American Safety Insurance Holdings, Ltd.
Reports a Net Loss of $8.2 Million
for the Fourth Quarter 2008
HAMILTON, Bermuda, March 4, 2009 – American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a net loss of $8.2 million, or $0.80 per diluted share, for the 2008 fourth quarter, compared to net earnings of $6.8 million, or $0.61 per diluted share, for the same period of 2007. Net operating loss for the quarter, after excluding realized investment losses of $6.0 million, was $2.2 million, or $0.22 per diluted share, compared to net operating earnings of $7.0 million which excludes realized losses of $0.2 million, or $0.63 per diluted share, for the 2007 quarter.
Net earnings for the year ended December 31, 2008 were $0.3 million, or $0.03 per diluted share, compared to $28.2 million, or $2.56 per diluted share, for 2007. Net operating earnings for 2008 were $14.7 million, or $1.37 per diluted share, compared to net operating earnings of $28.5 million, or $2.59 per diluted share, in 2007.
Financial Highlights for the quarter and year included:
| § | Gross premiums written increased 8% for the quarter and 19% for the year. |
| § | Net premiums earned increased 35% for the quarter and 17% for the year. |
| § | Net investment income was $7.5 million for the quarter and $29.6 million for the year, compared to $7.8 million and $30.3 million, respectively, for 2007. |
| § | Cash flow from operations totaled $31.1 million for the quarter and $101.2 million for the year compared to $11.9 million and $67.0 million, respectively, in 2007. |
| § | Loss ratio was 70.1% for the quarter and 63.1% for the year, compared to 65.6% and 61.3%, respectively, in 2007. |
| § | The combined ratio was 115.4% for the quarter and 106.0% for the year, compared to 105.0% and 97.4%, respectively, in 2007. |
| § | Book values per share and per diluted share at December 31, 2008 were $21.12 and $20.55, respectively, compared to $21.53 and $20.81, respectively, at December 31, 2007. |
Fourth Quarter Results
The fourth quarter results include $6.0 million of realized losses due to other-than-temporary-impairment of investments, $3.9 million of net prior year adverse reserve development and $1.6 million of reinsurance reinstatement premiums primarily related to the environmental line in New York and a $2.5 million increase in the allowance for reinsurance recoverables. These items, totaling $14.0 million, increased the combined ratio by 17.0 percentage points. The 2007 quarter included $0.2 million of net realized investment losses, $1.8 million of net prior year adverse reserve development and $2.3 million of additional ceded reinsurance premium, primarily in our environmental line, increasing the combined ratio by 11.5 percentage points.
Revenues for the quarter were $48.6 million, an increase of 14.5% over the comparable 2007 quarter. Excluding net realized losses on investments, revenues totaled $54.6 million, or 27.9% over the 2007 quarter. Net premiums earned totaled $46.6 million, an increase of $12.1 million, or 35.2%, over 2007. The increase in net premiums earned, primarily from our diversification efforts, more than offset declines in other lines.
Year End Results
Net earnings for 2008 were negatively impacted by $14.3 million of net realized losses on investments primarily due to other-than-temporary-impairment of investments, $5.4 million of net prior year adverse reserve development primarily related to the environmental line in New York and the reinsurance reinstatement premium and valuation allowance on reinsurance recoverables recorded in the fourth quarter. The 2007 results were negatively impacted by $2.2 million of net prior year reserve development and $2.3 million of additional ceded reinsurance premium primarily in the environmental line.
Revenues for the year were $192.3 million, an increase of 6.3% over 2007. Excluding net realized losses on investments, revenues for the year were $206.7 million, an increase of $25.4 million, or 14.0%, over 2007, due to increased net premiums earned. Net premiums earned from our newer lines of business totaled $56.8 million, an increase of $44.0 million over 2007.
Comments by Management:
Commenting on the results, Stephen R. Crim, Chief Executive Officer, said; “2008 was a difficult year for both the insurance industry and American Safety Insurance. I am disappointed in our fourth quarter performance but, despite the losses we experienced, our balance sheet remains strong, book value remains at $21 per share and we generated over $100 million of positive cash flow from operations last year, significantly increasing our investment portfolio. Newer products resulting from the diversification of our product platform over the past three years generated more than a third of our written premiums in 2008. Short term, we will continue to focus on improving underwriting profitability and operational efficiency. We believe our expanded product base will support future growth when market conditions improve.”
