American Safety Insurance Holdings, Ltd.
Reports Earnings of $6.8 Million
HAMILTON, Bermuda, July 28, 2008 – American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $6.8 million for the three months ended June 30, 2008, or $0.63 per diluted share, a decrease of 7% from $7.3 million, or $0.66 per diluted share, for the same period of 2007.
Financial highlights for the quarter included:
| • | Gross premiums written increased 26% to $72.6 million. |
| • | Net premiums written increased 29% to $57.2 million. |
| • | Net premiums earned increased 22% to $48.1 million. |
| • | Investment income decreased 2% to $7.3 million. |
| • | Combined ratio increased to 103.7% compared to 94.4% for the same period of 2007. |
| • | Loss ratio was 63.1% compared to 59.9% for the same period of 2007. |
| • | Expense ratio increased to 40.6% from 34.5% for the same period of 2007. |
| • | Annualized return on average equity declined to 11.2% from 14.1%. |
| • | Book value per share increased to $21.92 per outstanding share and $21.35 per diluted share compared to $21.53 and $20.81, respectively, as of December 31, 2007. |
Second Quarter Results
The 7% decline in net earnings in the second quarter is the result of the impact of the soft insurance market on underwriting profit driven by declines in our construction line and other changes in the mix of our business. Premium writings for the quarter included a greater contribution from newer products added as a part of the Company’s diversification strategy and which currently have lower margins than our more mature products.
Revenues for the quarter were $56.6 million, compared to $47.6 million for the 2007 quarter. Net premiums earned totaled $48.1 million, an increase of $8.7 million, primarily due to increased writings in assumed reinsurance and increased retention levels in the specialty program line. Investment income was $7.3 million, compared to $7.5 million for the 2007 quarter. Average invested assets increased to $601 million from $570 million at June 30, 2007 while the average yield on the portfolio declined 40 basis points to 4.9%.
The expense ratio increase for the quarter was primarily a result of higher acquisition expenses due to the change in the mix of business. The loss ratio increase includes $1.5 million of prior year development primarily relating to New York risks written in the middle market segment of our environmental product line. We have substantially reduced environmental premiums in New York over the past two years. Corporate and other expenses decreased $2.8 million primarily due to a reversal of an accrued expense in our non-insurance segment.
Year to Date Results
Net earnings for the six months ended June 30, 2008 were $12.8 million, or $1.18 per diluted share, compared to $14.4 million, or $1.31 per diluted share, for the same period of 2007. Total revenues increased $9.4 million primarily due to an increase in net earned premiums for the period. The increase in net premiums earned was primarily due to increased writings in assumed reinsurance and increased retention levels in the specialty program line. The combined ratio for the six months ended June 30, 2008 was 102.2% composed of a 60.8% loss ratio and a 41.4% expense ratio. The 2007 combined ratio was 95.0% composed of a loss ratio of 61.2% and an expense ratio of 33.8%.
Average invested assets increased 4.6% over June 30, 2007. The pre-tax investment yield decreased 40 basis points to 4.8% as compared to 5.2% for the same period of 2007. Book value for the six months increased 1.8% per outstanding share and 2.6% per diluted share despite a $9.8 million increase in unrealized losses for the period.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “Gross and net premiums written increased by 12% and 15% respectively for the first six months of 2008, driven by premium growth from lines of business added since 2006 in connection with our product diversification strategy. These newer products generated $45.5 million of gross premiums written through June, compared to $17.8 million for the same period in 2007. The largest contributor to growth was assumed reinsurance, which produced $28.6 million. I am pleased with the progress in broadening our product platform, which has allowed us to achieve growth in a competitive insurance market while maintaining underwriting discipline. This platform positions the Company for meaningful growth and improved profitability when market conditions improve.”
Conference Call
A conference call to discuss second quarter 2008 results is scheduled for Monday, July 28, 2008 at 9:00 a.m. (Eastern Daylight 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.
This report 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 impact of new accounting standards. 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 collectability 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.
