American Safety Insurance Holdings, Ltd.
Reports 61% Increase in Third Quarter Earnings
HAMILTON, Bermuda, November 1, 2006 — American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a 61% increase in net earnings for the three months ended September 30, 2006 to $5.4 million, or $0.50 per diluted share, compared to $3.3 million, or $0.47 per diluted share, for the same period of 2005.
Financial highlights for the quarter included:
Gross Premiums Written increased 4% to $61.6 million.
Net Premiums Written increased 38% to $42.3 million.
Net Premiums Earned increased 24% to $38.6 million.
Net investment income increased 64% to $6.0 million.
The combined ratio improved to 97.7% from 98.6%.
Book value increased to $17.99 per outstanding share and $17.34 per diluted share.
Revenues for the quarter rose 29% totaling $45.0 million as compared to $35.0 million in the 2005 quarter due to increased net premiums earned and investment income. Net premiums earned increased 24% to $38.6 million, primarily from increased retention levels in our construction line of business. The third quarter combined ratio improved to 97.7%, and is composed of a loss ratio of 61.0% and an expense ratio of 36.7%. Net investment income increased 64% to $6.0 million driven by a 35% increase in average invested assets to $502 million and increased investment yields. The average tax equivalent yield increased 68 basis points to 5.0%. Annualized return on average equity for the quarter, including the impact of our secondary offering, was 11.7% as compared to 11.8% for the same period of 2005.
For the nine months ended September 30, 2006, net earnings improved 39% to $14.1 million, or $1.67 per diluted share, compared to $10.1 million, or $1.41 per diluted share, for the 2005 period. Total revenues increased 10% to $125.5 million due to increases in net premiums earned and net investment income. Net premiums earned increased 9% to $108.5 million due to increased retention levels in the construction and specialty program business lines. The combined ratio through September 30 was 98.3%, composed of a loss ratio of 61.5% and an expense ratio of 36.8%. Net investment income increased 49% to $15.3 million due to greater invested assets and increased investment yields. The average tax equivalent yield for the period increased 62 basis points to 4.8%. Annualized return on average equity for the nine months ended September 30, 2006 improved to 12.6% from 12.2% for the same period of 2005.
As of September 30, 2006, net book value per outstanding share increased to $17.99 from $17.54 at December 31, 2005, due to earnings during the year and a decrease in unrealized loss on investments, offset in part by an increase in shares outstanding due to our second quarter equity offering.
Commenting on the results, Stephen R. Crim, President and Chief Executive PersonNameOfficer of American Safety Insurance Holdings, Ltd., said, “The third quarter results represented the first complete quarter of operating results since the completion of our common equity offering in June, and reflect significant progress toward achieving our objectives for deploying the new capital. While growth in gross premiums written was modest for the quarter, we achieved a 19% increase in gross premiums written in our Excess and Surplus Lines segment, driven by focused growth in construction, surety and new products. Net premiums written increased by 38% over the same period in 2005, largely driven by increased retentions in our construction line of business. The new capital was favorably invested in a rising interest rate environment, which helped to improve the yield of our fixed maturity portfolio for the quarter. As previously announced, our “A” rating from A.M. Best was affirmed during the quarter with a “stable” outlook. We remain committed to exercising underwriting discipline in a softening insurance market, and the Company is well positioned to make effective use of the new capital and improve shareholder value.”
Conference Call
A conference call to discuss third quarter 2006 results is scheduled for Thursday, November 2, 2006 at 8:30 a.m. (Eastern Time), which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com or the Company’s website at www.americansafetyinsurance.com. If you are unable to participate at this time, a replay will be available for 30 days, beginning approximately two hours after the call.
American Safety Insurance Holdings, Ltd., (NYSE:ASI), through its operating subsidiaries, offers customized insurance products and solutions to small and medium sized businesses in industries that it believes are underserved by the standard insurance market. ASI provides excess and surplus lines and alternative risk transfer products through its U.S. program administrator, American Safety Insurance Services, Inc., its insurance company subsidiaries, American Safety Casualty Insurance Company and American Safety Indemnity Company, its non-subsidiary affiliate, American Safety Risk Retention Group, Inc., and its Bermuda-based reinsurance company, American Safety Reinsurance, Ltd. ASI specializes in underwriting these products for insureds with environmental and construction risks as well as in developing programs for other specialty classes of risk. ASI is rated “A” (Excellent) VIII by A.M. Best.
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. 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 Form 10-Q for the quarter ended June 30, 2006 as filed with the Securities and Exchange Commission.
Contacts:
American Safety Insurance Services, Inc.
