American Safety Insurance Holdings, Ltd.
Reports Fourth Quarter and Year End Results
HAMILTON, Bermuda, March 29, 2004 - American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported net earnings of $3.3 million from its insurance and real estate operations for the fourth quarter ended December 31, 2003, which were offset by the establishment of a $3.9 million valuation allowance related to a note receivable secured by real property, resulting in a net loss for the quarter of $582,000, or $0.09 per diluted share, as compared to a net loss of $2.5 million, or $.51 per diluted share in the fourth quarter of 2002. The valuation allowance was established in connection with the preparation of the Company’s year end financial statements as a result of the review of the 2003 financial performance of the golf course property which secures the loan, coupled with a general economic decline in the value of golf course properties. In January 2004, the Company entered into a settlement agreement under which modified repayment terms the borrower is required to pay $5.4 million. The Company received payment of the first installment of $1.4 million during the first quarter of 2004. After the payment and valuation allowance, the Company has no remaining notes receivable on its balance sheet.
Fourth quarter net earnings (loss) are detailed as follows (in thousands):
Quarter Ended Quarter Ended December 31, 2003 December 31, 2002 Insurance Operations $2,083 $ 771 Real Estate Operations 1,219 (1,660) Other, including realized gains and (losses) 16 909 Earnings before Impairment of Note 3,318 20 Receivable Impairment of Note Receivable (3,900) (2,468) Net Loss $ (582) $(2,448) ======= =======
The increase in net earnings from insurance operations was due to strong underwriting profits in the Company’s core environmental, excess and surplus and program business lines. The increase in net earnings from real estate operations was due to increased closings of condominiums units and one boat slip at Harbour Village. Total revenues for the fourth quarter of 2003 increased 70% to $55 million as compared to the same quarter of 2002 as a result of increased net premiums earned, investment income and real estate income. Net premiums earned for the fourth quarter of 2003 increased 50% to $34.6 million from the same quarter of 2002 due to increases in the Company’s core environmental, excess and surplus, and program business net premiums earned. Net cash flow generated from operations increased to $20 million for the fourth quarter of 2003 from $7.1 million in the same quarter of 2002.
Net earnings for the year ended December 31, 2003 increased to $7.4 million, or $1.42 per diluted share, from $2.5 million, or $.51 per diluted share for the same period of 2002. The Company’s net earnings are detailed as follows (in thousands):
Year Ended Year Ended December 31, 2003 December 31, 2002 ----------------- ----------------- Insurance Operations $7,076 $3,618 Real Estate Operations 2,218 1,900 Other, including realized gains and (losses) 2,020 (566) ------ ------- Earnings before Impairment of Note 11,314 4,952 Receivable Impairment of note Receivable (3,900) (2,468) ------- ------- Net Earnings $ 7,414 $2,484 ====== =====
The increase in net earnings from insurance operations was due to strong underwriting profits in the Company’s core environmental, excess and surplus and program business lines. The increase in net earnings from real estate operations was due to increased closings of condominium units and boat slips at Harbour Village. Total revenues for the year ended December 31, 2003 increased 35% to $176 million as compared to the same period of 2002 as a result of increased net premiums earned, investment income and realized gains from the sale of investments. Net premiums earned for the year ended December 31, 2003 increased 49% to $109 million from the same period of 2002 due to increases in net premiums earned in the Company’s core lines of business. Net cash flow from operations increased to $80 million for the year ended December 31, 2003 from $38 million in the same period of 2002.
