American Safety Insurance Holdings, Ltd.Reports
a 57% Increase in Second Quarter Earnings
HAMILTON, Bermuda, July 30, 2007 — American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a 57% increase in net earnings for the three months ended June 30, 2007 to $7.3 million, or $0.66 per diluted share, compared to $4.6 million, or $0.62 per diluted share, for the same period of 2006.
Financial highlights for the quarter included:
• Gross premiums written decreased 6% to $57.9 million.
• Net premiums written increased 7% to $44.5 million.
• Net premiums written as a percentage of gross premiums written increased to 76.9% from 67.6% in 2006.
• Net premiums earned increased 12% to $39.4 million.
• Investment income increased 58% to $7.5 million.
• Combined ratio decreased to 94.4% compared to 95.2% for the same period of 2006.
• Loss ratio was 59.9% compared to 59.6% for the same period of 2006.
• Expense ratio decreased to 34.5% from 35.7% for the same period of 2006.
• Annualized return on average equity declined to 14.1% from 15.8% for the same period of 2006 due to the impact
of the 2006 equity offering.
• Book value per share increased to $19.49 per outstanding share and $18.90 per diluted share compared to $18.59
and $17.88, respectively, as of December 31, 2006.
Second Quarter Results
The increase in net earnings for the quarter was primarily due to an 18% increase in total revenues, driven by a 58% increase in net investment income and a 12% increase in net premiums earned. Average invested assets increased 33% over June 30, 2006 due to the proceeds from the 2006 equity offering and positive cash flow from operations. The pre-tax investment yield increased 80 basis points to 5.3% as compared to 4.5% in the 2006 quarter. The increase in net premiums earned was primarily due to increased retention levels on the Company’s core product lines and increased writings of assumed reinsurance. The combined ratio for the quarter was 94.4%, comprised of a 59.9% loss ratio and a 34.5% expense ratio. The increase in the loss ratio is the result of an increase in the 2007 accident year loss ratio due to the effects of the soft market. Book value per share increased by 4.8% and book value per diluted share increased by 5.7% despite the negative impact of $0.48 per share and $0.47 per diluted share due to the increase in unrealized losses on the investment portfolio as a result of higher interest rates.
Year to Date Results
Net earnings for the six months ended June 30, 2007 were $14.4 million, or $1.31 per diluted share, compared to $8.7 million, or $1.19 per diluted share, for the same period of 2006. The increase in net earnings was due mainly to a 17% increase in total revenues driven by an 11% increase in net premiums earned and a 59% increase in net investment income. Average invested assets increased 27% over June 30, 2006 due to the proceeds from the 2006 equity offering and positive cash flow from operations. The pre-tax investment yield increased 100 basis points to 5.2% as compared to 4.2% for the same period of 2006. The increase in net premiums earned was primarily due to increased retention levels on the Company’s core product lines and increased writings of assumed reinsurance. The combined ratio for the six months ended June 30, 2007 was 95.0% comprised of a 61.2% loss ratio and a 33.8% expense ratio. The 2006 combined ratio was 97.3% comprised of a loss ratio of 61.7% and an expense ratio of 35.6%. Cash flow from operations totaled $45.7 million, an increase of $13.3 million over 2006 due to lower claims payments and increased receivable collections.
The Company also announced the reversal by a Florida Court of Appeals of the $4.0 million trial court judgment against the Company in the Griggs case, which is associated with the Company’s former real estate development project in Florida. This decision did not impact the financial results for the second quarter 2007.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “The soft market adversely impacted premium growth in the quarter as we continued to exercise underwriting discipline. Our western states construction line was impacted the most, declining by approximately 50% during the quarter. Given the greater than anticipated decline in the insurance markets, we are revising our growth projection for 2007 to be flat in gross premiums written and modest growth in net premiums written. As previously announced, to further diversify our products we recently added an excess and surplus lines property underwriting team that has already begun producing premium. Our new products and our eastern states construction business produced $18 million of premium, representing 31% of gross premiums written for the quarter. We remain optimistic about the longer term prospects for profitable premium growth as a result of our product diversification strategy.”
Conference Call
A conference call to discuss second quarter 2007 results is scheduled for Tuesday, July 31, 2007 at 9:00 a.m. (Eastern Time), which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com, or the Company’s website at www.amsafety.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. A transcript of the call will be available on the Company’s website beginning several days after the call.
American Safety Insurance Holdings, Ltd., (NYSE:ASI), offers customized insurance and reinsurance products and solutions to small and medium sized businesses in industries that it believes are underserved by the standard insurance market. ASI provides reinsurance, excess and surplus lines and alternative risk transfer products through its Class III Bermuda reinsurance subsidiary, American Safety Reinsurance, Ltd., and through its captive, segregated cell subsidiary, American Safety Assurance, Ltd., and 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, and its non-subsidiary affiliate, American Safety Risk Retention Group, Inc. ASI specializes in underwriting these products for insureds with environmental risks and construction risks as well as in developing programs for other specialty classes of risk and reinsurance. 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 March 31, 2007 as filed with the Securities and Exchange Commission.
Contacts:
American Safety Insurance Services, Inc.
