American Safety Insurance Holdings, Ltd.
Reports Net Earnings of $6.0 Million
HAMILTON, Bermuda, April 28, 2008 - American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported first quarter net earnings of $6.0 million, or $0.55 per diluted share, a decrease of 15%, from $7.1 million, or $0.65 per diluted share, for the same period in 2007.
Financial highlights for the quarter included:
• | Gross premiums written decreased 2% to $54.4 million. |
• | Net premiums earned declined 1% to $38 million. |
• | Net investment income increased 1.4% to $7.3 million. |
• | Cash flow used in operations was $1.8 million compared to $18.9 million generated from operations for the same period of 2007. |
• | Combined ratio was 100.4% compared to 95.5%. |
• | Loss ratio was 57.9% compared to 62.4%. |
• | Expense ratio increased to 42.5% from 33.1%. |
• | Annualized return on average equity was 9.8% compared to 14.2% for the same period of 2007. |
• | Book value per share increased to $22.11 from $21.53 at December 31, 2007. |
First Quarter Results
Net earnings for the quarter decreased to $6.0 million, or $0.55 per diluted share, compared to $7.1 million, or $0.65 per diluted share, for the 2007 quarter. The decline in net earnings is the result of changes in the mix of business as premium writings for the quarter included a greater portion from newer products added as a part of the Company’s diversification strategy. The newer products will generate lower profit margins than our more mature product lines until they attain critical mass.
Revenues for the quarter were essentially flat at $46.6 million, compared to $46.1 million for the 2007 quarter. Net premiums earned for the quarter totaled $38 million, an increase of $0.3 million. Investment income was relatively flat at $7.3 million. While invested assets increased to $605 million from $569 million, the average yield on the portfolio declined 40 basis points to 4.8% due to lower rates. Uses of cash in the quarter included higher paid losses, premium payments under the casualty reinsurance treaty, acquisition of our healthcare division and repurchase of our common stock.
The combined ratio for the quarter was 100.4%, composed of a loss ratio of 57.9% and an expense ratio of 42.5%, compared to a combined ratio of 95.5%, with a loss ratio of 62.4% and an expense ratio of 33.1%, for the 2007 quarter. The decrease in the loss ratio was due primarily to the impact of the casualty reinsurance treaty as more losses were ceded than under our previous treaties. The increased expense ratio was due primarily to the impact of the casualty reinsurance treaty and the increase in the proportion of premiums generated by assumed reinsurance, which carries higher acquisition expenses.
Pursuant to our announced stock repurchase program, the Company repurchased 119,600 shares during the quarter at an average price of $17.62 per share.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer of American Safety Insurance Holdings, Ltd., said, “The first quarter demonstrated continued momentum in the execution of our product diversification plan, with $16 million, or 29% of gross premiums written coming from newer products, compared to $5.5 million, or 10%, for the first quarter of 2007. Net earnings declined 15% over the first quarter of 2007 due to the impact of the soft market. The largest contributor to the earnings decline was a 49% decrease in net premiums earned in our construction business line, historically one of our more profitable lines. This premium decrease was largely offset by premium increases in newer products that carry a lower profit margin. We also reserve these newer lines at what we believe are conservative loss ratios until there is an established track record of underwriting results. The investment in these newer products is key to our future success as they create a broader platform for growth when market conditions improve. Based on the current growth opportunities we see in assumed reinsurance, we expect to exceed our previous projection for growth in gross premiums written in 2008. However, we expect the impact of the soft market, in combination with the change in the mix of business from our original expectations, to place downward pressure on underwriting profitability, and we expect to fall short of our previous projection of 10-11% for return on equity.”
About Us:
American Safety Insurance Holdings, Ltd. (NYSE:ASI), a Bermuda holding company, offers innovative insurance solutions outside the U.S. in the reinsurance and alternative risk markets through its subsidiaries, American Safety Reinsurance, Ltd. and American Safety Assurance, Ltd., and in the U.S. for specialty risks and alternative risk markets through its program administrator, American Safety Insurance Services, Inc., and insurance company subsidiaries and affiliates, American Safety Casualty Insurance Company, American Safety Indemnity Company and American Safety Risk Retention Group, Inc. As a group, ASI’s insurance subsidiaries and affiliates are rated "A" (Excellent) VIII by A.M. Best.
