Reports 32% Increase in Fourth Quarter Insurance Earnings; Book Value Per Share
Increases to $17.54
HAMILTON, Bermuda March 1, 2006 — American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported a 32% increase in earnings from insurance operations to $3.8 million for the quarter ended December 31, 2005 from $2.9 million for the same period in 2004. Net earnings from insurance operations for the year ended December 31, 2005 increased to $13.6 million from $4.3 million for the same period in 2004. Net earnings for the fourth quarter increased to $4.5 million or $0.63 per diluted share, from $3.8 million or $0.52 per diluted share in the same period in 2004. Net earnings for the year ended December 31, 2005 were $14.7 million or $2.05 per diluted share, as compared to $14.8 million or $2.01 per diluted share for the same period of 2004.
Net earnings are detailed as follows (in thousands):
Quarter Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Insurance Operations $3,773 $2,853 $13,618 $4,263 Real Estate Operations (126) 2,010 209 7,816 Other 877 (1,110) 829 2,678 ---------------- ----------------- ----------------- ------------------ Net Earnings $4,524 $3,753 $14,656 $14,757 ================ ================= ================= ==================
Financial highlights in the quarter and year-end included:
o Book value per share increased 9.4% for the year to $17.54. o Net earnings from insurance operations increased 32.3% for the quarter and 219.5% for the year. o Gross premiums written rose 5.5% for the quarter and 7.4% for the year. o Net premiums earned grew 7.1% for the quarter and 1.6% for the year. o Net investment income increased 39.5% for the quarter and 46.5% for the year. o Loss ratio improved to 59.1% for the quarter from 64.2% for the same period of 2004. o Loss ratio improved to 60.9% for the year from 68.6% for the previous year. o Combined ratio was 99.5% for the quarter compared to 98.5% for the same period of 2004. o Combined ratio improved to 97.8% for the year from 102.7% for the previous year.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer of American Safety Insurance Holdings, Ltd., said: “I am pleased with the continued premium growth and increased net earnings in our insurance operations, which have replaced the earnings previously generated by the real estate operations. Moreover, we have established a track record of solid insurance results, and have strengthened our infrastructure to position ourselves to take advantage of market opportunities. We intend to capitalize on favorable market conditions by increasing our net retentions on business we write, continuing to grow our core business lines, opportunistically developing new products for underserved markets and exploring acquisition opportunities.”
The increase in net earnings from insurance operations for the fourth quarter of 2005 was due to improved underwriting results in the Company’s core business lines and increased investment income. The fourth quarter underwriting results included the establishment of a valuation allowance of $1.3 million on reinsurance recoverables and prior year reserve development of $1.4 million. Absent these charges, the combined ratio for the quarter would have been 92.4%. The expected decrease in real estate earnings for the quarter was due to the substantial completion of the Company’s real estate operations. Earnings from other items of $877,000 for the quarter resulted from the settlement of the Principal Management, Inc. rescission litigation for an amount less than previously accrued. This settlement concludes all outstanding litigation associated with the rescission. Total revenues for the quarter decreased 19.8% to $42.2 million when compared to the same quarter of 2004 as a result of the expected decrease in real estate income. Net premiums earned in the quarter increased 7.1% to $38.1 million from $35.6 million in the same period in 2004. Net investment income for the quarter increased 39.5% to $4.1 million from $2.9 million in the fourth quarter of 2004 due to increased invested assets and an increase in the annualized yield to 4.1% from 3.7%.
The increase in insurance earnings for the year ended December 31, 2005 was due to improved underwriting results in the Company’s core business lines and increased investment income. The 2005 underwriting results included an accrual for reinsurance reinstatement premiums of $2.3 million from run-off lines; the establishment of a valuation allowance for reinsurance recoverables of $1.3million; and prior year reserve development of $2.6 million. Absent these charges, the combined ratio for the year would have been 93.3%. The expected decrease in real estate earnings of $7.6 million for the year was due to the substantial completion of the Company’s real estate operations. Earnings from other items for the year were $829,000, primarily attributable to the settlement of the Principal Management, Inc. rescission litigation, as compared to $2.6 million for the same period in 2004, primarily attributable to the payment of an impaired notes receivable. Total revenues for the year decreased 27.4% to $155.9 million when compared to the same in 2004 as a result of the expected decrease in real estate income. Net premiums earned for the year increased 1.6% to $138.5 million from $136.4 million in the same period in 2004. Net investment income for the year increased 46.5% to $14.3 million from $9.8 million for the same period in 2004 due to increased invested assets and an increase in the annualized yield to 3.9% from 3.6%.
The Company’s book value per share increased 9.4% to $17.54 at December 31, 2005 from $16.04 at December 31, 2004, due primarily to the Company’s net earnings during the year, offset, in part, by a change in unrealized gains and losses on the Company’s investment portfolio during the year due to increases in interest rates.
