CHICAGO, Feb. 27 /PRNewswire-FirstCall/ -- Specialty Underwriters'
Alliance, Inc. (NASDAQ:SUAI) today reported a net loss of $4.7
million, or $0.32 per share, for the three months ended December
31, 2005 and a net loss of $18.0 million, or $1.22 per share, for
the year ended December 31, 2005. Total revenues for the three
months were $15.7 million, comprised of earned insurance premiums
of $14.8 million and investment income of $0.9 million. Total
revenues for the year ended were $30.2 million, comprised of earned
insurance premiums of $26.6 million and investment income of $3.6
million. Gross written premiums for the three months and year ended
December 31, 2005 were $28.9 million and $90.6 million,
respectively. For the fourth quarter and full year, premium by
Partner Agent was as follows: Risk Transfer Holdings, Inc. (RTH)
$17.9 million and $50.2 million, respectively; American Team
Managers (ATM) $7.5 million and $22.1 million, respectively;
Appalachian Underwriters, Inc. (Appalachian) $0.3 million; AEON
Insurance Group, Inc. (AEON) $3.2 million and $11.0 million,
respectively; and Specialty Risk Solutions, LLC (SRS) $0.0 million
and $7.0 million, respectively. For the fourth quarter, total
expenses were $20.4 million, $9.9 million of losses and loss
adjustment expenses and $10.5 million of acquisition costs and
general administrative and operating expenses. During the fourth
quarter, general administrative expenses totaled $6.5 million, of
which $2.2 million was service company fees with Syndicated
Services Company, Inc. (SSC). Other major categories of expense
included $1.2 million of salaries and benefit costs (excluding $0.9
million of salary and benefit costs classified as loss adjustment
and acquisition expenses), $1.0 million of professional and
consulting fees, $.5 million of depreciation and amortization and
$1.6 million of other expenses. For the year ended December 31,
2005, total expenses were $48.2 million, $19.1 million of losses
and loss adjustment expenses and $29.1 million of acquisition costs
and general administrative and operating expenses. For the year,
general administrative expenses totaled $23.0 million, of which
$8.8 million was service company fees with Syndicated Services
Company, Inc. (SSC). Other major categories of expense included
$4.6 million of salaries and benefit costs (excluding $2.9 million
of salary and benefit costs classified as loss adjustment and
acquisition expenses), $2.8 million of professional and consulting
fees, $1.8 million of depreciation and amortization and $5.0
million of other expenses. 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. Courtney Smith, president
and chief executive officer stated, "While we successfully
established our business and infrastructure last year, we are not
satisfied with our results of operation for 2005. In 2006, we are
focused on growing our business and dramatically improving our
results of operation through increasing and diversifying our
premium, improving our loss ratio, and reducing and better
controlling our expenses. Our efforts in 2005 coupled with these
activities supports our belief that we will reach profitability in
the first half of 2006. January 2006 was our largest premium
production month to date." Increasing and Diversifying Premium
Income Smith noted, "We are continuing to build our premium volume
by writing solid business with our existing Partner Agents. In
addition, we are adding Partner Agents and expanding customer
classes with existing agents to increase our premiums. Our 2005
business was approximately 69% workers' compensation. Our longer
term goal is to produce a more balanced book of business. We signed
new Partner Agent agreements with Appalachian Underwriters, Inc.
and American Patriot Insurance Agency, Inc. specializing in general
liability and commercial auto. Also, we signed a letter of intent
with an agent focusing on general liability and commercial auto for
artisan contractors in the western region. As with our existing
relationships, we are partnering with additional agents who fit
into our business model in terms of mix of business and profit
potential. We are also performing due diligence for the addition of
new customer classes for ATM and RTH. We should note that we have
ended discussions with a potential agent who signed a letter of
intent with us. We will continue to be diligent in signing
contracts only with Partner Agents whose business fits within our
model." Improving Loss Ratio "For the year ended, our direct loss
ratio was 52.9% and our direct loss and loss adjustment expense
ratio was 66.7%. This reflects our commitment to adequate pricing
and strong underwriting standards. Our net loss and loss adjustment
expense ratio year to date was 71.8%. Included is an unallocated
loss adjustment expense ratio (ULAE) of 9.0%. This level of
unallocated loss adjustment expense was due to lower premium
volume, while having to build a claim infrastructure and management
process. We anticipate a reduction of ULAE in 2006 as premium
increases. Also, as previously stated, our net loss and loss
adjustment expense ratio was impacted by our reinsurance program,
which includes minimum payments, due to our lower earned premium
level. We have finalized our reinsurance program for 2006 which we
expect will produce ceded results that are more in line with our
direct results," Smith stated. Lowering Expense "As was the case
with our third quarter," Smith continued, "our expenses primarily
consisted of salaries and benefits and service company fees under
our contract with SSC. Our contract with SSC, which amounted to
$8.8 million in 2005, has been terminated effective December 31,
2005 and the transition process for these activities is
substantially complete. As a result, we believe the expense
associated with these specific back office functions will be
reduced at least fifty percent. We have essentially completed the
building of our infrastructure. We currently have 65 employees and
are committed to operating efficiently and will increase staff only
as our business volume requires. Also, we have completed installing
the first agent on our new technology platform for policy
administration. We have been pleased with our new technology
direction and technology partner and anticipate that the system
will enable us to reduce processing costs, eliminate duplication of
work, and assist us in better managing our results." Partner Agents
Risk Transfer Holdings, Inc. (RTH) SUA's 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. Currently, SUA is quoting business in California,
Florida, Georgia, Alabama, South Carolina, Texas and Illinois. We
have also recently expanded into Michigan. RTH produced total
premiums of $17.9 million and $50.2 million for the three months
and year ended December 31, 2005 respectively. Smith stated, "RTH
wrote 43 PEOs in 2005 including 17 PEOs in California. As
previously mentioned, California approved a 15.3% decrease in
advisory pure premium rate for workers' compensation effective as
of January 1, 2006. This decrease was in response to an improvement
in loss experience caused by recent workers' compensation reform.
