SeaBright Holdings, Inc. (
Q3 2010 Earnings Call
October 26, 2010 4:30 pm ET
Philip Romney - VP of Finance & Principal Accounting Officer
John Pasqualetto - Chairman, President & CEO
Richard Gergasko - COO
Scott Maw - SVP & CFO
Mike Grasher - Piper Jaffray
Bijan Moazami - FBR Capital Markets
Matt Carletti - JMP
Bob Farnam - KBW
Adam Klauber - Macquarie
Raymond Iardella - Oppenheimer
Matt Carletti - JMP
SeaBright Holdings, Inc. Q2 2010 Earnings Call Transcript
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Good afternoon, ladies and gentlemen and welcome to SeaBright Holdings third quarter 2010 earnings conference call. At this time all participants have been placed in a listen-only mode. Following formal remarks, the call will be open to questions.
It is now my pleasure to introduce the host of today's call, Mr. Philip Romney, Vice President of Finance and Principal Accounting Officer for SeaBright Holdings. Please go ahead, sir.
Thank you, Marvin and welcome to SeaBright's third quarter 2010 conference call. Joining me on the call today are John Pasqualetto, Chairman, President and Chief Executive Officer; Richard Gergasko, Chief Operating Officer; and Scott Maw, Senior Vice President and Chief Financial Officer.
Before I turn the call over to John for opening remarks, I'd like to remind you that statements made during this conference call that are not based on historical facts are forward-looking statements.
These statements are made in reliance on the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to uncertainties and risks. SeaBright's future results may differ materially from those anticipated and discussed in forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the press release issued today and in SeaBright's filings with the SEC. We refer you to these sources for additional information.
I'd also like to point out that remarks made during the conference call are based on information and understandings that are believed to be accurate as of today's date October 26, 2010. This call is a property of SeaBright Holdings, Inc. Any distribution, transmission, broadcast or rebroadcast in any form without the express written consent of the company is prohibited.
With those announcements complete, I give you John Pasqualetto.
Thank you, Phil. Good afternoon, and thank you for joining us today. Before turning the call over to Rich and Scott for a review of our operating and financial results let me make a few comments about the third quarter.
I am pleased to report a return to relative stability for SeaBright in the third quarter following an uncharacteristically difficult second quarter. I'm sure you remember that we took decisive action on quarter two to strengthen our reserves and response to adverse developments.
As we stated before SeaBright is committed to doing the right thing and we did what we felt was necessary to bring the reserves to a level we believe would reflect their ultimate claim cost. I remain confident that we acted in the timely an appropriate manner and in the best long term interest of world SeaBright shareholders.
No adjustments to reserves were made during the third quarter. I'm pleased to report that we encountered a more routine operating conditions during the recent quarter or at least conditions to which we have become accustom throughout this prolonged very soft underwriting environment.
The three things that have dominated our industry during the past few years are recession, soft pricing and rising claim cost, all of which we have persistently worked to address. While we had no ability to directly affect the recession and the rate at which the economy recovers, we've dealt with what it affects by creating a more balanced portfolio of business thereby reducing our vulnerability on that single industry of construction, our past core market segment.
Alternative market program business expands both in terms of premium, both written and breadth of targeted industries. Our small maritime program has steadily gained traction and provides an operating model for the launch of similar programs. Also we now offer workers' competition coverage for healthcare and refuse management businesses to a retail broker network and through our PointSure subsidiary; we now market a new manufacturing employers program.
We respect the claims cost, the workers compensation industry continues to experience medical inflation as well as longer case duration mostly driven by the high unemployment.
As we've discussed during our previous call, longer claim duration negatively impacts claim expenditures, calls for more medical treatment and use of higher price procedures. SeaBright has made in its claims challenges directly by continuing to deliver excellent claim service and innovation.
Our medical care management subsidiary Paladin reviews all medical bills and performs utilization review pursued by an insurance company and has outperformed our prior outsourced medical management vendors. We also launched our new BrightCurePDQ program in California to address the high cost and longer duration claims.
BrightCurePDQ, PDQ stand for Physician Directed Quality used as predictive modeling to identify those potential high cost claims very early which are then managed by medical doctors who got approved dotcoms working side by side with company claims examiners. Our initial results from this groundbreaking approach are encouraging. After we've had suitable amount of time to evaluate the program performance, we would plan the concept to be moved out nationwide.
We've also been successful in managing expenses and in implementing efficiencies which has had a positive impact on our operating expenses. Later in the call, Scott will provide insight into the anticipated direction of our expense ratio.
Regarding pricing, we've been successful in gaining rate increases to counter to counter rising claims severity. Rich will provide more detail about these increases. As a consequence in our rate increases in California and Illinois, we are seeing preliminary signs of customer price resistance. We had lower than anticipated gross written premium of 51.7 million during the third quarter. The reduction in gross written premium was experienced both in new and renewal business.