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 |
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(in thousands except per share data and percentages)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, | ||||
| 2008 |
| 2007 |
| 2008 |
| 2007 |
INCOME STATEMENT DATA: Revenues: |
|
|
|
|
|
|
|
Direct premiums earned | $47,903 |
| $55,280 |
| $ 94,271 |
| $110,402 |
Assumed premiums earned | 14,419 |
| 1,653 |
| 22,113 |
| 3,165 |
Ceded premiums earned | (14,180) |
| (17,522) |
| (30,193) |
| (35,799) |
Net premiums earned | 48,142 |
| 39,411 |
| 86,191 |
| 77,768 |
|
|
|
|
|
|
|
|
Net investment income | 7,316 |
| 7,482 |
| 14,643 |
| 14,706 |
Net realized gains (losses) | 291 |
| (27) |
| 795 |
| (8) |
Fee income | 791 |
| 748 |
| 1,518 |
| 1,264 |
Other income | 16 |
| 15 |
| 30 |
| 32 |
Total revenues | 56,556 |
| 47,629 |
| 103,177 |
| 93,762 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Losses and loss adjustment expenses | 30,380 |
| 23,622 |
| 52,410 |
| 47,574 |
Acquisition expenses | 11,962 |
| 7,728 |
| 21,038 |
| 13,846 |
Payroll and related expenses | 5,605 |
| 4,522 |
| 10,246 |
| 8,676 |
Other underwriting expenses | 2,770 |
| 2,083 |
| 5,932 |
| 4,997 |
Interest Expense | 824 |
| 822 |
| 1,655 |
| 1,638 |
Corporate and other expenses | (1,883) |
| 922 |
| (1,309) |
| 1,435 |
Minority interest | 14 |
| 9 |
| 152 |
| 124 |
Total expenses | 49,672 |
| 39,708 |
| 90,124 |
| 78,290 |
Earnings before income taxes | 6,884 |
| 7,921 |
| 13,053 |
| 15,472 |
Income taxes | 95 |
| 649 |
| 243 |
| 1,108 |
Net earnings | $ 6,789 |
| $ 7,272 |
| $ 12,810 |
| $ 14,364 |
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
Basic | $0.64 |
| $0.69 |
| $1.21 |
| $1.36 |
Diluted | $0.63 |
| $0.66 |
| $1.18 |
| $1.31 |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Basic | 10,543,397 |
| 10,605,708 |
| 10,619,552 |
| 10,580,917 |
Diluted | 10,803,446 |
| 10,974,296 |
| 10,896,841 |
| 10,952,738 |
|
|
|
|
|
|
|
|
GAAP combined ratio | 103.7% |
| 94.4% |
| 102.2% |
| 95.0% |
|
|
|
|
|
|
|
|
BALANCE SHEET DATA: |
|
|
|
| June 30, 2008 |
| December 31, 2007 |
|
|
|
|
| (in millions except per share data) | ||
|
|
|
|
|
|
|
|
Total investments |
|
|
|
| $597 |
| $617 |
Total assets |
|
|
|
| 959 |
| 934 |
Unpaid losses and loss adjustment expenses |
|
|
|
| 538 |
| 505 |
Total liabilities |
|
|
|
| 729 |
| 704 |
Total shareholders' equity |
|
|
|
| 230 |
| 230 |
|
|
|
|
|
|
|
|
Book value per share |
|
|
|
| $21.92 |
| $21.53 |
|
|
|
|
|
|
|
|
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(in thousands )
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||
| 2008 |
| 2007 |
| 2008 |
| 2007 |
PREMIUM SUMMARY (in Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 13,085 |
| $ 11,844 |
| $ 26,332 |
| $ 24,982 |
Construction | 11,206 |
| 16,930 |
| 20,070 |
| 32,923 |
Excess | 1,869 |
| 1,227 |
| 4,330 |
| 3,196 |
Healthcare | 3,362 |
| - |
| 5,103 |
| - |
Products Liability | 1,748 |
| 2,047 |
| 3,113 |
| 2,859 |
Property | 2,441 |
| 233 |
| 4,290 |
| 233 |
Surety | 2,594 |
| 1,476 |
| 4,619 |
| 2,786 |
Total Excess and Surplus Lines Segment | 36,305 |
| 33,757 |
| 67,857 |
| 66,979 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 16,224 |
| 15,353 |
| 30,498 |
| 34,785 |
Total Alternative Risk Transfer Segment | 16,224 |
| 15,353 |
| 30,498 |
| 34,785 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 20,102 |
| 8,742 |
| 28,628 |
| 11,511 |
|
|
|
|
|
|
|
|
Total Gross Premiums Written | $ 72,631 |
| $ 57,852 |
| $ 126,983 |
| $113,275 |
|
|
|
|
|
|
|
|
Net Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 9,694 |
| $ 9,363 |
| $18,620 |
| $20,111 |
Construction | 8,689 |
| 16,811 |
| 14,902 |
| 32,513 |
Excess | 410 |
| 156 |
| 632 |
| 417 |
Healthcare | 2,185 |
| - |
| 3,317 |
| - |
Products Liability | 1,411 |
| 1,024 |
| 2,491 |
| 1,429 |
Property | 1,715 |
| 157 |
| 3,012 |
| 157 |
Surety | 1,980 |
| 1,467 |
| 3,677 |
| 2,736 |
Total Excess and Surplus Lines Segment | 26,084 |
| 28,978 |
| 46,651 |
| 57,363 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 11,055 |
| 6,747 |
| 20,469 |
| 14,435 |
Total Alternative Risk Transfer Segment | 11,055 |
| 6,747 |
| 20,469 |
| 14,435 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 20,102 |
| 8,742 |
| 28,628 |
| 11,511 |
|
|
|
|
|
|
|
|
Total Net Premiums Written | $57,241 |
| $44,467 |
| $95,748 |
| $83,309 |
|
|
|
|
|
|
|
|
Net Premiums Earned: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 9,223 |
| $10,024 |
| $17,829 |
| $19,550 |
Construction | 10,335 |
| 18,895 |
| 20,688 |
| 39,259 |
Excess | 183 |
| 184 |
| 363 |
| 411 |
Products Liability | 1,168 |
| 482 |
| 2,183 |
| 943 |
Property | 1,029 |
| 7 |
| 1,755 |
| 7 |
Surety | 1,726 |
| 1,156 |
| 3,352 |
| 2,071 |
Healthcare | 637 |
| - |
| 721 |
| - |
Total Excess and Surplus Lines Segment | 24,301 |
| 30,748 |
| 46,891 |
| 62,241 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 9,422 |
| 7,009 |
| 17,188 |
| 12,361 |
Total Alternative Risk Transfer Segment | 9,422 |
| 7,009 |
| 17,188 |
| 12,361 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 14,419 |
| 1,653 |
| 22,112 |
| 3,166 |
|
|
|
|
|
|
|
|
Total Net Premiums Earned | $48,142 |
| $39,410 |
| $86,191 |
| $77,768 |