Contacts:
American Safety Insurance Services, Inc. |
| American Safety Insurance Services, Inc. |
Investor Relations |
| Media Relations |
William Tepe |
| Julie McDonald |
btepe@amsafety.com |
| jmcdonald@amsafety.com |
(770) 916-1908 |
| (770) 916-1908 |
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American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
��
|
| Three Months Ended | |||||||
|
| (Unaudited) |
| (Unaudited) | |||||
PREMIUM SUMMARY (in Thousands) |
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Gross Premiums Written: |
|
|
|
|
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Environmental |
| $ 13,247 |
| $ 13,138 |
| ||||
Construction |
| 8,864 |
| 15,993 |
| ||||
Excess |
| 2,461 |
| 1,969 |
| ||||
Healthcare |
| 1,742 |
| - |
| ||||
Products Liability |
| 1,365 |
| 811 |
| ||||
Property |
| 1,849 |
| - |
| ||||
Surety |
| 2,025 |
| 1,310 |
| ||||
Total Excess & Surplus Lines Segment |
| 31,553 |
| 33,221 |
| ||||
Alternative Risk Transfer Segment |
|
|
|
|
| ||||
Specialty Programs |
| 14,275 |
| 19,433 |
| ||||
|
|
|
|
|
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Assumed Reinsurance Segment |
| 8,526 |
| 2,769 |
| ||||
Total Gross Premiums Written |
| $ 54,354 |
| $ 55,423 |
| ||||
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Net Premiums Written: |
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Excess and Surplus Lines Segment |
|
|
|
|
| ||||
Environmental |
| $ 8,927 |
| $ 10,747 |
| ||||
Construction |
| 6,213 |
| 15,702 |
| ||||
Excess |
| 221 |
| 261 |
| ||||
Healthcare |
| 1,132 |
| - |
| ||||
Products Liability |
| 1,080 |
| 406 |
| ||||
Property |
| 1,297 |
| - |
| ||||
Surety |
| 1,697 |
| 1,270 |
| ||||
Total Excess & Surplus Lines Segment |
| 20,567 |
| 28,386 |
| ||||
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Alternative Risk Transfer Segment |
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|
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Specialty Programs |
| 9,413 |
| 7,687 |
| ||||
|
|
|
|
|
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Assumed Reinsurance Segment |
| 8,526 |
| 2,769 |
| ||||
Total Net Premiums Written |
| $ 38,506 |
| $ 38,842 |
| ||||
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Net Premiums Earned: |
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Excess and Surplus Lines Segment: |
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|
|
|
| ||||
Environmental |
| $ 8,606 |
| $ 9,526 |
| ||||
Construction |
| 10,353 |
| 20,365 |
| ||||
Excess |
| 179 |
| 227 |
| ||||
Healthcare |
| 84 |
| - |
| ||||
Products Liability |
| 1,015 |
| 461 |
| ||||
Property |
| 726 |
| - |
| ||||
Surety |
| 1,626 |
| 915 |
| ||||
Total Excess & Surplus Lines Segment |
| 22,589 |
| 31,494 |
| ||||
|
|
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|
|
| ||||
Alternative Risk Transfer Segment |
|
|
|
|
| ||||
Specialty Programs |
| 7,766 |
| 5,351 |
| ||||
|
|
|
|
|
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Assumed Reinsurance Segment |
| 7,694 |
| 1,513 |
| ||||
Total Net Premiums Earned |
| $ 38,049 |
| $ 38,358 |
| ||||
3
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(In thousands except per share data)
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|
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|
| Three Months Ended | |||||||
|
| (Unaudited) |
| (Unaudited) | |||||
|
| 2008 |
| 2007 | |||||
INCOME STATEMENT DATA: |
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Revenues: |
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Direct and assumed premiums earned |
| $ 54,062 |
| $ 56,635 |
| ||||
Ceded premiums earned |
| (16,013) |
| (18,277) |
| ||||
Net premiums earned |
| 38,049 |
| 38,358 |
| ||||
|
|
|
|
|
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Net investment income |
| 7,327 |
| 7,224 |
| ||||
Net realized gains |
| 504 |
| 19 |
| ||||
Fee income |
| 727 |
| 516 |
| ||||
Other income |
| 15 |
| 17 |
| ||||
Total revenues |
| 46,622 |
| 46,134 |
| ||||
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
| ||||
Losses and loss adjustment expenses |
| 22,030 |
| 23,952 |
| ||||
Acquisition expenses |
| 9,076 |
| 6,118 |
| ||||
Payroll and related expenses |
| 4,683 |
| 4,154 |
| ||||
Real estate expenses |
| 1 |
| 23 |
| ||||
Interest expense |
| 832 |
| 816 |
| ||||
Other Expenses |
| 3,693 |
| 3,405 |
| ||||
Minority interest |
| 38 |
| 15 |
| ||||
Total expenses |
| 40,453 |
| 38,583 |
| ||||
|
|
|
|
|
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Earnings before income taxes |
| 6,169 |
| 7,551 |
| ||||
Income taxes |
| 148 |
| 459 |
| ||||
Net earnings |
| $ 6,021 |
| $ 7,092 |
| ||||
|
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|
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Basic |
| $ .56 |
| $ .67 |
| ||||
Diluted |
| $ .55 |
| $ .65 |
| ||||
Average number of shares outstanding: |
|
|
|
|
| ||||
Basic |
| 10,696 |
| 10,556 |
| ||||
Diluted |
| 10,990 |
| 10,931 |
| ||||
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| As of |
| ||||||
BALANCE SHEET DATA: |
| 3/31/2008 |
| 12/31/2007 |
| ||||
|
| (unaudited) |
| (audited) |
| ||||
Total investments |
| $604,813 |
| $617,211 |
| ||||
Total assets |
| 932,390 |
| 934,009 |
| ||||
Unpaid losses and loss adjustment expenses |
|
|
|
|
| ||||
Total liabilities |
| 697,959 |
| 703,609 |
| ||||
Total shareholders’ equity |
| 234,431 |
| 230,400 |
| ||||
|
|
|
|
|
| ||||
Book value per share |
| $ 22.11 |
| $ 21.53 |
| ||||
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