Conference CallA conference call to discuss fourth quarter and year-end 2005 results is scheduled for Thursday, March 2, 2006 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, premium growth, acquisitions and new products and the Company’s real estate development project. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, 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, the integration and other challenges attendant to acquisitions, and changes in levels of general business activity and economic conditions. For additional factors, which could influence 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 Stephen Crim or Steven Mathis Kevin McGrath (770) 916-1908 (212) 245-4577
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $ 61,611,215 $ 59,027,141 $ 231,437,482 $227,715,755 Ceded premiums earned (23,467,913) (23,426,474) (92,901,413) (91,325,127) --------------------- ------------------ ---------------- -------------------- Net premiums earned 38,143,302 35,600,667 138,536,069 136,390,628 Net investment income $ 4,078,960 $2,923,261 $14,315,891 $9,772,722 Net realized gains (losses) (34,238) 88,296 (54,101) 208,135 Real estate income 0 13,900,257 3,000,078 67,967,125 Other income 20,252 126,178 76,286 317,784 --------------------- ------------------ ---------------- -------------------- Total revenues $42,208,276 $52,638,659 $155,874,223 $214,656,394 --------------------- ------------------ ---------------- -------------------- Expenses: Losses and loss adjustment expenses $22,537,259 $22,857,780 $84,406,158 $93,503,285 Acquisition expenses 7,809,639 6,449,736 28,511,675 26,528,722 Payroll and related expenses 3,637,213 2,534,333 12,130,136 10,297,037 Real estate expenses 352,066 10,387,602 2,439,022 55,480,408 Other expenses 4,875,197 3,954,341 13,158,004 9,635,383 Minority interest 77,859 376,366 515,233 988,202 Expense due to rescission (1,362,423) 1,426,577 (1,334,162) (229,568) --------------------- ------------------ ---------------- -------------------- Total expenses 37,926,810 47,986,735 139,826,066 196,203,469 --------------------- ------------------ ---------------- -------------------- Earnings before income taxes 4,281,466 4,651,924 16,048,157 18,452,925 Income taxes (242,549) 899,329 1,391,747 3,695,950 --------------------- ------------------ ---------------- -------------------- Net earnings $4,524,015 $3,752,595 $14,656,410 $14,756,975 ===================== ================== ================ ==================== Net earnings per share: Basic $0.67 $0.56 $2.18 $2.15 ===================== ================== ================ ==================== Diluted $0.63 $0.52 $2.05 $2.01 ===================== ================== ================ ==================== Average number of shares outstanding: Basic 6,736,379 6,739,978 6,736,938 6,863,619 ===================== ================== ================ ==================== Diluted 7,167,921 7,200,686 7,163,892 7,342,879 ===================== ================== ================ ==================== GAAP combined ratio 99.5% 98.5% 97.8% 102.7%
BALANCE SHEET DATA: December 31, December 31, 2005 2004 Total investments $415,496,577 $329,042,420 Total assets 697,134,863 584,159,976 Unpaid losses and loss adjustment expenses 394,872,581 321,623,730 Total liabilities 578,699,616 475,380,293 Total shareholders' equity 118,435,247 108,779,683 Book value per share $17.54 $16.04
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
Three Months Ended Year Ended December 31, December 31, 2005 2004 2005 2004 PREMIUM SUMMARY (in Thousands) Gross Premiums Written: Excess and Surplus Lines Segment Environmental $ 11,331 $ 11,278 $ 51,014 $ 44,157 Construction (Previously Excess and Surplus) 25,746 25,795 95,406 96,905 Surety 813 499 2,581 1,725 ------------------ ------------------ ------------------ ------------------- Total Excess and Surplus Lines Segment 37,890 37,572 149,001 142,787 Alternative Risk Transfer Segment Specialty Programs 17,442 14,842 85,138 76,264 Fully Funded 1,456 938 3,822 1,281 ------------------ ------------------ ------------------ ------------------- Total Alternative Risk Transfer Segment 18,898 15,780 88,960 77,545 Runoff 98 559 (81) 1,243 ------------------ ------------------ ------------------ ------------------ Total Gross Premiums Written 56,886 53,911 237,880 221,575 ================== ================== ================== =================== Net Premiums Written: Excess and Surplus Lines Segment Environmental $ 8,365 $ 8,777 $ 41,477 $ 35,024 Construction (Previously Excess and Surplus) 22,162 20,876 78,026 77,894 Surety 407 266 1,345 1,174 ------------------ ------------------ ------------------ ------------------- Total Excess and Surplus Lines Segment 30,934 29,919 120,848 114,092 Alternative Risk Transfer Segment Specialty Programs 5,236 3,822 19,712 17,273 Fully Funded 583 257 2,037 257 ------------------ ------------------ ------------------ ------------------- Total Alternative Risk Transfer Segment 5,819 4,079 21,749 17,530 Runoff 98 453 (2,045) 299 ------------------ ------------------ ------------------ ------------------- Total Net Premiums Written 36,851 34,451 140,552 131,921 ================== ================== ================== =================== Net Premiums Earned: Excess and Surplus Lines Segment Environmental $ 10,017 $ 8,819 $ 38,081 $ 32,152 Construction (Previously Excess and Surplus) 22,513 21,648 81,908 79,781 Surety 337 296 1,148 1,138 ------------------ ------------------ ------------------ ------------------- Total Excess and Surplus Lines Segment 32,867 30,763 121,137 113,071 Alternative Risk Transfer Segment Specialty Programs 4,826 3,817 18,297 16,516 Fully Funded 352 89 956 89 ------------------ ------------------ ------------------ ------------------- Total Alternative Risk Transfer Segment 5,178 3,906 19,253 16,605 Runoff 98 932 (1,854) 6,715 ------------------ ------------------ ------------------ ------------------- Total Net Premiums Earned 38,143 35,601 138,536 136,391 ================== ================== ================== ===================