The Company’s book value per share increased 5% to $13.80 at December 31, 2003 from $13.18 at December 31, 2002. This increase in book value per share is due primarily to the Company’s net earnings during the year ended December 31, 2003 offset, in part, by a decrease in unrealized gains on investments, and a small amount of dilution from the secondary offering in the fourth quarter of 2003.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer of American Safety Insurance Holdings, Ltd., said, “I am very pleased with the continued improvement in our insurance business for both the quarter and year ended December 31, 2003. Net earnings from insurance improved by 170% for the quarter and 96% for the year over the same period in 2002. The consistent growth in underwriting profits and strong cash flow from our insurance business supports our ability to effectively utilize our capital and continue to profitably grow our insurance business in the current favorable market conditions. The note receivable charge was required under GAAP due to a decrease in the value of the collateral securing the note. Any future payments received from the borrower under the settlement agreement will be treated as earnings to the Company. Absent the note receivable charge, net earnings for the fourth quarter were $3.3 million or 50 cents per diluted share, and $11.3 million or $2.16 per diluted share for the year.” A conference call to discuss fourth quarter and year end 2003 results is scheduled for Tuesday, March 30, 2004 at 11:00 a.m. (Eastern Time), which will be broadcast through the Investor Broadcast Network’s Vcall website at http://www.vcall.com or the Company’s website at http://www.americansafetyinsurance.com. A replay will be available on the Company’s website. American Safety Insurance Holdings, Ltd. is a specialty insurance holding company which, through its subsidiaries, provides innovative insurance solutions in the alternative insurance market for environmental remediation, contracting and other specialty risks. Additional information about the Company can be found at http://www.americansafetyinsurance.com.
This press release contains forward-looking statements. These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, including future insurance claims and losses, and the Company’s expectations with respect to the outcome of the Principal Management acquisition rescission litigation, and the future profitability and the value of the Harbour Village real estate development project. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various factors, including competitive conditions in the insurance industry, levels of new and renewal insurance business, unpredictable developments in loss trends, adequacy and changes in loss reserves, timing or collectibility of reinsurance recoverables, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and arbitration proceedings, and changes in levels of general business activity and economic conditions. With respect to the development of the Harbour Village project, such forward looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various real estate development industry factors, including competitive housing conditions in the local market area, risks inherent in real estate development and new construction, increases in construction costs, construction delays, weather, zoning, litigation, changes in interest rates and the availability of mortgage financing for prospective purchasers of condominium units and boat slips, and changes in local and national levels of general business activity and economic conditions. For additional factors, which could influence the results of the Company’s operating and financial performance, see the Company’s filings with the Securities and Exchange Commission.
Contacts:
American Safety Insurance Services, Inc. Cameron Associates Fred J. Pinckney Kevin McGrath Investor Relations/General Counsel (212) 245-4577 (770) 916-1908
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American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