William Tepe
(770) 916-1908
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited) (in thousands except per share data and percentages)
Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 INCOME STATEMENT DATA: Revenues: Direct and assumed premiums earned $56,932 $53,240 $113,567 $109,074 Ceded premiums earned (17,522) (17,975) (35,799) (39,119) --------------------- ------------------ ---------------- -------------------- Net premiums earned 39,410 35,265 77,768 69,955 Net investment income 7,482 4,726 14,706 9,269 Net realized gains (27) (3) (8) 360 Fee income 749 374 1,264 867 Other income 15 14 32 31 --------------------- ------------------ ---------------- -------------------- Total revenues 47,629 40,376 93,762 80,482 --------------------- ------------------ ---------------- -------------------- Expenses: Losses and loss adjustment expenses 23,622 21,012 47,574 43,167 Acquisition expenses 7,728 6,368 13,846 13,422 Payroll and related expenses 4,522 3,992 8,676 7,534 Real estate expenses 271 102 294 170 Interest Expense 822 838 1,638 1,741 Other expenses 2,734 2,877 6,138 5,616 Minority interest 9 (39) 124 (512) --------------------- ------------------ ---------------- -------------------- Total expenses 39,708 35,150 78,290 71,138 --------------------- ------------------ ---------------- -------------------- Earnings before income taxes 7,921 5,227 15,472 9,344 Income taxes 649 600 1,108 616 --------------------- ------------------ ---------------- -------------------- Net earnings $7,272 $4,627 $14,364 $8,728 ===================== ================== ================ ==================== Net earnings per share: Basic $0.69 $0.65 $1.36 $1.26 ===================== ================== ================ ==================== Diluted $0.66 $0.62 $1.31 $1.19 ===================== ================== ================ ==================== Average number of shares outstanding: Basic 10,605 7,106 10,581 6,935 ===================== ================== ================ ==================== Diluted 10,974 7,498 10,952 7,329 ===================== ================== ================ ==================== GAAP combined ratio 94.4% 95.2% 95.0% 97.3% ===================== ================== ================ ==================== BALANCE SHEET DATA: June 30, December 31, 2007 2006 Total investments $570,548 $551,158 Total assets 886,480 847,130 Unpaid losses and loss adjustment expenses 466,788 439,673 Total liabilities 678,354 650,980 Total shareholders' equity 208,126 196,150 Book value per share $19.49 $18.59
American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 PREMIUM SUMMARY (in Thousands) Gross Premiums Written: Excess and Surplus Lines Segment Environmental $ 11,844 $14,243 $24,982 $ 26,884 Construction 16,930 24,297 32,923 46,749 Excess 1,227 858 3,196 1,469 Non Construction 2,047 547 2,859 547 Property 233 0 233 0 Surety 1,476 1,085 2,786 1,955 ------------------ ------------------- ------------------ ------------------ Total Excess and Surplus Lines Segment 33,757 41,030 66,979 77,604 Alternative Risk Transfer Segment Specialty Programs 15,353 20,576 34,785 36,922 ------------------ ------------------- ------------------ ------------------ Total Alternative Risk Transfer Segment 15,353 20,576 34,785 36,922 Assumed Reinsurance 8,742 0 11,511 0 ------------------ ------------------- ------------------ ------------------ Total Gross Premiums Written $57,852 $61,606 $ 113,275 $114,526 ================== =================== ================== ================== Net Premiums Written: Excess and Surplus Lines Segment Environmental $ 9,363 $ 11,736 $20,111 $ 19,808 Construction 16,811 23,033 32,513 43,218 Excess 156 214 417 382 Non Construction 1,024 547 1,429 547 Property 157 0 157 0 Surety 1,467 643 2,736 1,083 ------------------ ------------------- ------------------ ------------------ Total Excess and Surplus Lines Segment 28,978 36,173 57,363 65,038 Alternative Risk Transfer Segment Specialty Programs 6,747 5,463 14,435 9,988 ------------------ ------------------- ------------------ ------------------ Total Alternative Risk Transfer Segment 6,747 5,463 14,435 9,988 Assumed Reinsurance 8,742 0 11,511 0 ------------------ ------------------- ------------------ ------------------ Total Net Premiums Written $ 44,467 $ 41,636 $ 83,309 $75,026 ================== =================== ================== ================== Net Premiums Earned: Excess and Surplus Lines Segment Environmental $ 10,024 $ 9,040 $ 19,550 $ 17,360 Construction 18,895 20,957 39,259 41,871 Excess 184 117 411 239 Non Construction 482 24 943 24 Property 7 0 7 0 Surety 1,156 431 2,071 783 ------------------ ------------------- ------------------ ------------------ Total Excess and Surplus Lines Segment 30,748 30,569 62,241 60,277 Alternative Risk Transfer Segment Specialty Programs 7,009 4,696 12,361 9,678 ------------------ ------------------- ------------------ ------------------ Total Alternative Risk Transfer Segment 7,009 4,696 12,361 9,678 Assumed Reinsurance 1,653 0 3,166 0 ------------------ ------------------- ------------------ ----------------- Total Net Premiums Earned $ 39,410 $35,265 $ 77,768 $ 69,955 ================== =================== ================== ==================