
Smith added, "In the second quarter, our net loss and loss
adjustment expense ratio was 57.4 percent. As we balance our mix of
business and grow our premium, this ratio should improve further.
Our expenses remain controlled with plans to increase staff only as
our business volume requires." Partner Agent Summary Risk Transfer
Holdings, Inc. (RTH) SUA's largest producing Partner Agent, RTH,
specializes in providing workers' compensation coverage to PEOs,
which are organizations that provide small employers with human
resource services, employee benefits, and workers' compensation
insurance. SUA is conducting business with RTH in California,
Florida, Georgia, Alabama, South Carolina, Texas, Illinois,
Michigan, and most recently Nevada. RTH produced total premiums of
$22.1 million and $40.4 million for the three and six months ended
June 30, 2006, as compared to $17.8 million and $23.1 million for
the three and six months ended June 30, 2005. Smith stated, "RTH
continues to be a solid producer for us. While the recent rate
decrease in California impacted this quarter's premium, we continue
to believe that California is an attractive market. We also
continue to push into other markets including our recent entrance
into Nevada." American Team Managers (ATM) ATM specializes in
general liability coverage for artisan contractors (electricians,
plumbers and other trades) and general contractors and small to
midsize workers' compensation niches within California. ATM also
offers general liability, commercial auto and garage coverages for
local and intermediate trucking in California. Premium was $7.6
million and $14.8 million, respectively, for the three and six
months ended June 30, 2006, as compared to $5.4 million and $7.1
million for the three and six month months ended June 30, 2005.
Smith noted, "We continue to be satisfied with ATM's growth,
especially outside of workers' compensation. Our newest customer
class - local and intermediate trucking - is producing well." AEON
Insurance Group, Inc. (AEON) AEON, the company's Partner Agent
specializing in commercial auto, general liability and inland
marine for tow trucks and repossession segments, produced written
premiums of $4.1 million and $7.6 million, respectively, for the
three and six months ended June 30, 2006, as compared to $1.8
million and $3.3 million for the three and six months ended June
30, 2005. Smith stated, "We are encouraged by the improvement in
AEON's production." Specialty Risk Solutions, LLC (SRS) SRS
specializes in providing general liability to the public entity
segment including schools, municipalities and special districts.
SRS became a Partner Agent in May 2005 and did not write any
business in the first half of either 2006 or 2005. Smith noted, "As
mentioned, SRS selectively targets a limited number of accounts
that are attractively priced. We are quoting business for the third
quarter." Appalachian Underwriters, Inc. (AUI) AUI specializes in
providing general liability and commercial auto to small artisan
and general contractors such as carpentry professionals,
electricians and interior decorators, as well as suppliers to the
construction industry, such as drywall suppliers. AUI has expanded
its offering from 12 to 14 midwest and southeast states. AUI became
a Partner Agent in October 2005 and produced $3.2 and $5.0 million,
respectively, for the three and six months ended June 30, 2006. "We
are pleased with AUI's progress," Smith stated. American Patriot
Insurance Agency, Inc. (API) API specializes in general liability
and commercial auto for small to medium roofing contractors and
markets directly and through retail brokers. API produced $0.4
million in its first quarter of operations. Smith stated, "API has
expanded to 19 states and we are working to enter others. API began
producing premium in the second quarter and is marketing
aggressively to penetrate its extensive roofing supply customer
base." ***** Smith concluded, "We have achieved profitability,
which is great news. The next step is to generate favorable returns
on equity for our investors. Our continued focus is on controlling
expenses and adding business that provides a better balance of
premium while maintaining our strict underwriting standards."
Conference Call Details SUA will host a conference call on
Thursday, August 3 at 9:00 am Central Time to discuss second
quarter results. Interested parties may access a live webcast by
going to the "Investor Relations" page of SUA's website at
http://www.suainsurance.com/ or by calling 866-700-0161. 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
employee 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 for per share data) For
the For the For the For the Three Months Three Months Six Months
Six Months Ended Ended Ended Ended June 30, June 30, June 30, June
30, 2006 2005 2006 2005 Results of operations Gross written
premiums $37.4 $25.0 $68.2 $33.5 Net written premiums $34.9 $22.2
$62.3 $29.8 Earned premiums $25.2 $3.0 $48.5 $3.5 Net investment
income 1.5 1.0 2.6 1.8 Total revenues 26.7 4.0 51.1 5.3 Net loss
and loss adjustment expense 14.5 2.3 28.5 2.8 Amortization of
deferred acquisition costs 5.2 0.6 10.7 0.7 Service company fees -
2.2 - 4.4 Other operating expenses 4.7 2.9 9.8 5.9 Total expenses
24.4 8.0 49.0 13.8 Pre-tax income 2.3 (4.0) 2.1 (8.5) Federal
income tax expense 0.1 - 0.1 - Net income (loss) $2.2 $(4.0) $2.0
$(8.5) Key ratios Net loss and loss adjustment expense ratio 57.4%
76.5% 58.7% 79.7% Ratio of amortization of deferred acquisition
expense to earned premium 20.6% 21.1% 22.1% 21.1% Ratio of all
other expenses to gross written premium 12.7% 20.2% 14.3% 30.6% Net
income (loss) per share Basic and diluted $0.14 $ (0.27) $0.13 $
(0.58) Average common shares outstanding (basic and diluted) 15,176
14,754 15,096 14,731 Summary Financial Data (in millions, except
for per share data) As of As of June 30, December 31, Financial
Condition 2006 2005 Investments $131.9 $103.0 Total assets $317.4
$277.2 Loss and loss adjustment expense reserves* $123.9 $104.9
Unearned insurance premiums $72.4 $58.6 Other liabilities $17.2
$12.9 Shareholders' equity $103.9 $100.8 Book value data Shares
outstanding 15.2 14.9 Book value per share $6.81 $6.76 Tangible
book value per share $6.11 $6.04 * Includes $78.8 million and $86.7
million as of June 30, 2006 and December 31, 2005 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 For the Six For the Months Ended Months Ended Year Ended
June 30, 2006 June 30, 2006 December 31, 2005 California 31.0%
32.3% 39.4% Florida 49.2% 41.3% 42.6% Other States 19.8% 26.4%
18.0% Total 100.0% 100.0% 100.0% For the Three For the Six For the
Months Ended Months Ended Year Ended June 30, 2006 June 30, 2006
December 31, 2005 Workers' compensation 62.9% 65.2% 68.8%
Commercial automobile 15.3% 13.2% 10.4% General liability 20.2%
20.1% 11.8% All other 1.6% 1.5% 9.0% Total 100.0% 100.0% 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, or Scott Goodreau of Specialty
Underwriters' Alliance, Inc., +1-888-782-4672 Web site:
http://www.suainsurance.com/
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