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Seattle specialty insurer SeaBright seeks to go public

By Drew DeSilver
Seattle Times business reporter

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The Seattle-based insurer specializes in workers' compensation coverage for maritime workers; in "underserved" markets such as California, Hawaii and Alaska; and in niches, such as California's construction industry, where labor contracts rather than state law governs workers' comp matters.

Although SeaBright itself is just over a year old, its business dates back almost two decades.

Eagle Pacific and its California-based sister company, Pacific Eagle, were for many years key parts of Services Group of America (SGA), the sprawling enterprise owned by Seattle businessman Thomas Stewart. They focused on insuring longshoremen, shipbuilders and other maritime workers against on-the-job injuries.

In July 1998, SGA sold the Eagle businesses to Lumbermens Mutual Casualty, flagship of the Chicago-based Kemper Group of insurance companies. But Kemper soon ran into financial difficulties; it defaulted on its debt last year, has been selling off pieces of its business to other companies and is no longer writing new policies.

Last summer the executives running the Eagle businesses, led by John Pasqualetto, teamed with Summit Partners to buy them from Kemper. The purchase price was $16 million.

Summit, a Palo Alto, Calif.-based private equity firm, also injected about $30 million in new capital into the businesses, which now operate under the newly formed SeaBright holding company. Summit owns all but a sliver of SeaBright, though its stake would decline after a successful public stock offering.

SeaBright Insurance Holdings Founded: 2003, though the underlying businesses date to the 1980s Headquarters: Seattle CEO: Joseph Pasqualetto, 61 Gross premiums written: $61 million in six months ended June 30 Employees: 102 Source: Company reports

Pasqualetto, SeaBright's chairman and chief executive, declined yesterday to comment on the offering, citing Securities and Exchange Commission restrictions on what companies and their officers can say publicly while an IPO is pending.

For the first half of this year, SeaBright reported a $1.3 million profit on $27.3 million in revenue. Though revenue was up 24 percent from the equivalent period last year, higher claims and costs associated with the Kemper deal cut into the insurer's profit.

As of June 30, SeaBright had $183.3 million in assets.

With new capital from the IPO, SeaBright hopes to expand geographically and to write more business in its core markets. Although licensed to write workers' comp policies in 42 states and the District of Columbia, the company now gets 53 percent of its gross premiums from California, and another 30 percent in Washington, Alaska and Hawaii.

Due largely to increases in medical costs, workers' comp in recent years has been a sinkhole for many insurers; Safeco, for example, has sharply cut back the amount of new workers' comp business it writes, especially in California.

SeaBright, however, said in its filing that it believes claims costs are rising more slowly than in the past few years, and that as fewer insurers write workers' comp policies, those still in the market have more power to raise premiums.

Several other niche insurers have filed for IPOs this year. Affirmative Insurance Holdings, a Texas-based provider of high-risk auto insurance, raised $114.4 million in its July offering; National Atlantic Holdings, which specializes in selling auto insurance in New Jersey, is seeking to raise $75 million.

As is common with newly filed IPOs, the company did not give details on how many shares it plans to sell or what its target price is; that information will come later. SeaBright did, however, say it had applied to list its shares on the Nasdaq under the ticker symbol SEAB.

The offering is being managed by Piper Jaffray, Friedman Billings Ramsey and Cochran Caronia.

SeaBright joins six other Northwest companies that have filed this year to go public.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com

Copyright © 2004 The Seattle Times Company

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