American Safety Insurance Holdings, Ltd.
Reports Second Quarter Earnings
HAMILTON, Bermuda, August, 11, 2004 - American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported net earnings of $4.1 million or $0.55 per diluted share for the second quarter ended June 30, 2004, as compared to $3.8 million or $0.79 per diluted share for the second quarter of 2003. Net earnings for the six months ended June 30, 2004 are $7.7 million or $1.04 per diluted share, as compared to $5.0 million or $1.05 per diluted share for the same period in 2003.
Net earnings are detailed as follows (in thousands):
Quarter Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Operations $(1,691) $1,597 $420 $3,225 Real Estate Operations 1,997 284 3,518 (174) Other 3,791 1,933 3,809 1,983 Net Earnings $4,097 $3,814 $7,747 $5,034 ============= ============= ============= ==============
The net loss from insurance operations for the second quarter of 2004 reflects a total of $6.2 million of reserve strengthening as a result of adverse loss development that occurred during the period. Of this amount, $3.0 million represents reserve increases for discontinued lines and the balance of $3.2 million consists of reserve increases for excess and surplus business for accident year 2001 primarily attributable to certain New York commercial contracting risks (which represented 16% of the excess and surplus premium written in 2001). Premium written for New York commercial contracting risks has been reduced annually, and currently represents less than 2% of the Company’s excess and surplus premium. Based on the reserve development, the Company is evaluating its actuarial reserving assumptions for its excess and surplus business, which is expected to be completed during the third quarter of 2004. Given that approximately 50% of the reserve development was attributable to discontinued lines and the balance of the development related to its excess and surplus business, the Company does not believe that these reserve adjustments have any material implications with respect to the quality or profitability of the core business lines currently being written by the Company.
The increase in earnings for the second quarter of 2004 from real estate operations was due to increased profits from closings of condominium units at Harbour Village. Earnings from other items for the quarter include a $2.6 million payment received by the Company in settlement of the impaired note receivable that was written off in the fourth quarter of 2003, which represents the final payment from the borrower. Other items also include a $1.8 million payment received by the Company in settlement of professional liability claims against parties who are involved in the Principal Management rescission litigation.
The decrease in insurance earnings for the six months ended June 30, 2004 reflects a total of $9.0 million of reserve strengthening. Of this amount, $4.7 million consists of reserve increases for excess and surplus business relating to accident year 2001 primarily attributable to certain New York commercial contracting risks, and the remaining $4.3 million represents reserve increases for discontinued lines.
The increase in earnings for the six months ended June 30, 2004 from real estate operations was due to increased profits from closings of condominium units at Harbour Village.
Total revenues for the second quarter of 2004 increased 19% to $55 million as compared to the same quarter of 2003 as a result of increased net premiums earned, investment income and real estate income. Net premiums earned for the second quarter of 2004 increased 31% to $32 million from the same quarter of 2003 due to increases in the Company’s core business lines. Net cash flow generated from operations was $21 million for the second quarter of 2004.
Total revenues for the six months ended June 30, 2004 increased 39% to $105 million as compared to the same period in 2003 as a result of increased net premiums earned, investment income and real estate income. Net premiums earned for the six months ended June 30, 2004 increased 40% to $66 million from the same period of 2003 due to increases in the Company’s core business lines. Net cash flow from operations increased to $44 million for the six months ended June 30, 2004.
The Company’s book value per share increased 5% to $14.43 at June 30, 2004 from $13.80 at December 31, 2003. This increase in book value per share is due primarily to the Company’s net earnings during the six months ended June 30, 2004 offset, in part, by an increase in unrealized losses in its investment portfolio.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer of American Safety Insurance Holdings, Ltd., said: “We are disappointed that the reserve strengthening has adversely affected the otherwise strong insurance results. The Company has taken steps in our underwriting and claims areas to address the reserve development. It should be noted that the scope of the development is limited to discontinued lines and a small portion of our excess and surplus business. The insurance market conditions remain favorable for the market segments served by the Company, and we are pleased with the continued growth in our core business lines.”
