American Safety Insurance Holdings, Ltd.
Reports Net Earnings of $6.9 Million
HAMILTON, Bermuda, July 29, 2009 – American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $6.9 million for the three months ended June 30, 2009, or $0.66 per diluted share, as compared to $6.8 million, or $0.63 per diluted share, for the same period of 2008.
Financial highlights for the quarter included:
| • | Gross premiums written decreased 22% to $56.7 million. |
| • | Net premiums written decreased 25% to $42.9 million. |
| • | Net premiums earned decreased 14% to $41.6 million. |
| • | Investment income increased 6% to $7.7 million. |
| • | Cash flow from operations was $33.1 million compared to $2.4 million for the same period in 2008. |
| • | Combined ratio decreased to 97.0% compared to 103.7% for the same period of 2008. |
| • | Loss ratio decreased to 58.1% compared to 63.1% for the same period of 2008. |
| • | Expense ratio decreased to 38.9% from 40.6% for the same period of 2008. |
| • | Annualized return on average equity increased to 12.0% from 11.2% for the same period of 2008. |
| • | Book value increased to $23.80 per outstanding share and $22.96 per diluted share compared to $21.12 and $20.55, respectively, as of December 31, 2008. |
Second Quarter Results
The increase in net earnings in the second quarter as compared to the 2008 quarter resulted from improved underwriting results, higher fee income and increased investment income, partially offset by a higher effective tax rate.
Revenues for the quarter decreased 10.2% to $50.8 million from $56.6 million in the 2008 quarter, due primarily to decreased net premiums earned. Net premiums earned totaled $41.6 million, a decrease of $6.5 million, resulting from a decline in the construction line of business and assumed reinsurance. The decline in our construction line was driven by the slow economy and our continued exercise of underwriting discipline in a competitive market. The decline in assumed reinsurance reflects the positive impact of a non-recurring assumed reinsurance transaction in the 2008 quarter. Eliminating the effect of this reinsurance transaction, second quarter net premiums earned declined 6% as compared to the 2008 quarter. Investment income totaled $7.8 million, an increase of $0.4 million, due to growth in the investment portfolio as a result of positive cash flow. The increased cash flow for the quarter was driven by lower ceded reinsurance premium payments and the timing of the settlement of investment security transactions. The book yield realized during the quarter on the investment portfolio was 4.4%.
The decrease in the loss ratio for the quarter as compared to the 2008 quarter was due to a combination of the mix of business and $1.5 million in adverse reserve development in the 2008 quarter in the environmental line. We had no prior year reserve development in the 2009 quarter. The expense ratio decline for the quarter is driven primarily by lower acquisition costs in the assumed reinsurance line of business. Corporate and other expenses increased by $2.6 million as the 2008 quarter included the impact of a $2.8 million reduction in accrued warranty expense related to our former real estate project in Florida.
Year to Date Results
Net earnings for the six months ended June 30, 2009 were $12.5 million, or $1.19 per diluted share, compared to $12.8 million, or $1.18 per diluted share for the same period in 2008. Results in 2009 were impacted by a higher effective tax rate and lower realized gains, partially offset by improved underwriting results, higher fee income and increased investment income.
Total revenues for the six-month period increased by $1.0 million primarily due to increased investment income and higher fee income in the Company’s alternative risk transfer segment.
The combined ratio for the six months ended June 30, 2009 was 99.1%, composed of a 59.4% loss ratio and a 39.7% expense ratio. The 2008 combined ratio was 102.2%, with a loss ratio of 60.8% and an expense ratio of 41.4%. The decrease in loss ratio was due to the combination of the mix of business and $1.5 million in adverse reserve development in 2008 in the environmental line, compared to no prior year reserve development in the 2009 period. The expense ratio reduction resulted from lower acquisition costs in the assumed reinsurance line of business.
Invested assets increased 9% to $733 million at June 30, 2009 from December 31, 2008. The book yield realized during the six months on the investment portfolio was 4.4%. Book value at June 30, 2009 increased 12.7% to $23.80 per outstanding share and 11.7% to $22.96 per diluted share as compared to December 31, 2008.
Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “We are encouraged by the second quarter results following a solid first quarter. In particular, the continued improvement in the Company’s expense and loss ratios confirms that initiatives we have taken are positively impacting results. I am particularly pleased with our results given both a difficult economy and competitive insurance environment. Based on the six month results, we are revising our combined ratio estimate for the full year to 100% to 102%, from 102% to 104%.”
Conference Call
A conference call to discuss second quarter 2009 results is scheduled for Thursday, July 30, 2009 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 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, combined ratio, 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, 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. |
Investor Relations |
Stephen R. Crim |
scrim@amsafety.bm |
(441) 296-8560 |
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(dollars in thousands )
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
PREMIUM SUMMARY |
|
|
|
|
|
|
|
Gross Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $10,405 |
| $ 13,085 |
| $ 22,818 |
| $ 26,332 |
Construction | 6,314 |
| 11,206 |
| 10,841 |
| 20,070 |
Products Liability | 2,233 |
| 1,748 |
| 4,216 |
| 3,113 |
Excess | 1,447 |
| 1,869 |
| 3,308 |
| 4,330 |
Property | 2,736 |
| 2,441 |
| 5,187 |
| 4,290 |
Surety | 3,153 |
| 2,594 |
| 5,754 |
| 4,619 |
Healthcare | 3,382 |
| 3,362 |
| 6,385 |
| 5,103 |
Total Excess and Surplus Lines Segment | 29,670 |
| 36,305 |
| 58,509 |
| 67,857 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment: |
|
|
|
|
|
|
|
Specialty Programs | 17,228 |
| 16,224 |
| 30,884 |
| 30,498 |
Total Alternative Risk Transfer Segment | 17,228 |
| 16,224 |
| 30,884 |
| 30,498 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 9,830 |
| 20,102 |
| 18,228 |
| 28,628 |
|
|
|
|
|
|
|
|
Total Gross Premiums Written | $56,728 |
| $ 72,631 |
| $107,621 |
| $ 126,983 |
|
|
|
|
|
|
|
|
Net Premiums Written: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 8,712 |
| $ 9,694 |
| $ 18,825 |
| $ 18,620 |
Construction | 5,255 |
| 8,689 |
| 8,978 |
| 14,902 |
Products Liability | 1,879 |
| 1,411 |
| 3,530 |
| 2,491 |
Excess | 243 |
| 410 |
| 499 |
| 632 |
Property | 2,424 |
| 1,715 |
| 4,210 |
| 3,012 |
Surety | 2,192 |
| 1,980 |
| 4,068 |
| 3,677 |
Healthcare | 2,198 |
| 2,185 |
| 4,150 |
| 3,317 |
Total Excess and Surplus Lines Segment | 22,903 |
| 26,084 |
| 44,260 |
| 46,651 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 10,154 |
| 11,055 |
| 19,644 |
| 20,469 |
Total Alternative Risk Transfer Segment | 10,154 |
| 11,055 |
| 19,644 |
| 20,469 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 9,848 |
| 20,102 |
| 18,732 |
| 28,628 |
|
|
|
|
|
|
|
|
Total Net Premiums Written | $42,905 |
| $57,241 |
| $82,636 |
| $95,748 |
|
|
|
|
|
|
|
|
Net Premiums Earned: |
|
|
|
|
|
|
|
Excess and Surplus Lines Segment |
|
|
|
|
|
|
|
Environmental | $ 9,451 |
| $ 9,223 |
| $ 18,406 |
| $ 17,829 |
Construction | 6,052 |
| 10,335 |
| 12,597 |
| 20,688 |
Products Liability | 1,482 |
| 1,168 |
| 2,863 |
| 2,183 |
Excess | 207 |