Stephen Crim or William Tepe
(770)916-1908
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $ 55,723,691 $ 54,746,865 $164,798,077 $ 168,277,150 Ceded premiums earned (17,152,022) (23,737,628) (56,271,814) (68,488,494) Net premiums earned 38,571,669 31,009,237 108,526,263 99,788,656 Net investment income 6,001,675 3,653,075 15,271,388 10,236,931 Net realized gains (8,692) 24,602 351,123 (19,863) Real estate income - - - 3,000,078 Fee income earned 450,365 321,528 1,317,275 796,993 Other income 5,966 20,278 36,564 56,034 Total revenues $ 45,020,983 $ 35,028,720 $125,502,613 $ 113,858,829 Expenses: Losses and loss adjustment expenses $ 23,526,279 $ 19,575,162 $ 66,693,776 $ 61,854,315 Acquisition expenses 7,038,445 6,790,113 20,460,863 20,909,502 Payroll and related expenses 4,360,605 2,344,439 11,894,758 8,492,923 Real estate expenses 54,979 (601,506) 224,480 2,086,956 Interest Expense 838,999 265,364 2,579,668 795,004 Other expenses 3,422,802 2,318,189 9,037,918 7,516,064 Minority interest 48,102 (93,408) (463,528) 445,874 Total expenses 39,290,211 30,598,353 110,427,935 102,100,638 Earnings before income taxes 5,730,772 4,430,367 15,074,678 11,758,191 Income taxes 343,151 1,083,069 958,926 1,625,796 Net earnings $ 5,387,621 $ 3,347,298 $ 14,115,752 $ 10,132,395 ============== ============== ============== ============== Net earnings per share: Basic $ 0.52 $ 0.50 $ 1.74 $ 1.50 ============== =============== ============== ============== Diluted $ 0.50 $ 0.47 $ 1.67 $ 1.41 ============== =============== ============== ============== Average number of shares outstanding: Basic 10,438,692 6,702,609 8,116,056 6,737,126 ============== =============== ================= ============== Diluted 10,782,087 7,146,664 8,477,697 7,172,497 ============== =============== ================= ============== GAAP combined ratio 97.7% 98.6% 98.3% 97.7% ============== =============== ================= ============== BALANCE SHEET DATA: September 30, December 31, 2006 2005 Total investments $525,330,608 $415,496,577 Total assets 794,739,430 694,998,977 Unpaid losses and loss adjustment expenses 408,572,370 393,493,107 Total liabilities 605,024,286 576,563,730 Total shareholders' equity 189,715,144 118,435,247 Book value per share $ 17.99 $ 17.54
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 PREMIUM SUMMARY (in Thousands) Gross Premiums Written: Excess and Surplus Lines Segment Environmental $ 12,404 $ 12,393 $ 39,289 $ 39,683 Construction 26,204 21,157 72,952 68,203 Excess 881 468 2,350 1,457 Surety 1,132 833 3,087 1,768 Non Construction 733 0 1,280 0 Total Excess and Surplus Lines Segment 41,354 34,851 118,958 111,111 Alternative Risk Transfer Segment Programs 20,241 24,370 56,880 67,696 Total Alternative Risk Transfer Segment 20,241 24,370 56,880 67,696 Runoff 0 (186) 0 (179) Total Gross Premiums Written $ 61,595 $ 59,035 $175,838 $178,628 ============ ============ ========= ========= Total Fully Funded Fees Written $ 143 $ 1,087 $ 1,538 $ 1,754 ============ ============ ========= ========= Net Premiums Written: Excess and Surplus Lines Segment Environmental $ 9,869 $ 8,988 $ 29,676 $ 33,112 Construction 25,325 17,337 68,543 55,479 Excess 123 187 505 385 Surety 1,048 468 2,131 938 Non Construction 50 0 597 0 Total Excess and Surplus Lines Segment 36,415 26,980 101,452 89,914 Alternative Risk Transfer Segment Programs 5,900 5,692 15,606 14,476 Total Alternative Risk Transfer Segment 5,900 5,692 15,606 14,476 Runoff 0 (2,108) 0 (2,143) Total Net Premiums Written $ 42,315 $ 30,564 $117,058 $102,247 ============= ============ =========== ========= Total Fully Funded Fees Written $ 143 $ 1,087 $ 1,538 $ 1,754 ============= ============ =========== ========= Net Premiums Earned: Excess and Surplus Lines Segment Environmental $ 9,947 $ 9,542 $ 27,306 $ 28,064 Construction 23,151 18,332 65,023 59,066 Excess 139 101 378 329 Surety 720 377 1,503 811 Non Construction 155 0 179 0 Total Excess and Surplus Lines Segment 34,112 28,352 94,389 88,270 Alternative Risk Transfer Segment Programs 4,460 4,765 14,138 13,471 Total Alternative Risk Transfer Segment 4,460 4,765 14,138 13,471 Runoff 0 (2,108) 0 (1,952) Total Net Premiums Earned $ 38,572 $ 31,009 $108,527 $ 99,789 ============ ============ ============ =========== Total Fully Funded Fees Earned $ 450 $ 322 $ 1,317 $ 796 ============ ============ ============ ===========