A conference call to discuss second quarter 2004 results is scheduled for Thursday, August 12, 2004 at 11:00 a.m. (Eastern Time), which will be broadcast through the Investor Broadcast Network’s Vcall website at www.vcall.com or the Company’s website at 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 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, 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, results of evaluating actuarial reserving assumptions, 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
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights Three Months Ended Six Months Ended June 30, June 30, ---------------------------------------- ----------------------------------------- ------------------ -- ------------------ ------------------ -- ------------------- 2004 2003 2004 2003 - --------------------------------------------- ------------------ -- ------------------ -- ------------------ -- ------------------- - --------------------------------------------- ------------------ -- ------------------ -- ------------------ -- ------------------- INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $ 54,682,498 $ 41,141,883 $ 110,106,931 $ 83,950,784 Ceded premiums earned (22,592,774) (16,653,065) (43,898,470) (36,649,971) ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Net premiums earned 32,089,724 24,488,818 66,208,461 47,300,813 Net investment income 2,249,139 1,239,006 4,320,251 2,458,749 Net realized gains (5,139) 2,951,280 20,272 3,101,995 Real estate income 20,176,157 17,167,373 34,128,311 22,597,220 Other income 113,511 16,879 144,624 31,273 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Total revenues $ 54,623,392 $ 45,863,356 $ 104,821,919 $ 75,490,050 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Expenses: Losses and loss adjustment expenses $ 24,555,449 $ 14,630,662 $ 46,914,891 $ 27,447,300 Acquisition expenses 6,513,912 4,805,213 13,124,130 9,482,438 Payroll and related expenses 2,705,771 2,099,339 5,329,147 4,321,251 Real estate expenses 16,993,188 16,714,993 28,487,023 22,876,634 Other expenses 896,898 1,983,477 2,993,440 4,362,932 Minority interest 162,543 152,070 336,654 223,456 Expense due to rescission (1,745,544) 60,953 (1,715,970) 144,512 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Total expenses $ 50,082,217 $ 40,446,707 $ 95,469,315 $ 68,858,523 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Earnings before income taxes 4,541,175 5,416,649 9,352,604 6,631,527 4,811,429 Income taxes 444,406 1,602,733 1,606,016 1,597,258 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Net earnings $ 4,096,769 $ 3,813,916 $ 7,746,588 $ 5,034,269 ================== ================== ================== =================== ================== ================== ================== =================== Net earnings per share: Basic $ 0.59 $ 0.80 $ 1.12 $ 1.06 ================== ================== ================== =================== ================== ================== ================== =================== Diluted $ 0.55 $ 0.79 $ 1.04 $ 1.05 ================== ================== ================== =================== ================== ================== ================== =================== Average number of shares outstanding: Basic 6,932,237 4,739,888 6,919,668 4,739,888 ================== ================== ================== =================== ================== ================== ================== =================== Diluted 7,447,155 4,814,216 7,419,104 4,802,124 ================== ================== ================== =================== ================== ================== ================== =================== GAAP combined ratio 114.0% 96.5% 105.7% 95.9% ================== ================== ================== =================== ================== ================== ================== =================== June 30, December 31, BALANCE SHEET DATA: 2004 2003 Total investments excluding real estate $ 266,290,312 $ 222,418,972 Total assets 553,364,573 514,259,644 Unpaid losses and loss adjustment expenses 277,137,669 230,103,754 Total liabilities 453,280,132 418,916,521 Total shareholders' equity 100,084,441 95,343,123 Book value per share $ 14.43 $ 13.80
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights Three Months Ended Six Months Ended June 30, June 30, ---------------------------------------- ----------------------------------------- ------------------ -- ------------------ ------------------ -- ------------------- 2004 2003 2004 2003 - --------------------------------------------- ------------------ -- ------------------ -- ------------------ -- ------------------- - --------------------------------------------- ------------------ -- ------------------ -- ------------------ -- ------------------- PREMIUM SUMMARY (in Thousands) Gross Written Premium: Environmental $ 13,131 $ 9,027 $ 22,290 $ 18,139 Excess and Surplus 19,482 16,995 47,379 33,935 Program Business 20,735 19,973 41,276 36,610 Other 386 1,445 2,143 4,228 ------------------ ------------------ ------------------ ------------------- Total 53,734 47,440 113,088 92,912 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Net Written Premium: Environmental 10,606 6,248 17,678 13,207 Excess and Surplus 14,685 14,667 38,472 28,993 Program Business 4,536 3,357 6,914 7,308 Other 78 920 1,397 3,178 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Total 29,905 25,192 64,461 52,686 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Net Earned Premium: Environmental 7,720 5,418 14,636 10,064 Excess and Surplus 18,560 12,712 38,400 23,654 Program Business 4,591 4,847 10,746 10,545 Other 1,219 1,512 2,427 3,038 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ ------------------- Total $ 32,090 $ 24,489 $ 66,209 $ 47,301 ------------------ ------------------ ------------------ ------------------- ------------------ ------------------ ------------------ -------------------
Exhibit 99 Harbour Village Development Status (000)s except references to Condo Units (unaudited) --------- Harbour Village Development Status (000)s except references to Condo Units Phase 1 Phase 2 ---------------------------------------------------- --------------------------------- Townhouses ------------------------------------ Marina Oak The Links The Links Total Condos Hammock Riverwalk North South Condos Boat Slips Total - -------------------------------------------------------------------------------------------------- --------------------------------- ----------------- ----------------- ----------------- - ----------------------------------------------- 6/30/2004 - ----------------------------------------------- - ----------------------------------------------- Planned Number of Condo Units and Boat Slips 248 18 28 188 188 670 142 812 Condo Units and Boat Slips under Contract 248 17 27 185 177 654 142 796 Value of Pre-sale Contracts (Note 1) 62,892 7,931 10,462 47,521 50,159 178,965 13,082 192,047 Number of Buildings 8 4 6 4 4 26 Number of Closed Units 248 17 27 185 86 563 140 703 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 3 Certificate of Occupancy Received 8 4 6 4 3 - ----------------------------------------------- - ----------------------------------------------- 2nd Quarter Actual - ----------------------------------------------- - ----------------------------------------------- Units Closed - - 1 5 62 68 1 69 Revenue Recognized Condos and Boat Slips 89 15 426 1,832 17,190 19,552 127 19,679 Land Sales and Other Revenue 497 Total Revenue 20,176 Gross Profit Recognized Condos and Boat Slips 35 12 (7) 325 3,668 4,033 (215) 3,818 Land Sales and Other Revenue 211 Total Gross Profit 4,029 Other Expense (Income) Items (846) Pre-Tax Profit 3,183 - ----------------------------------------------- Outlook For 3rd Quarter of 2004 - ----------------------------------------------- Units Closed - 1 - - 59 60 - 60 Sales Value of Closed Units - 750 - - 16,675 17,425 - 17,425 Revenue Recognized Condos and Boat Slips - 735 - - 16,175 16,910 - 16,910 Land Sales and Other Revenue - Total Revenue 16,910 Gross Profit Recognized Condos and Boat Slips - (1) - - 3,154 3,153 (150) 3,003 Land Sales and Other Revenue - Total Gross Profit 3,003 Other Expense (Income) Items (1,070) Pre-Tax Profit 1,933