SBX has been getting dumped by shareholders. According to the company:
“During the second quarter we undertook prudent measures to strengthen our loss reserves to reflect recent adverse claim development we have experienced, primarily in our California book of business,” noted John Pasqualetto, SeaBright’s Chairman, President and Chief Executive Officer. “In California, we encountered increasing medical cost trends and longer average claim durations, made worse by protracted high unemployment levels. SeaBright has instituted rate increases in California over the last 18 months and based on the recent claim data, we filed yesterday for a 15.3% increase in that state.”
The net loss ratio for the second quarter of 2010 was 121.1% compared to 68.2% in the same period of 2009. During the second quarter of 2010, on a pre-tax basis, the Company recognized $30.6 million, net of reinsurance, in adverse development of prior years’ loss reserve estimates, compared to approximately $2.9 million in adverse development of prior years’ loss reserve estimates in the second quarter of 2009. During the second quarter of 2010, we also increased the net expected loss and allocated loss adjustment expense ratio for the 2010 accident year from 61.5% to 64.5%, the quarterly impact of which was approximately $1.9 million.
Right now, the company is trading at a 55% discount to book value. I think this is far too great a discount. I think chances are good that investors are overreacting. I also would bet that SeaBright is a good acquisition target at the moment. Its historic combined ratio is pretty good and it seems to have a competitive niche in the workers’ comp market.
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