Three Months Ended Twelve Months Ended December 31 December 31, 2003 2002 2003 2002 INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $ 54,469,923 $ 40,291,170 $ 184,402,663 $ 145,307,974 Ceded premiums earned (19,872,808) (17,283,613) (75,068,826) (71,725,522) Net premiums earned 34,597,115 23,007,557 109,333,837 73,582,452 Net investment income 1,931,451 1,263,684 5,800,536 4,388,416 Net realized gains (losses) 24,164 1,242,109 3,139,907 685,472 Real estate income 18,677,300 7,121,389 57,555,194 51,780,576 Other income 42,249 (19,003) 161,785 226,197 Total revenues $ 55,272,279 $ 32,615,736 $175,991,259 $ 130,663,113 Expenses: Losses and loss adjustment expenses $ 22,009,364 $ 12,004,785 $ 65,833,743 $ 42,030,633 Acquisition expenses 7,780,168 5,433,143 21,817,717 14,506,718 Payroll and related expenses 2,388,148 1,922,490 9,048,799 8,526,990 Real estate expenses 16,721,714 9,745,698 53,998,892 48,527,026 Other expenses 6,654,227 7,082,634 14,635,404 11,975,672 Minority interest (9,240) (68,684) 311,774 128,044 Expense due to rescission 65,521 58,653 255,145 1,565,121 Total expenses $ 55,609,902 $ 36,178,719 $165,901,474 $127,260,204 Earnings before income taxes (337,623) (3,562,983) 10,089,785 3,402,909 Income taxes 244,286 (1,114,646) 2,675,375 918,790 Net earnings $ (581,909) $ (2,448,337) $ 7,414,410 $ 2,484,119 ================== ================== ================== =============== Net earnings per share: Basic $ (0.09) $ (0.52) $ 1.45 $ 0.52 ================== ================== ================== =============== Diluted $ (0.09) $ (0.51) $ 1.42 $ 0.51 ================== ================== ================== =============== Average number of shares outstanding: Basic 6,182,108 4,748,130 5,105,770 4,735,933 ================== ================== ================== ================== Diluted 6,594,397 4,796,307 5,233,716 4,870,736 ================== ================== ================== ================== GAAP combined ratio 99.4% 105.5% 96.8% 101.3% BALANCE SHEET DATA: December 31 December 31, 2003 2002 Total investments, excluding real estate $222,418,972 $ 111,926,287 Total assets 514,259,644 389,341,789 Unpaid losses and loss adjustment expenses 230,103,754 179,163,593 Total liabilities 418,916,521 326,889,940 Total shareholders' equity 95,343,123 62,451,849 Book value per share $ 13.80 $ 13.18
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Harbour Village Development Status (000)s except references to Condo Units Phase 1 Phase 2 ------------------------------------------- ---------------------------- Townhouses The The ------------------------------ Marina Oak Links Links Total Condos Hammock Riverwalk North South Condos Boat Slips Total ------------------------------------------- ---------------------------- ------------ ------------- ------------ 12/31/2003 Planned Number of Condo Units and Boat Slips 248 18 28 188 188 670 142 812 Condo Units and Boat Slips under Contract 248 15 27 179 161 630 142 772 Value of Pre-sale Contracts (Note 1) 62,892 6,696 10,486 45,506 44,674 170,254 13,082 183,336 Number of Buildings 8 4 6 4 4 26 - 26 Number of Closed Units 248 15 25 171 - 459 138 597 Number of Buildings Complete by Task Building Foundation 8 4 6 4 4 Vertical Building Completed 8 4 6 4 4 Interior Finish Completed 8 4 6 4 - Certificate of Occupancy Received 8 4 6 4 - 4th Quarter Actual Units Closed - - 3 62 - 65 1 66 Revenue Recognized 85 19 1,277 16,788 - 18,169 142 18,311 Other Revenue 366 Total Revenue 18,677 Gross Profit Recognized (301) (295) 39 4,212 - 3,655 (874) 2,781 Other Expense (Income) Items 825 Pre-Tax Profit 1,956 Actual 12/31/2003 YTD Units Closed - 12 14 171 197 17 214 Revenue Recognized 498 5,314 5,840 42,706 54,358 1,905 56,263 Other Revenue 1,292 Total Revenue 57,555 Gross Profit Recognized (935) (546) 37 8,898 7,454 (73) 7,381 Other Expense (Income) Items 3,825 Pre-Tax Profit 3,556 Outlook For 1st Quarter of 2004 Units Closed - 2 1 24 27 1 28 Revenue Recognized - Condos and Boat Slips - 1,186 372 7,214 8,772 138 8,910 Land Sales and Other Revenue 2,300 Total Revenue 11,210 Gross Profit Recognized - Condos and Boat - (1) 8 1,322 1,329 58 1,387 Gross Profit Recognized - Land Sales 450 Other Expense (Income) Items 811 Pre-tax Profit 1,026
Note 1 - No assurance can be given that purchasers under binding pre-sale contracts with deposits will close each contemplated transaction.
Note 2 - Other includes net brokerage commissions, advertising, promotion, and other general and administrative costs. These items are not allocated to specific buildings.
The projected results contained above for unit closings, revenue, gross profit, fixed costs and pre-tax profit are forward looking statements. With respect to the Company's development of the Harbour Village property, such forward looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various real estate development industry factors, including competitive housing conditions in the local market area, risks inherent in real estate development and new construction, increases in construction costs, construction delays, weather, litigation, changes in interest rates and the availability of mortgage financing for prospective purchasers of condominium units and boat slips and changes in local and national levels of general business activity and economic conditions.