Conference Call
A conference call to discuss fourth quarter 2008 results is scheduled for Thursday, March 5, 2009 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.bm. 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 and non-GAAP financial measures. The 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 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. and American Safety Assurance (Vermont), Inc. As a group, ASI’s insurance subsidiaries and affiliates are rated “A” (Excellent) VIII by A.M. Best. For additional information, please visit www.asih.bm.
Contacts:
American Safety Insurance Holdings, Ltd. |
| American Safety Administrative Services, Inc. |
Investor Relations |
| Media Relations |
William Tepe |
| Julie McDonald |
btepe@amsafety.bm |
| jmcdonald@amsafety.com |
(441) 296-8560 |
| (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 December 31, |
|
Twelve Months Ended December 31, | ||||
| 2008 |
| 2007 |
| 2008 |
| 2007 |
INCOME STATEMENT DATA: Revenues: |
|
|
|
|
|
|
|
Direct premiums earned | $ 53,678 |
| $ 50,144 |
| $ 201,735 |
| $ 212,757 |
Assumed premiums earned | 12,869 |
| 3,814 |
| 48,089 |
| 9,352 |
Ceded premiums earned | (19,959) |
| (19,505) |
| (75,353) |
| (73,316) |
Net premiums earned | 46,588 |
| 34,453 |
| 174,471 |
| 148,793 |
|
|
|
|
|
|
|
|
Net investment income | 7,450 |
| 7,772 |
| 29,591 |
| 30,268 |
Net realized losses | (5,990) |
| (223) |
| (14,348) |
| (311) |
Fee income | 615 |
| 470 |
| 2,632 |
| 2,145 |
Other (loss) income | (17) |
| 16 |
| (24) |
| 66 |
Total revenues | $ 48,646 |
| $ 42,488 |
| $ 192,322 |
| $ 180,961 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Losses and loss adjustment expenses | 32,677 |
| 22,598 |
| 110,146 |
| 91,184 |
Acquisition expenses | 12,761 |
| 7,841 |
| 43,484 |
| 28,872 |
Payroll and related expenses | 4,693 |
| 4,272 |
| 20,667 |
| 17,268 |
Other underwriting expenses | 4,241 |
| 1,919 |
| 13,215 |
| 9,684 |
Interest expense | 793 |
| 799 |
| 3,163 |
| 3,283 |
Corporate and other expenses | 766 |
| 853 |
| 153 |
| 2,986 |
Minority interest | 1,312 |
| (1,396) |
| 1,153 |
| (1,245) |
Total expenses | $ 57,243 |
| $ 36,886 |
| $ 191,981 |
| $ 152,032 |
(Loss) earnings before income taxes | (8,597) |
| 5,602 |
| 341 |
| 28,929 |
Income taxes | (392) |
| (1,180) |
| 31 |
| 737 |
Net (loss) earnings | $ (8,205) |
| $ 6,782 |
| $ 310 |
| $ 28,192 |
|
|
|
|
|
|
|
|
Net (loss) earnings per share: |
|
|
|
|
|
|
|
Basic | $ (0.80) |
| $ 0.63 |
| $ 0.03 |
| $ 2.65 |
Diluted | $ (0.80) |
| $ 0.61 |
| $ 0.03 |
| $ 2.56 |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Basic | 10,274,368 |
| 10,719,600 |
| 10,459,161 |
| 10,648,408 |
Diluted | 10,274,368 |
| 11,037,556 |
| 10,685,933 |
| 10,997,206 |
|
|
|
|
|
|
|
|
Loss Ratio | 70.1% |
| 65.6% |
| 63.1% |
| 61.3% |
Expense Ratio | 45.3% |
| 39.4% |
| 42.9% |
| 36.1% |
GAAP combined ratio | 115.4% |
| 105.0% |
| 106.0% |
| 97.4% |
|
|
|
|
|
|
|
|
BALANCE SHEET DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Total investments |
|
|
|
| $ 673,739 |
| $ 617,211 |
Total assets |
|
|
|
| 1,026,364 |
| 934,009 |
Unpaid losses and loss adjustment expenses |