| 183 |
| 641 |
| 363 |
Property | 1,647 |
| 1,029 |
| 3,133 |
| 1,755 |
Surety | 2,233 |
| 1,726 |
| 4,234 |
| 3,352 |
Healthcare | 2,296 |
| 637 |
| 4,559 |
| 721 |
Total Excess and Surplus Lines Segment | 23,368 |
| 24,301 |
| 46,433 |
| 46,891 |
|
|
|
|
|
|
|
|
Alternative Risk Transfer Segment |
|
|
|
|
|
|
|
Specialty Programs | 9,836 |
| 9,422 |
| 20,496 |
| 17,188 |
Total Alternative Risk Transfer Segment | 9,836 |
| 9,422 |
| 20,496 |
| 17,188 |
|
|
|
|
|
|
|
|
Assumed Reinsurance Segment | 8,391 |
| 14,419 |
| 19,346 |
| 22,112 |
|
|
|
|
|
|
|
|
Total Net Premiums Earned | $41,595 |
| $48,142 |
| $86,275 |
| $86,191 |
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, | ||||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
INCOME STATEMENT DATA: Revenues: |
|
|
|
|
|
|
|
Direct premiums earned | $ 50,401 |
| $47,903 |
| $ 101,179 |
| $ 94,271 |
Assumed premiums earned | 9,056 |
| 14,419 |
| 20,096 |
| 22,113 |
Ceded premiums earned | (17,868) |
| (14,180) |
| (35,006) |
| (30,193) |
Net premiums earned | 41,589 |
| 48,142 |
| 86,269 |
| 86,191 |
|
|
|
|
|
|
|
|
Net investment income | 7,729 |
| 7,316 |
| 15,519 |
| 14,643 |
Net realized gains | 281 |
| 291 |
| 237 |
| 795 |
Fee income | 1,185 |
| 791 |
| 2,118 |
| 1,518 |
Other income | 66 |
| 16 |
| 84 |
| 30 |
Total revenues | 50,850 |
| 56,556 |
| 104,227 |
| 103,177 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Losses and loss adjustment expenses | 24,175 |
| 30,380 |
| 51,248 |
| 52,410 |
Acquisition expenses | 8,873 |
| 11,962 |
| 19,077 |
| 21,038 |
Payroll and related expenses | 5,704 |
| 5,374 |
| 11,521 |
| 9,859 |
Other underwriting expenses | 2,766 |
| 3,000 |
| 5,795 |
| 6,316 |
Interest Expense | 810 |
| 824 |
| 1,551 |
| 1,655 |
Corporate and other expenses | 744 |
| (1,882) |
| 1,425 |
| (1,306) |
Total expenses | 43,072 |
| 49,658 |
| 90,617 |
| 89,972 |
|
|
|
|
|
|
|
|
Earnings before income taxes | 7,778 |
| 6,898 |
| 13,610 |
| 13,205 |
Income taxes | 766 |
| 95 |
| 974 |
| 243 |
Net earnings before noncontrolling interest | 7,012 |
| 6,803 |
| 12,636 |
| 12,962 |
Less: Net earnings attributable to the noncontrolling interest | 93 |
| 14 |
| 172 |
| 152 |
|
|
|
|
|
|
|
|
Net earnings | $6,919 |
| $6,789 |
| $12,464 |
| $12,810 |
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
Basic | $0.67 |
| $0.64 |
| $1.21 |
| $1.21 |
Diluted | $0.66 |
| $0.63 |
| $1.19 |
| $1.18 |
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Basic | 10,302,511 |
| 10,543,397 |
| 10,294,390 |
| 10,619,552 |
Diluted | 10,523,511 |
| 10,803,446 |
| 10,515,391 |
| 10,896,841 |
|
|
|
|
|
|
|
|
Loss Ratio | 58.1% |
| 63.1% |
| 59.4% |
| 60.8% |
Expense Ratio | 38.9% |
| 40.6% |
| 39.7% |
| 41.4% |
GAAP combined ratio | 97.0% |
| 103.7% |
| 99.1% |
| 102.2% |
|
| As of | |||
BALANCE SHEET DATA: |
| 6/30/2009 |
| 12/31/2008 | |
|
| (unaudited) |
|
| |
Total investments |
| $733,395 |
| $ 673,739 | |
Total assets |
| 1,086,901 |
| 1,026,364 | |
Unpaid losses and loss adjustment expenses |
| 605,478 |
| 586,647 | |
Total liabilities |
| 838,300 |
| 806,242 | |
Total shareholders' equity |
| 245,189 |
| 217,024 | |
|
|
|
|
| |
Book value per share |
| $23.80 |
| $21.12 | |
|
|
|
|
| |