American Safety Insurance Holdings, Ltd.Reports
Fourth Quarter and Year End Earnings
HAMILTON, Bermuda March 16, 2005 — American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported net earnings of $3.8 million or $0.52 per diluted share for the fourth quarter ended December 31, 2004, as compared to a loss of $582,000 or $0.09 per diluted share for the fourth quarter of 2003. Net earnings for the twelve months ended December 31, 2004 were $14.8 million or $2.01 per diluted share, as compared to $7.4 million or $1.42 per diluted share for the same period in 2003.
Net earnings (loss) are detailed as follows (in thousands):
Quarter Ended Twelve months Ended December 31, December 31, 2004 2003 2004 2003 Insurance Operations $2,853 $2,082 $4,263 $7,076 Real Estate Operations 2,009 1,220 7,816 2,218 Other (1,109) (3,884) 2,678 (1,880) Net Earnings $3,753 $(582) $14,757 $7,414
The increase in net earnings from insurance operations for the fourth quarter of 2004 was due to improved underwriting results in the Company’s core business lines. The insurance results for the quarter include $1.9 million of reserve strengthening for prior accident years. There was no reserve development for the quarter relating to the Company’s excess and surplus business. The increase in net earnings for the quarter from real estate operations was due to the closing of units with higher profit margins at Harbour Village. The $1.1 million net loss from other items resulted from an adverse court ruling in the Principal Management, Inc. rescission litigation, which the Company intends to appeal. Total revenues for the quarter decreased 5% to $53 million compared to the same quarter of 2003 as a result of decreased closings of units at Harbour Village. This decrease was offset, in part, by a 3% increase in net earned premiums in the Company’s core business lines, and a 51% increase in investment income as a result of increases in invested assets. Net cash flow generated from operations increased to $23 million for the quarter from $20 million in the same quarter of 2003.
Net earnings from insurance operations for the twelve months ended December 31, 2004 include reserve strengthening of $14.4 million for prior accident years. The increase in net earnings from real estate operations was due to closings of units at Harbour Village with higher profit margins. Earnings from other items include a $2.6 million payment received by the Company in settlement of an impaired note receivable that was written off in the fourth quarter of 2003. Total revenues for the year ended December 31, 2004 increased 22% to $215 million compared to 2003 as a result of increased net premiums earned, real estate and investment income. Net premiums earned for the year ended December 31, 2004 increased 25% to $136 million from 2003 due to increases in the Company’s core business lines. Investment income increased 69% to $9.8 million compared to 2003 as a result of increased invested assets. Net cash flow from operations increased to $90 million for the year ended December 31, 2004 from $80 million in 2003.
The Company’s book value per share increased 16% to $16.04 at December 31, 2004 from $13.80 at December 31, 2003, due primarily to the Company’s net earnings during the year.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer of American Safety Insurance Holdings, Ltd., said: “I am encouraged by the improved results in our insurance operations during the fourth quarter and pleased with the contribution to earnings from real estate for the year. During the fourth quarter, we regained momentum in our insurance earnings, which improved by 37% over the same quarter in 2003. Looking ahead, I believe that insurance market conditions in our core lines of business remain favorable for modest premium growth and strong earnings based on a targeted combined ratio of 95% for 2005.”