|
|
|
| 586,647 |
| 504,779 |
Total liabilities |
|
|
|
| 809,340 |
| 703,609 |
Total shareholders’ equity |
|
|
|
| 217,024 |
| 230,400 |
|
|
|
|
|
|
|
|
Book value per share |
|
|
|
| $21.12 |
| $21.53 |
Book value per diluted share |
|
|
|
| $20.55 |
| $20.81 |
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(in thousands)
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2008 |
| 2007 |
| 2008 |
| 2007 |
PREMIUM SUMMARY (in Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 10,598 |
| $ 11,517 |
| $ 48,275 |
| $ 47,891 |
Construction | 6,322 |
| 12,130 |
| 34,575 |
| 59,533 |
Products Liability | 2,283 |
| 1,972 |
| 6,780 |
| 5,730 |
Excess | 1,361 |
| 1,371 |
| 7,235 |
| 6,322 |
Property | 2,047 |
| 1,834 |
| 7,752 |
| 3,117 |
Surety | 3,068 |
| 2,007 |
| 11,248 |
| 6,438 |
Healthcare | 4,014 |
| - |
| 12,238 |
| - |
Total Excess and Surplus Lines Segment | $ 29,693 |
| $ 30,831 |
| $ 128,103 |
| $ 129,031 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 18,663 |
| 18,391 |
| 79,249 |
| 68,097 |
Total Alternative Risk Transfer Segment | 18,663 |
| 18,391 |
| 79,249 |
| 68,097 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 10,575 |
| 5,543 |
| 53,032 |
| 21,242 |
|
|
|
|
|
|
|
|
Total Gross Premiums Written | $ 58,931 |
| $ 54,765 |
| $ 260,384 |
| $ 218,370 |
|
|
|
|
|
|
|
|
Net Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 6,701 |
| $ 5,138 |
| $ 34,372 |
| $ 31,444 |
Construction | 4,729 |
| 8,606 |
| 26,649 |
| 50,502 |
Products Liability | 1,925 |
| 1,587 |
| 5,549 |
| 3,746 |
Excess | (478) |
| (31) |
| 1,088 |
| 578 |
Property | 1,537 |
| 1,127 |
| 5,900 |
| 2,145 |
Surety | 2,151 |
| 1,714 |
| 8,333 |
| 6,084 |
Healthcare | 2,609 |
| - |
| 7,955 |
| - |
Total Excess and Surplus Lines Segment | $ 19,174 |
| $ 18,141 |
| $ 89,846 |
| $ 94,499 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 12,829 |
| 10,888 |
| 43,849 |
| 34,260 |
Total Alternative Risk Transfer Segment | 12,829 |
| 10,888 |
| 43,849 |
| 34,260 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 11,310 |
| 5,543 |
| 45,913 |
| 21,242 |
Runoff | 257 |
| - |
| 257 |
| - |
|
|
|
|
|
|
|
|
Total Net Premiums Written | $ 43,570 |
| $ 34,572 |
| $ 179,865 |
| $ 150,001 |
|
|
|
|
|
|
|
|
Net Premiums Earned: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 7,623 |
| $ 7,248 |
| $ 34,026 |
| $ 36,356 |
Construction | 8,119 |
| 12,850 |
| 37,358 |
| 66,450 |
Products Liability | 1,491 |
| 813 |
| 4,954 |
| 2,382 |
Excess | (125) |
| (71) |
| 789 |
| 527 |
Property | 1,528 |
| 291 |
| 4,905 |
| 520 |
Surety | 2,096 |
| 1,701 |
| 7,355 |
| 5,469 |
Healthcare | 1,807 |
| - |
| 3,588 |
| - |
Total Excess and Surplus Lines Segment | $ 22,539 |
| $ 22,832 |
| $ 92,975 |
| $ 111,704 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 11,270 |
| 7,807 |
| 38,695 |
| 27,737 |
Total Alternative Risk Transfer Segment | 11,270 |
| 7,807 |
| 38,695 |
| 27,737 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 12,523 |
| 3,814 |
| 42,544 |
| 9,352 |
Runoff | 257 |
| - |
| 257 |
| - |
|
|
|
|
|
|
|
|
Total Net Premiums Earned | $ 46,589 |
| $ 34,453 |
| $ 174,471 |
| $ 148,793 |