We believe that California is still an attractive workers'
compensation market. We are encouraged by the progress that RTH is
making and are optimistic of our future together." 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. Premium was $7.5 million and $22.1
million for the three months and year ended December 31, 2005,
respectively. Smith noted, "ATM continues to gain traction after a
remarketing of the contractors product. We expect their growth to
continue." 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 $3.2 million and $11.0 million for the
three months and year ended December 31, 2005, respectively. Smith
stated, "We are working with AEON to analyze their marketing
approach in an effort to improve their results." Specialty Risk
Solutions, LLC (SRS) SRS specializes in providing general liability
to the public entity segment including schools, municipalities and
special districts. SRS wrote $7.0 million for the year ended
December 31, 2005. SRS wrote no business in the fourth quarter. Mr.
Smith noted, "SRS was not expected to write any business in the
fourth quarter. SRS selectively targets a limited number of
accounts that are attractively priced and that will most likely
occur in the second and third quarters." Appalachian Underwriters,
Inc. (Appalachian) Appalachian specializes in small artisan and
general contractors business such as carpentry, electricians, and
interior decorators, as well as suppliers to the construction
industry such as drywall suppliers. Appalachian provides commercial
general liability and commercial auto. The company began writing
business in December in Illinois. They will focus initially on 12
midwest and southeast states. Appalachian produced $0.3 million for
the three months and year ended December 31, 2005. Smith stated,
"Appalachian provides a great opportunity to expand our contractors
program into the midwest and southeast region with a Partner Agent
who understands this customer class and how to market in this
territory. Appalachian is committed to expanding its current book
of commercial general liability and commercial auto business by
marketing to its current workers' compensation customer base of
which over $80 million and 8,500 accounts are written in the small
contractors market segment. We are confident they will be great
partners." Agreement Signed with Partner Agent for Roofing
Contractors SUA signed a new Partner Agent contract with American
Patriot Insurance Agency, Inc., which specializes in general
liability and commercial auto for small to medium roofing
contractors and will market directly and through retail brokers.
They will initially market in fourteen states in the central and
southern regions. Smith stated, "American Patriot is owned by the
same principals as ABC Supply Company, the largest roofing
materials supplier in the country. We will market to small to
medium roofing contractors by capitalizing on its pre-existing
relationships in the roofing industry. We expect them to begin
writing in the first half of 2006." Letter of Intent and Expansion
of Existing Agents SUA signed a letter of intent in the fourth
quarter with a potential agent writing general liability and
commercial auto for artisan contractors in the western region and
is moving into the final phase of the due diligence process. Mr.
Smith noted, "We expect to sign this potential agent to contract
some time in the second quarter and have them writing business by
the third quarter. We are also pursuing the possibility of
developing new customer classes for ATM and RTH. We believe that
both of these opportunities look promising and will help us to
further balance our book of business." Smith concluded, "We are
adding agents and customer classes. Our business is solid, our
expenses are controlled, and our infrastructure is progressing
well. We have taken steps to ensure that our programs will continue
to grow in 2006 and our results will improve significantly from
2005." Conference Call Details SUA will host a conference call on
Tuesday, February 28 at 10:00 a.m. Eastern Time (9:00 a.m. Central
Time) to discuss fourth quarter and year-end results for 2005.
Interested parties may access a live webcast by going to our
website at http://www.suainsurance.com/ , clicking on "Investor
Relations," and clicking on "Live Webcast" or by calling (800)
706-7741. 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. Summary Financial Data (in millions, except for per
share data) Results of operations Three Months Ended Year Ended
December 31, December 31, 2005 2005 Gross written premiums $28.9
$90.6 Earned premiums $14.8 $26.6 Net investment income 0.9 3.6
Total revenues 15.7 30.2 Loss and loss adjustment expense 9.9 19.1
Amortization of deferred acquisition costs 4.0 6.1 Service company
fees 2.2 8.8 Other operating expenses 4.3 14.2 Total expenses 20.4
48.2 Net income (loss) $(4.7) $(18.0) Net income(loss) per share
Basic and Diluted $(0.32) $(1.22) Average common shares outstanding
(basic and diluted) 14,853 14,774 Financial condition Investments
$103.0 Total assets $277.2 Loss and loss adjustment expense
reserves* $104.9 Unearned insurance premiums $58.6 Other
liabilities $12.9 Shareholders' equity $100.8 Book value data
Shares outstanding 14,904 Book value per share $6.76 Tangible book
value per share $6.04 * $86.7 million of loss and loss adjustment
expense reserves represent 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 our balance sheet as a reinsurance
recoverable. Gross Written Premium Data for the Year Ended December
31, 2005 (in millions, except percentages) State Gross Percentage
written of gross premium written premium California $35.7 39.4%
Florida $38.6 42.6% Other States $16.3 18.0% Total $90.6 100.0%
Line of business Gross Percentage written of gross premium written
premium Workers' compensation $62.3 68.8% Commercial automobile
$9.4 10.4% General liability $10.7 11.8% All other $8.2 9.0% Total
$90.6 100.0% To learn more about Specialty Underwriters' Alliance,
please visit http://www.suainsurance.com/ . 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.
First Call Analyst: FCMN Contact: 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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