A conference call to discuss fourth quarter and year end 2004 results is scheduled for Thursday, March 17, 2005 at 9:00 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 insurance market conditions, future insurance claims and losses, and profitability 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, developments in loss trends, adequacy and changes in loss reserves and actuarial assumptions, 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 (including the outcome of the Principal Management, Inc. acquisition rescission litigation), 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 risks inherent in real estate development and new construction, and litigation. 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:
Cameron Associates
Kevin McGrath
(212) 245-4577
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $ 59,027,141 $ 54,469,923 $ 227,715,755 $184,402,663 Ceded premiums earned (23,426,474) (19,872,808) (91,325,127) (75,068,826) Net premiums earned 35,600,667 34,597,115 136,390,628 109,333,837 Net investment income 2,923,261 1,931,451 9,772,722 5,800,536 Net realized gains 88,296 24,164 208,135 3,139,907 Real estate income 13,900,257 18,677,300 67,967,125 57,555,194 Other income 126,178 42,249 317,784 161,785 Total revenues $ 52,638,659 $ 55,272,279 $ 214,656,394 $ 175,991,259 Expenses: Losses and loss adjustment expenses $ 22,857,780 $ 22,009,364 $ 93,503,285 $ 65,833,743 Acquisition expenses 6,449,736 6,994,483 26,528,722 21,817,717 Payroll and related expenses 2,534,333 2,388,148 10,297,037 9,048,799 Real estate expenses 10,387,602 16,721,714 55,480,408 53,998,892 Other expenses 3,954,341 7,439,912 9,635,383 14,635,404 Minority interest 376,366 (9,240) 988,202 311,774 Expense due to rescission 1,426,577 65,521 (229,568) 255,145 Total expenses $ 47,986,735 $ 55,609,902 $196,203,469 $165,901,474 Earnings before income taxes 4,651,924 (337,623) 18,452,925 10,089,785 Income taxes 899,329 244,286 3,035,950 2,675,375 Net earnings $ 3,752,595 $ (581,909) $ 14,756,975 $ 7,414,410 Net earnings per share: Basic $ 0.56 $ (0.09) $ 2.15 $ 1.45 Diluted $ 0.52 $ (0.09) $ 2.01 $ 1.42 Average number of shares outstanding: Basic 6,739,978 6,182,108 6,863,619 5,105,770 Diluted 7,200,686 6,594,397 7,342,879 5,233,716 GAAP combined ratio 98.5% 99.4% 102.7% 96.8% December 31, December 31, BALANCE SHEET DATA: 2004 2003 Total investments, excluding real estate $ 327,036,980 $ 222,418,973 Total assets 584,159,976 514,259,644 Unpaid losses and loss adjustment expenses 321,623,730 230,103,754 Total liabilities 475,380,293 418,916,521 Total shareholders' equity 108,779,683 95,343,123 Book value per share $ 16.04 $ 13.80 American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 PREMIUM SUMMARY (in Thousands) Gross Written Premium: Environmental $ 11,279 $ 9,430 $ 44,157 $ 34,603 Excess and Surplus 25,796 29,373 96,905 85,793 Program Business 15,780 17,272 77,545 73,690 Other 1,059 7,021 2,969 18,581 Total 53,914 63,096 221,576 212,667 Net Written Premium: Environmental 8,777 7,831 35,024 27,233 Excess and Surplus 20,876 25,721 77,894 73,572 Program Business 4,240 3,497 17,530 15,152 Other 558 5,899 1,473 15,521 Total 34,451 42,948 131,921 131,478 Net Earned Premium: Environmental 8,819 6,551 32,152 22,446 Excess and Surplus 21,648 19,269 79,781 57,379 Program Business 4,096 3,306 16,605 14,068 Other 1,038 5,471 7,853 15,441 Total $ 35,601 $ 34,597 $ 136,391 $ 109,334 Exhibit 99 Harbour Village Development Status (000)s except references to Condo Units Unaudited Phase 1 Phase 2 Townhouses The The Marina Oak Links Links Total Condos Hammock Riverwalk North South Condos Boat Slips Total 12/31/2004 - ------------------------------------------------ Planned Number of Condo Units and Boat Slips 248 18 28 188 188 670 142 812 Condo Units and Boat Slips under Contract 248 18 28 187 182 663 142 805 Value of Pre-sale Contracts (Note 1) 62,892 8,680 10,916 48,206 52,040 182,734 13,082 195,816 Number of Buildings 8 4 6 4 4 26 Number of Closed Units 248 18 28 187 181 662 142 804 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 4 Certificate of Occupancy Received 8 4 6 4 4 4th Quarter Actual - ------------------------------------------------ Units Closed - - - - 28 28 - 28 Revenue Recognized Condos and Boat Slips 714 172 152 867 10,009 11,914 236 12,150 Land Sales and Other Revenue 1,747 Total Revenue 13,900 Gross Profit Recognized Condos and Boat Slips 209 96 61 759 4,189 5,314 172 5,486 Land Sales and Other Revenue 1,240 Total Gross Profit 6,726 Other Expense (Income) Items (3,213) Pre-Tax Profit 3,513 Actual 12/31/2004 YTD - ------------------------------------------------ Units Closed - 3 3 16 181 203 4 207 Revenue Recognized Condos and Boat Slips 603 2,097 1,364 6,133 52,199 62,396 708 63,104 Land Sales and Other Revenue 4,860 Total Revenue 67,967 Gross Profit Recognized Condos and Boat Slips 365 218 149 2,184 14,528 17,444 600 18,044 Land Sales and Other Revenue 2,530 Total Gross Profit 20,574 Other Expense (Income) Items (8,087) Pre-Tax Profit 12,487 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 risks inherent in real estate development and new construction, and litigation.