SeaBright Insurance Holdings, Inc. jumps on upgrade
Shares of SeaBright Insurance Holdings, Inc. (Nasdaq: SEAB) are on a rampage today after Friedman Billings Ramsey upgraded the provider of multi-jurisdictional workers' compensation insurance to a rating of “outperform” from “marketperform” on stellar second quarter top and bottom line results.
For the three months ended June 30, the Seattle, Wash.-based company late Tuesday reported income of $10.2 million, or $0.49 cents per share, compared with earnings of $9.4 million, or $0.45 per share, in the second quarter of 2006. Analysts polled by Thomson Financial had anticipated earnings of $0.43 per share.
Total revenue for the quarter increased 29.4% to $60.7 million, compared with $46.9 million in the second quarter last year.
On account of the second quarter results, Friedman Billings Ramsey analyst Bijan Moazami is raising his EPS estimates and target price. “The robust top-line growth, combined with favorable loss development in the workers' compensation segment, is giving us enough confidence to increase our projected EPS,” Moazami wrote.
Moazami is raising his earnings per share estimates to $1.95 for 2007 and $2.05 for 2008, up from his previously forecasted estimates of $1.80 and $1.85,respectively. Additionally, Moazami raised his price target to $22 from $21.
Aside from robust top and bottom lines, SeaBright reported a mixed bag of business results with mostly positive undertones, which investors use to evaluate SeaBright’s business.
On the positive side, SeaBright is aggressively expanding across the country into Minnesota, Hawaii, Illinois and Florida, which is helping the company to diversify away from its core state California.
While SeaBright has decreased its California workers’ compensation rate by 14%, as of July 1, the company’s rate is 10% higher than what is recommended by the insurance department.
Additionally, operating in a tough competitive environment characterized by pricing pressure SeaBright was able to expand its net premiums written by a growth rate of 32% from last year.
On a more lackluster note, in the second quarter, SeaBright’s expense ratio increased to 26.8% from 23.3%. The company said it perceives that expenses will most likely decline going forward.
Shares of SeaBright surged 15.1%, or $2.55, to $19.47 Wednesday.
